May 8, 2025/Cordros Report
In this report, we update our outlook and estimates for TOTAL for 2025E. So far this year, the company’s performance has been underwhelming, with a loss per share of NGN0.35 reported in Q1-25, reflecting a decline in revenue (-17.9% y/y) and still biting cost pressures (-16.0% y/y). We anticipate slower revenue growth in 2025E, reflecting our expectations of lower sales volumes, which we believe was the likely driver for the lower revenue in Q1. Consequently, we revise our TP downwards by 22.3% to NGN651.95/s (Previous: NGN838.93/s) and downgrade our rating to a “HOLD”. We model a DPS of NGN19.30, yielding 2.7% at the current price (NGN705.00/s). Based on our estimates, TOTAL trades at a 2025E P/E and EV/EBITDA of 18.0x and 5.5x, representing a discount to the MEA peer average of 19.4x and 11.8x, respectively.
Lower sales to weigh on earnings: For 2025, we model a 6.4% y/y increase in revenue, driven by modest product price increases amid a decline in sales volume. Specifically, we forecast 2025E average PMS prices at NGN912.27 (2024FY: NGN873.75) based on our assumptions of Brent crude price of USD66.00/bbl, and exchange rate of NGN1,600.00/USD. On volumes, we project a 10.0% y/y decline primarily due to increased competition from the Dangote Refinery and its trading partners, whose product prices are relatively cheaper than TOTAL’s. Over the forecast period, we model an average revenue growth of 7.0%. We project EBITDA margin at 4.4% in 2025E (2024FY: 6.6%), as we expect a normalization of the other income line, stripping out the effect of the one-off gain on writeback of provision charges for technical assistance in 2024FY (NGN25.03 billion). Additionally, we expect the 4.0% y/y increase in OPEX to further contribute to the EBITDA margin contraction. Consequently, we forecast a 51.7% y/y decline in EPS to NGN39.08 in 2025E (2024FY: NGN80.99).
Lower but positive ROE and ROIC: We expect TOTAL’s ROE and ROIC to decline in 2025E, reflecting the projected lower net income. Our model indicates that ROE will decrease from 36.6% in 2024FY to 17.7% in 2025E, while ROIC is expected to decline from 40.2% to 28.5% in the same period. Notwithstanding, the forecasted ROIC remains above the estimated weighted average cost of capital (WACC: 24.1%), dousing worries of the company’s ability to sustain long-term shareholder value. Over the forecast period (2025E-2029E), we expect average ROE and ROIC to increase to 28.1% and 39.2%, respectively (2020-2024 averages: 27.9% and 22.9%, respectively), reflecting improved profitability.
Valuation: Our year-end target price is NGN651.95/s, derived from a 70/30 blend of DCF and sector-relative valuation estimates (P/E & EV/EBITDA). Our DCF FV is derived from an equal blend of FCFF (NGN569.52/s) and FCFE (NGN388.37/s) estimates, assuming a 24.1% WACC, 28.5% CoE and a 4.0% terminal growth rate. Similarly, our multiple-based FV was derived from an equal blend of EV/EBITDA (NGN1,513.38/s) and P/E (NGN597.92/s) multiples, utilizing Bloomberg’s Middle East and African peer median for both factors (11.2x and 15.3x) as multipliers.
