March 21, 2025/Cordros Report
In this note, we update our views on BUACEMENT following the release of its 2024FY financial results. The company reported a 90.5% y/y increase in revenue for 2024FY, driven by higher cement prices (+56.8% y/y) and increased sales volumes (+25.7% y/y), resulting in a modest 6.4% y/y growth in earnings. For 2025E, we expect topline growth to remain strong, driven by higher sales volumes and improved pricing. Sales volume growth will be supported by increased output from the newly commissioned 6Mtpa production lines in Sokoto (3Mtpa) and Obu (3Mtpa). However, at the current price of NGN83.70/s, the stock trades at elevated multiples relative to peers (P/E – BUACEMENT: 38.4x; Local peer average: 14.0x; MEA peer average: 16.5x). Consequently, we maintain our “SELL” rating with a target price of NGN51.54. On our projected 2025E EPS of NGN3.26 (+49.4% y/y), we estimate a dividend per share (DPS) of NGN3.18, implying a dividend yield of 3.8% based on the last closing price of NGN83.70/s (as of 20 March). Based on our estimates, BUACEMENT is trading at a 2025E P/E of 25.7x and EV/EBITDA of 8.3x.
Revenue and earnings growth expected in 2025E: We project BUACEMENT’s cement revenue to grow by 44.0% y/y in 2025, driven by a 30.9% y/y increase in sales volume (to 11.10Mtpa) and a modest price adjustment of +10.0% y/y to NGN114,250.00/t. Strong sales volume growth will be supported by increased construction activity, driven by the government’s infrastructure agenda and additional output from the newly commissioned production lines. Additionally, we expect BUACEMENT to maintain a pricing edge, with its price per ton projected to be c.16.0% lower than peers. We also forecast a 42.6% y/y rise in COGS and a 46.4% y/y increase in OPEX, reflecting higher energy costs (+34.2% y/y), operation and maintenance service charges (+56.3% y/y), and distribution costs (+57.9% y/y). Consequently, we expect the EBITDA margin to settle at 31.1% (2024: 31.0%), while EPS is projected to rise by 49.4% y/y to NGN3.26 despite a projected 38.2% y/y increase in net finance costs to NGN185.12 billion.
Topline growth to drive ROE recovery: Historically, BUACEMENT’s return on equity (ROE) has shown a consistent upward trend from 16.7% in 2019 to 24.6% in 2022, largely driven by steady earnings growth (EPS increased from NGN1.79 in 2019 to NGN2.98 in 2022). However, the cost and currency pressures experienced in 2023 and 2024 weighed on earnings (2023 EPS: NGN2.05 | 2024 EPS: NGN2.18), dampening the ROE growth trend (2023: 18.0% | 2024: 19.0%). Looking ahead, we anticipate a recovery in ROE, projecting a 689bps y/y increase to 25.9% in 2025E and an average of 42.1% over 2025 – 2028E. Our forecast reflects our expectation of sustained earnings growth, primarily supported by continued topline expansion.
Valuation: Our year-end target price is NGN51.54/s, derived from an 80/20 blend of DCF and sector relative valuation (P/E & EV/EBITDA) estimates. Our DCF FV is derived from an equal blend of FCFF (NGN58.81/s) and FCFE (NGN41.51/s) estimates, assuming a 19.9% WACC and a 4.0% terminal growth rate. For EV/EBITDA, we utilised the 2025E Bloomberg MEA peer average (7.0x) and derived a fair value estimate of NGN70.73/s. On P/E, we utilised the Bloomberg Middle East & African (MEA) peer average 2025E multiple of 13.3x. Applying this to our 2025E EPS estimate of NGN3.26/s gives a FV of NGN43.45/s.
