July 30, 2025/Cordros Report
We update our view on BUA Cement Plc (BUACEMENT) following a review of the company’s H1-25 performance. During the period, revenue grew by 59.4% y/y, EBITDA margin expanded by 20.28 ppts to 46.5% and earnings per share (EPS) surged by 428.1% y/y to NGN5.34. On the back of this performance, we raise our target price (TP) by 29.6% to NGN98.33/s (previous: NGN75.87/s), reflecting expectations of an improved EBITDA margin (+15.40 ppts y/y) and earnings (+354.5% y/y) outlook. Nonetheless, we downgrade our rating to a “SELL” (from “HOLD”), as the current market valuation (NGN135.00/s) appears stretched relative to our fundamentals-based assessment. Meanwhile, we upgrade our 2025E EPS forecast to NGN9.92 (previous: NGN8.64) and project a DPS of NGN9.77, translating to a 7.2% dividend yield at the last closing price (29 July). On our estimates, BUACEMENT trades at a 2025E P/E of 13.6x and EV/EBITDA of 8.5x.
Topline strength and stronger margins to propel EPS expansion: We maintain our positive outlook on BUA Cement’s topline, projecting a 40.6% y/y growth in 2025E revenue, driven by a 12.9% y/y increase in sales volume to 9.53 million tonnes and a 24.5% y/y rise in average cement prices. Volume growth is expected to remain supported by elevated construction activity, while the pricing uplift reflects a favourable pricing environment. On the cost side, we now forecast a more moderate increase in cost of sales (+7.3% y/y vs. prior: +16.8% y/y) and operating expenses (+43.3% y/y vs. prior: +46.4% y/y), as we anticipate continued margin discipline and efficiency gains, particularly in raw materials and energy costs, on the back of management’s sustained focus on cost control. As a result, we now project a 15.40 ppts expansion in EBITDA margin to 46.4% (previously: +10.78 ppts to 41.8%). EPS is also expected to surge by 354.5% y/y to NGN9.92 (previously: +295.9% y/y to NGN8.64). Over the 2025E–2029E forecast horizon, we estimate EPS will grow at a CAGR of 52.3%.
FCF margin set to expand as capex winds down: We expect BUA Cement’s free cash flow (FCF) margin to improve in 2025E, rising from 13.1% in 2024 to 21.8%. This will primarily be supported by stronger operating cash flows and a significant reduction in capital spending. For context, capex intensity is projected to decline from 33.2% to 3.1% as major outlays tied to plant construction — including work-in-progress assets — have largely been completed. While we highlight that the development of a 3 million tonnes per annum greenfield plant in Ososo, Edo State is still ongoing, we believe most of the associated costs have already been cleared, limiting further impact on 2025 cash flows. Thus, the drag from expansionary spending on near-term cash flows is expected to be limited, positioning the company for improved cash generation efficiency in 2025E.
Valuation: Our year-end target price is NGN98.33/s, derived from a 60/40 blend of DCF and sector relative valuation (P/E & EV/EBITDA) estimates. Our DCF FV is derived from an equal blend of FCFF (NGN86.34/s) and FCFE (NGN79.28/s) estimates, assuming a 24.2% WACC, 26.2% COE and a 4.0% terminal growth rate. For our EV/EBITDA valuation, we applied the Bloomberg 2025E Middle East & Africa (MEA) peer average multiple of 7.0x to BUA Cement’s projected EBITDA, yielding a fair value estimate of NGN111.03/s. On a P/E basis, we used the 2025E Bloomberg MEA peer average multiple of 13.3x, which, when applied to our EPS forecast of NGN9.92, results in a fair value of NGN132.19/s.
