May 7, 2025/Cordros Report
In this report, we revise our 2025E outlook on Dangote Cement (DANGCEM) following its Q1-25 results. In Q1-25, the company reported a 21.7% y/y increase in revenue, largely driven by a significant 30.5% y/y rise in prices. Revenue growth, along with a moderation in cost growth (+2.3% y/y), contributed to an 854bps y/y expansion in EBITDA margin and an 83.9% y/y growth in EPS. Building on this performance, we raise our year-end TP by 18.1% to NGN542.98/s (Prev: NGN459.65/s) and upgrade our rating to “BUY” with a 25.7% upside from the current price (NGN432.00/s). This revision reflects our expectations for slower growth in costs (+10.2% y/y), an improvement in EBITDA margin (+502bps y/y to 43.6%), and a reduction in FX losses (-68.2% y/y). Consequently, we now forecast an 80.3% y/y growth in EPS to NGN53.61 and a DPS of NGN50.00, implying a dividend yield of 11.6%. Based on our estimates, DANGCEM is trading on a 2025E P/E of 8.1x and EV/EBITDA of 4.8x.
Topline growth and cost savings to drive earnings expansion: We now project a 21.4% y/y revenue growth for 2025E (Prev.: +22.9% y/y), driven by a 27.3% y/y increase in Nigeria revenue (Prev.: +12.3% y/y) and a 5.2% y/y increase in Pan-Africa revenue (Prev.: +30.8% y/y). The Nigeria revenue revision reflects expectations of a 25.0% y/y rise in average cement prices to NGN155,000/t (Prev.: +10.0% y/y) and a slight downward revision in volume growth to 1.8% y/y (Prev.: +2.0% y/y). For Pan-Africa, the downward revision of our revenue forecast reflects a lower sales volume growth estimate of -2.3% y/y (Prev: +2.4% y/y), amid softer demand in key markets like Senegal, Ethiopia, and South Africa. We also lowered our price growth projection in the region to +7.7% y/y (Prev: +27.7% y/y) due to stabilising currencies, which are expected to reduce FX conversion gains. On costs, we expect a 10.2% y/y increase in cost of sales and a 12.5% y/y increase in OPEX (Prev: +20.0% y/y and +24.3% y/y, respectively), reflecting savings from cost initiatives, relatively stable currency and falling energy prices. As a result, we forecast EBITDA margin expansion of 502bps y/y to 43.6% (Prev.: -10bps y/y to 38.5%) and an 80.3% y/y growth in EPS to NGN53.61 (Prev.: +28.0% y/y to NGN38.07), aided by a 68.2% y/y reduction in FX losses.
Improving cost dynamics drive EBITDA margin upgrade: Following DANGCEM’s stronger-than-expected Q1-25 results, we have revised our 2025E EBITDA margin forecast upward. In Q1-25, the company reported an EBITDA margin of 46.4%, driven primarily by its Nigerian operations, where margin expanded by 707bps y/y to 56.7%—underpinned by effective cost containment efforts—offsetting a 248bps y/y contraction in Pan-African margin to 23.7%. Reflecting easing cost pressures, marked by declines in energy, raw material, and haulage costs, we now project a 502bps y/y improvement in EBITDA margin to 43.6% in 2025E, compared to our previous forecast of 38.5%. Our revised estimates incorporate slower growth in key cost elements, including energy costs (+10.3% y/y, Prev.: +25.1% y/y), raw material costs (+5.4% y/y, Prev.: +17.4% y/y), and haulage costs (+10.7% y/y, Prev.: +28.8% y/y).
Valuation: Our year-end target price is NGN542.98/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 (NGN464.84/s) and FCFE (NGN447.10/s) estimates, assuming a 22.6% WACC and a 4.0% terminal growth rate. Meanwhile we utilised Bloomberg’s Middle East and African peer average 2025E P/E (14.5x) and EV/EBITDA (7.3x) to arrive at a FV of NGN777.54/s and NGN714.43/s, respectively.
