May 2, 2025/Cordros Report
NASCON delivered a strong start to the year in Q1-25, with impressive growth across top line and bottom line. The solid performance reflects successful pricing actions and deeper market reach, especially in the Northern region. This early momentum supports our positive view for the rest of 2025E, where we expect NASCON to maintain their strong revenue momentum, supported by higher selling prices and volume growth from its enhanced market penetration initiatives. Beyond pricing and volume growth, we believe additional tailwinds such as improved plant efficiency, enhanced distribution logistics, and continued investments in route-to-market capabilities will reinforce top-line growth. Nonetheless, persistent cost pressures remain a key risk to margin stability.
Accordingly, we project a target price of NGN59.16/s and retain our “HOLD” recommendation on the ticker. We project a DPS of NGN2.66 for 2025E, equating to a dividend yield of 6.1% based on the current price. On our estimates, NASCON trades at a 2025E P/E and EV/EBITDA of 6.1x and 3.4x, respectively.
We expect earnings to remain robust in 2025E: For 2025E, we expect revenue growth of 39.6% y/y, driven by price increases in the salts (+22.0% y/y) and seasonings (+10.0% y/y) segments as well as continued volume growth in the refined salt segment supported by expanded market penetration efforts. For the seasonings segment, we expect NASCON to maintain its low-price strategy. We believe NASCON’s current strategy of maintaining competitive pricing in the seasoning segment is a tactical move to drive short-term market penetration. However, with plans to upgrade to the Tier 1 seasoning market by year-end—positioning to compete with established brands like Maggi and Knorr—we expect a transition towards more rational pricing in the medium term. Over the medium term (2026–2029E), we forecast average revenue growth of 16.6%. For 2025E, we expect gross margin to moderate to 44.6% (–148bps y/y | 2024FY: 46.1%), reflecting continued pressure from elevated raw material costs. However, with reduced FX volatility lowering dollar-linked expenses, we expect EBITDA margin to improve to 21.0% (+19bps y/y, 2024FY: 20.8% | 2026-2029E: 26.5%), supported by a lower opex-to-sales ratio of 23.9% (2024FY: 25.4%). Overall, we estimate EPS at NGN8.87 (2024FY: NGN5.77).
Stronger FCF to anchor dividend outlook: Our model projects a free cash flow (FCF) margin of 7.9% for 2025E, up from 1.6% in 2024FY, highlighting improved operating cash generation and more efficient capital allocation. Over the forecast period (2025–2029E), we expect NASCON’s FCF margin to average 11.8% (5-year historical average: 10.7%). Thus, we believe NASCON’s strong free cash flow generation provides a solid foundation for sustainable dividend payments, with our model pointing to a dividend per share (DPS) of NGN2.66 in 2025E (2024FY: NGN2.00/s), underscoring the company’s capacity to maintain shareholder returns while supporting operational and strategic priorities.
Valuation: We arrived at our year-end TP of NGN59.16/s through a 40/60 blend of sector-relative valuation estimates (P/E & EV/EBITDA) and a DCF valuation. On P/E, we applied the MEA peer average 2025E multiple of 7.0x, resulting in a fair value (FV) of NGN61.66/s based on our 2025E EPS estimate of NGN8.87/s. Similarly, utilising the MEA peer average EV/EBITDA multiple of 4.9x, we derived a fair value estimate of NGN71.01/s. The combined multiples yielded a multiple-based fair value of NGN66.34/s. Our DCF’s fair value estimate is NGN54.38/s, derived from an equal blend of FCFF (TP: NGN59.48/s) and FCFE (TP: NGN49.27/s) estimates assuming a 29.0% WACC, 29.6% cost of equity and a 4.0% terminal growth rate.
