May 15, 2025/Cordros Report
In this report, we update our views on Okomu Oil Palm Company Plc (OKOMUOIL) for 2025E. Revenue grew by 33.6% y/y in Q1-25 on stronger pricing, while a 15.1% y/y rise in OPEX led to a 61bps dip in EBITDA margin to 59.1%. EPS climbed by 44.1% y/y, buoyed by the robust topline. Looking ahead to 2025E, OKOMUOIL’s operating performance is expected to remain resilient, supported by stronger CPO prices which should sustain topline growth. At the same time, elevated inflation and operating cost pressures are projected to weigh on margins, leading to a decline in EBITDA margin in line with higher cost outlays. Thus, we maintain our “HOLD” rating with a year-end target price of NGN621.40/s. On our estimates, OKOMUOIL trades at forward P/E and EV/EBITDA multiples of 12.0x and 6.6x, respectively, relative to MEA peers’ forward averages of 15.4x and 7.4x.
Topline Expansion to Drive Profitability in 2025E: We project a 27.3% y/y revenue growth for OKOMUOIL in 2025E, driven by higher volumes and pricing. Specifically, processed CPO output is expected to rise by 18.7% y/y to 81,591 tonnes (2024FY: 68,721 tonnes), supported by a 13.6% y/y increase in FFB production to 351,472 tonnes and an improvement in extraction rate to 23.0% (2024FY: 22.0%). In addition, we forecast an increase in OKOMUOIL’s CPO prices to NGN1.69 million/t, sustained by the local supply-demand imbalance. Furthermore, rubber prices are projected to grow by 14.3% y/y, with rubber volumes expected to increase by 8.0% y/y to 9,931 tonnes (2024FY: 9,197 tones), providing further topline support. However, cost of sales is forecast to rise by 27.3% y/y due to higher input costs, and inflationary pressures. As a result, EBITDA margin is expected to contract by 344bps to 48.4%, further weighed by a 17.9% y/y increase in operating expenses tied to inflation and currency passthrough. Overall, EPS is projected to grow by 10.7% y/y to NGN46.37 (2024FY: NGN41.89), amid a 0.9% y/y rise in net finance costs. We model a 5-year EPS CAGR of 22.0% over the 2025-2029E horizon.
Sustained Capital Efficiency Amid Easing Returns: We expect OKOMUOIL to maintain robust capital efficiency despite a projected moderation in return metrics in 2025E, reflecting a more measured pace of net income growth as operating conditions stabilize. Our forecasts indicate that ROE will ease to 57.9% in 2025E (2024FY: 72.0%), while ROIC is anticipated to adjust to 90.2% (2024FY: 107.0%). Nevertheless, the expected ROIC remains significantly above the company’s estimated WACC of 26.5%, underscoring OKOMUOIL’s continued ability to generate strong economic value. Looking further ahead to the medium term (2025E–2029E), we project average ROE and ROIC of 57.7% and 95.6%, respectively—markedly higher than the 2020–2024FY averages of 43.4% and 52.4%. This outlook reflects sustained improvements in profitability and capital efficiency, driven by disciplined cost control and economies of scale across operations.
Valuation: We estimate a year-end target price of NGN621.40/s, using a blend of DCF (60.0%) and relative valuation (40.0%) methodologies. Our DCF fair value was derived using the FCFF (NGN634.39/s) and FCFE (NGN554.15/s) methods, with WACC of 26.5%, CoE of 27.4% and terminal growth rate of 4.0%. For EV/EBITDA, we utilised the 2025E Bloomberg MEA peer average (7.4x) and derived a fair value estimate of NGN625.17/s. On P/E, we utilised the Bloomberg Middle East & African (MEA) peer average 2025E multiple of 15.4x. Applying this to our 2025E EPS estimate of NGN46.37/s gives a FV of NGN714.01/s.
