March 21, 2025/Cordros Report
In this note, we update our outlook and estimates for Lafarge Africa Plc (WAPCO) and present our expectations for 2025E. In 2024FY, WAPCO’s revenue grew by 71.8% y/y, driven by higher pricing (+54.6% y/y) and increased sales volume (+12.0% y/y), leading to a 96.2% y/y rise in EPS to NGN6.22. Building on a strong performance in 2024, we project moderate revenue growth in 2025E, primarily driven by higher sales volumes supported by ongoing government infrastructure projects and moderate upward price adjustments. We also anticipate a slight expansion in EBITDA margin, underpinned by improved cost efficiency and operating leverage. Consequently, we reaffirm our “BUY” recommendation with a target price of NGN100.68, offering a 36.1% upside from the current trading price of NGN73.80 (as of 20 March). Based on our estimates, WAPCO currently trades at a 2024E P/E of 7.1x and an EV/EBITDA of 3.0x.
Demand, pricing, and cost efficiency to boost profit: We expect WAPCO to maintain top-line growth in 2025E, driven by a 22.9% y/y increase in sales volumes to 6.20Mtpa, supported by increased public infrastructure investment. We also project a modest 10.0% y/y rise in WAPCO’s average cement prices to NGN136,000.00/t. Consequently, we project 21.7% y/y revenue growth in 2025E, with a CAGR of 14.4% over 2025E–2029E. Furthermore, COGS is forecast to grow by 18.7% y/y, reflecting expectation of higher energy costs (+19.8% y/y | 68.9% of COGS) and raw material costs (+17.0% y/y | 31.1% of COGS), while OPEX is expected to rise by 22.0% y/y, primarily due to higher distribution costs (+17.5% y/y | 60.0% of OPEX). As a result, EBITDA margin is projected to increase slightly by 32bps y/y to 32.2% in 2025E. We also anticipate an 82.4% y/y decline in net finance costs to NGN7.48 billion, supported by balance sheet deleveraging and reduced exposure to foreign currency liabilities. Thus, we forecast EPS growth of 67.9% y/y to NGN10.44, with a 2025E–2029E CAGR of +25.3%.
FCF generation to remain strong: WAPCO has consistently maintained positive free cash flow (FCF) generation through its capital expenditure cycle, highlighting the company’s ability to achieve cash conversion at the operating cash level. Over the past five years (2020–2024), WAPCO’s FCF margin has averaged 21.6%, and we expect this trend to be sustained in the medium term. Based on our projections, we estimate an average FCF margin of 17.6% over 2025E–2029E. The slightly lower but still robust margin reflects the anticipated increase in capital expenditure related to operational improvements.
Valuation: Our target price is NGN100.68/s, derived from a 70/30 blend of DCF and sector relative valuation (P/E & EV/EBITDA) estimates. Our DCF FV is derived from an equal blend of FCFF (NGN87.61/s) and FCFE (NGN84.83/s) estimates, assuming a 23.9% WACC and a 4.0% terminal growth rate. For EV/EBITDA, we utilised the 2025E Bloomberg MEA peer median (6.8x) and derived a fair value estimate of NGN138.38/s. On P/E, we utilised the Bloomberg Middle East & African (MEA) peer median 2025E multiple of 12.5x. Applying this to our 2025E EPS estimate of NGN10.44/s gives a FV of NGN130.49/s.
