May 7, 2025/Cordros Report
INTBREW’s Q1-25 results mark a turning point in their performance trajectory, with a return to profitability driven by robust revenue growth (+68.2% y/y) and improved operational efficiency, with operating profit reaching NGN31.53 billion in Q1-25, compared to an operating loss of NGN80.58 billion in Q1-24. Additionally, the company recorded a net finance income of NGN3.53 billion in Q1-25, a sharp reversal from a net finance cost of NGN8.78 billion in Q1-24, reflecting the positive impact of the significant FCY debt repayment in 2024FY and improved FX stability. With solid revenue growth, an expanded route-to-market strategy, and improved operational efficiency, we believe INTBREW is now better positioned to sustain earnings recovery in 2025E. We believe this development sets the stage for long-term profitability and raises the prospect of a resumption of dividend payments in the coming years. Thus, reflecting improved fundamentals and stronger earnings visibility, we revise our target price to NGN9.17/s (previous: NGN4.97/s), and retain our “HOLD” rating on the stock. The stabilisation of the FX environment and stronger balance sheet fundamentals further reinforce the investment case for a turnaround in profitability and valuation re-rating. On our estimates, INTBREW trades on 2025E PE and EV/EBITDA multiples of 13.9x and 6.8x, respectively.
Profitability rebounds on improved cost dynamics and FX stability: For 2025E, we project revenue growth of 32.6% y/y, driven by a favourable price/volume mix in 2025E. We anticipate a 720bps y/y improvement in gross margin to 34.1%, driven by better operating leverage, improved cost control, and efficiency gains from local sourcing initiatives. Additionally, we expect EBITDA margin to print at 25.6% in 2025E (2024FY: -10.2%), reflecting the stronger topline growth and improved cost efficiency. Following the significant repayment of foreign currency debt in 2024FY and our expectation of a sharp decline in FX-related losses (-98.3% y/y) amid exchange rate stability, we expect finance costs to remain low. Accordingly, we forecast earnings per share of NGN0.57 in 2025E (vs loss per share of NGN0.68 in 2024FY), marking a return to positive full-year earnings.
Profitability ratios set to recover with earnings rebound: INTBREW’s return ratios are set to improve significantly in 2025E, reflecting the brewer’s return to profitability and enhanced balance sheet position. Accordingly, we project return on equity (RoE) to turn positive at 17.7% (2024FY: -25.3%), supported by a positive net income following improved operating performance and lower finance costs. Similarly, return on assets (ROA) is expected to turn positive also – 15.0% (2024E: -16.0%) – driven by the stronger earnings. These improvements signal a turnaround in shareholder value creation after several years of underperformance.
Valuation: Our year-end TP is NGN9.17/s, derived 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 14.2x, resulting in a fair value (FV) of NGN8.15/s based on our 2025E EPS estimate of NGN0.57/s. Similarly, utilising the MEA peer average EV/EBITDA multiple of 9.5x, we derived a fair value estimate of NGN10.66/s. The combined multiples yielded a multiple-based fair value of NGN9.40/s. Our DCF’s fair value estimate is NGN9.01/s, derived from an equal blend of FCFF (TP: NGN9.43/s) and FCFE (TP: NGN8.58/s) estimates assuming a 23.6% WACC, 23.6% CoE and a 4.0% terminal growth rate.
