May 7, 2025/Cordros Report
We update our outlook and estimates for Lafarge Africa Plc (WAPCO) for 2025E following a strong performance in Q1-25. During the period, WAPCO reported an impressive 80.3% y/y revenue growth, driven by a favorable price-volume mix, which resulted in an 8.37x y/y increase in EPS to NGN3.02. Given this robust performance, we have increased our 2025E revenue growth projection to 40.7% y/y, primarily reflecting a 27.1% y/y rise in sales volume and a 23.0% y/y rise in average cement prices. Consequently, we raise our year-end target price by 4.0% to NGN104.71/s (Prev: NGN100.68/s) and maintain our “BUY” rating on the stock. Sequentially, we now project 2025E EPS at NGN13.06 (+110.0% y/y) and a total dividend per share of NGN8.00, translating to a dividend yield of 9.6%, on last closing price (NGN82.95). Based on our estimates, WAPCO is trading at a 2025E P/E of 6.4x and an EV/EBITDA of 3.0x.
Volume growth and price increases to propel revenue and earnings: We revise our 2025E revenue projection upward to 40.7% y/y (Prev: +21.7% y/y). This adjustment reflects a 27.1% y/y increase in volumes to 6.41 Mt (Prev: +22.9% y/y to 6.20 Mt), along with a 23.0% y/y rise in average cement prices to NGN153,000/t (Prev: +10.0% y/y to NGN136,000/t). The volume increase is driven by expectations of stronger public and private demand, improved production efficiency, and positive market reception to the company’s new innovative products. We also model higher growth in COGS (+36.5% y/y, Prev: +18.7% y/y), driven by higher energy costs (+34.8% y/y, accounting for 44.8% of COGS) and raw material costs (+39.7% y/y, accounting for 21.5% of COGS). Similarly, we raise our OPEX growth forecast to 29.3% y/y (Prev: +22.0% y/y), mainly due to higher distribution costs (+30.9% y/y, representing 70.7% of OPEX). Nonetheless, we project an EBITDA margin expansion of 199bps y/y to 33.9% (Prev: +32bps y/y to 32.2%), primarily supported by robust revenue growth despite cost pressures. Finally, we now forecast EPS growth of 110.0% y/y to NGN13.06 (Prev: +67.9% y/y to NGN10.44) in 2025E, further supported by a 96.9% y/y decline in finance costs.
ROIC and ROCE improvement supports positive outlook: WAPCO’s Return on Invested Capital (ROIC) and Return on Capital Employed (ROCE) are projected to improve in 2025E, driven by anticipated growth in operating profit and a low debt profile. Specifically, ROIC is forecast to rise from 47.2% in 2024 to 58.1% in 2025, while ROCE is projected to increase from 33.2% to 38.0% over the same period. Importantly, forecast ROIC remains well above the estimated weighted average cost of capital (WACC: 23.9%), reinforcing the company’s ability to sustain shareholder value creation. Over the 2025–2029 forecast horizon, we expect average ROIC and ROCE to increase to 60.7% and 36.4%, respectively, compared to historical averages of 23.1% and 20.6% over 2020–2024.
Valuation: Our target price is NGN104.71/s, derived from an 80/20 blend of DCF and sector relative valuation (P/E & EV/EBITDA) estimates. Our DCF FV is derived from an equal blend of FCFF (NGN93.59/s) and FCFE (NGN87.05/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 NGN161.27/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 NGN13.06/s gives a FV of NGN163.23/s.
