April 29, 2025/Cordros Report
We have revised our estimates for NB following a solid start to the year. The brewer maintained strong topline momentum from Q4-24 into Q1-25, recording 24.2% (NGN383.64 billion) of our 2025E revenue of NGN1.59 trillion – thus retaining its top spot (2025E: 55.2%) in market share. Notably, NB’s optimised costs and operational efficiency methods are expected to yield even more positives in 2025e, reviving EBITDA margin, which is now expected to expand by +563bps to 17.6% (Prev: 17.2%). As expected, NB’s reduced FCY liabilities in 2024FY and relatively stable exchange rates provided the required room for mild FX losses in Q1-25 (NGN178.01 million vs NGN72.85 billion in Q1-24). Consequently, we retain our expectations for a revival across key operating margins in 2025FY, helped by gains from cost optimisation and reduced FX losses. That said, we raise our target price to NGN50.52/s (Prev.: NGN38.84/s), which results in a “BUY” recommendation (Prev.: “BUY”). NB now trades at a 2025E EV/EBITDA multiple of 4.3x, significantly below the Bloomberg MEA peer average of 9.3x.
Positive EPS is still expected in 2025E: We have revised our 2025E revenue growth forecast for NB upward to 46.3% y/y (Prev:. 27.1%), reflecting stronger-than-expected Q1-25 topline performance and improved visibility on revenue growth. The upgrade also factors in the positive impact of the Distell acquisition on product mix, premiumization and innovation — including the launch of the sleek 45cl Heineken® bottle and the draught variant of Legend Extra Stout. Over the medium term (2025E–2029E), we forecast average revenue growth of 29.6%. On the cost front, operational efficiency measures and the prospect of moderating inflationary pressures inform our expectation of a lower cost-to-sales ratio at 63.6% (-692bps y/y | Prev: 67.0%) and OPEX ratio of 23.0%, translating to an improved EBITDA margin of 17.5% (Prev: 15.1%). Consequently, our earnings estimate has been revised upward, with EPS now projected at NGN3.53 (Prev:. NGN1.78), a strong rebound from the 2024FY loss per share of NGN12.07.
Margin outlook upgraded on revenue strength and cost efficiency: In our 2025FY note, we cited our views on NB’s operating margins remaining stable over the next five years. We now expect strengthening margins on stronger revenue growth, improved cost efficiency, and a more supportive operating environment, characterised by moderating inflation and exchange rate stability. Accordingly, we project increases over 2025 -2029E in the average gross and EBITDA margins to 37.0% and 17.9%, (Prev. estimate: 35.1% and 17.2% | 2020 – 2024FY: 35.1% and 16.6%), respectively. We reiterate that the margins would remain weaker than pre-COVID levels – gross margin: 42.6% | EBITDA margin: 25.9%.
Valuation: Our year-end target price is NGN50.52/s, derived from a 60:40 blend of DCF and sector relative valuation (P/E & EV/EBITDA) estimates. Our DCF FV (NGN31.96/s) is derived from an equal blend of FCFF (TP: NGN46.80/s) and FCFE (TP: NGN35.88/s) estimates, assuming a 27.1% WACC and a 4.0% terminal growth rate. On P/E (TP: NGN47.65/s), we utilised the 2025E Middle East & African (MEA) peer average multiple of 13.6x. For EV/EBITDA (TP: NGN80.75/s), we utilised the 2025E MEA peer average (9.3x)
