August 01, 2025/Cordros Report
In this note, we revise our 2025E outlook on Dangote Cement (DANGCEM) following a robust H1-25 performance. During the period, the company reported modest topline growth (+17.7% y/y), improved EBITDA margin (+781bps y/y to 45.6%) and a 173.1% surge in EPS to NGN30.47. Building on this performance, we raise our 2025E target price by 11.4% to NGN604.91/s (previous: NGN542.98/s), reflecting a slower-than-expected cost of sales growth (+7.3% y/y) and an upward revision to our EBITDA margin assumptions (+633bps y/y to 44.9%). Despite the valuation uplift, we downgrade our rating to “HOLD” (from “BUY”) as the current price of NGN528.30/s offers a limited upside of 14.5%. Meanwhile, we now project 2025E EPS to grow by 105.8% y/y to NGN61.22 and expect a DPS of NGN50.00, translating to a 9.5% dividend yield (31 July). Based on our estimates, DANGCEM is trading on a 2025E P/E of 8.6x and EV/EBITDA of 5.5x.
Revenue, cost, and margin tailwinds to drive earnings surge: We now forecast 2025E aggregate revenue growth of 20.3% y/y (previous: +21.4% y/y), reflecting a stronger outlook for Nigeria (+32.4% y/y vs. prior +27.3%) but offset by a downward revision in Pan-Africa revenue (-5.1% y/y vs. prior +5.2%). The upward revision in Nigeria reflects expectations of a 30.0% y/y increase in average cement prices to c.NGN161,000/t (prior: +25.0% y/y), while our volume growth estimate is unchanged at 1.8% y/y to 18.00Mt. For Pan-Africa, the weaker revenue outlook stems from a revised sales volume decline of 8.2% y/y to 10.22Mt (prior: -2.3% y/y), reflecting sustained demand softness in key markets such as Senegal (-20.0% y/y), Ethiopia (-7.2% y/y), and South Africa (-14.4% y/y). In addition, we revise our Pan-Africa average price growth forecast downward to 3.4% y/y (previous: +7.7%), reflecting a more competitive pricing environment and stabilising currencies. On the cost side, we now model a 7.3% y/y increase in cost of sales and a 9.5% y/y rise in operating expenses (vs. prior: +10.2% and +12.5%, respectively), benefitting from cost-saving initiatives — such as alternative fuel adoption and CNG truck rollouts — combined with currency stability and lower energy prices. Overall, we now expect EBITDA margin to expand by 633bps y/y to 44.9% (prior: +502bps to 43.6%), translating into a 105.8% y/y surge in EPS to NGN61.22 (previous: +80.3% to NGN53.61).
Improved earnings to support broader return profile in 2025E: Return metrics are projected to strengthen meaningfully in 2025E, reflecting the impact of a 44.7% y/y increase in operating profit and a 105.8% y/y surge in earnings. Precisely, ROE is expected to rise to 35.4% (2024FY: 23.1%), largely supported by improved net profitability. Similarly, ROIC is forecast to expand to 24.7% (2024FY: 18.0%), slightly above our estimated WACC of 24.3%, suggesting a more balanced capital return profile. Meanwhile, ROCE is projected to increase to 18.7% (2024FY: 10.4%), driven by higher EBIT generation relative to capital employed. Overall, the step-change in return metrics reinforces the quality of earnings growth and signals enhanced value creation potential heading into 2025E.
Valuation: Our year-end target price is NGN604.91/s, derived from a 50/50 blend of DCF and sector relative valuation (P/E & EV/EBITDA) estimates. Our DCF FV is derived from an equal blend of FCFF (NGN473.28/s) and FCFE (NGN418.12/s) estimates, assuming a 24.3% WACC, 27.9% COE and a 4.0% terminal growth rate. Meanwhile we utilised Bloomberg’s Middle East and African (MEA) peer average 2025E P/E (12.8x) and EV/EBITDA (7.4x) to arrive at a FV of NGN786.26/s and NGN741.98/s, respectively.
