May 9, 2025/Cordros Report
In this report, we update our outlook on PRESCO for 2025E. So far in 2025E, PRESCO carried on their strong performance from 2024FY, with Q1-25 unaudited numbers reflecting an impressive 120.4% y/y revenue growth driven by higher pricing and marked volume growth. Based on our updated estimates, we project a year-end target price of NGN898.16/s and retain our “HOLD” rating. Our valuation reflects the impact of (1) increasing volumes on revenue growth, following the newly acquired Ghana Oil Palm Development Company (GOPDC), and (2) higher domestic CPO prices, which could continue to support margins despite the expected moderation in global CPO prices due to rising international supply and softening demand from key markets including India and China. On our estimates, PRESCO trades at 6.5x P/E and 3.8x EV/EBITDA on 2025E—discounted relative to MEA peers at 8.6x and 5.1x.
Volumes to support Topline Growth: We forecast a 46.9% y/y revenue growth for PRESCO in 2025, underpinned by robust volume expansion, amid modest domestic price increases. Specifically, we expect total volumes to rise by 17.2% y/y to 234,347 mt (2024FY: 199,877 mt), supported by the output from PRESCO’s current and new maturities (c. 28,389 ha), factoring in GOPDC’s c. 21,000ha planted area. At the same time, we forecast a 25.0% y/y increase in PRESCO’s CPO price to c. NGN1.30 million/mt (2024FY: c. NGN1.04 million/mt). We model a higher EBITDA margin print (+26bps y/y to 68.7%), further supported by lower increases in costs and operating expenses, as fertilizer prices fall, and inflation decelerates. Overall, we forecast EPS of NGN121.53 (2024FY: NGN76.07) in line with the aforementioned forecasts.
PRESCO’s Premium Valuation Reflects Structural Advantage: PRESCO currently trades at a 53.2% premium to OKOMUOIL, reflecting a reversal of historical pricing trends. In our view, this shift reflects the market’s recognition of PRESCO’s superior operational performance, with a stronger 5-year sales CAGR of 17.9% (vs OKOMUOIL: 10.4%) and a significantly higher EBITDA margin of 68.5% (vs OKOMUOIL: 51.8%). We also cite key catalysts like the strategic acquisition of Siat Plc and a 52.0% stake in GOPDC, which has broadened their regional exposure. Our model points to same over our forecast period, with our estimates across the aforementioned KPIs for the forecast period still pointing to an outperformance – Forward revenue CAGR (PRESCO: +17.9% | OKOMU: +10.4%); Forward EBITDA margin average (PRESCO: +69.5% | OKOMU: +50.7%). Thus, we view the switch in the pricing trend as justified.
Valuation: We estimate a year-end target price of NGN898.16/s, using a blend of DCF (50.0%) and relative valuation (50.0%) methodologies. Our DCF fair value was derived from an equal blend of FCFF (NGN833.58/s) and FCFE (NGN757.21/s) estimates, using 26.1% WACC, 28.2% cost of equity and a 4.0% terminal growth rate, reflecting long-term yield improvements and integrated cost advantages. For relative valuation, we utilized the 2025E Bloomberg MEA peer averages of 8.6x P/E and 5.1x EV/EBITDA. Applying these to our estimates, we derive a fair value of NGN1,045.34/s (P/E) and NGN1,060.19/s (EV/EBITDA), reinforcing our confidence in the long-term earnings compounding capacity of PRESCO.
