August 4, 2025/Cordros Report
In this report, we update our views on Okomu Oil Palm Company Plc (OKOMUOIL) for 2025E, following the strong H1-25 performance. Revenue grew by 73.1% y/y (Q2-25: +127.5% y/y), driven by favourable pricing, while EBITDA margin expanded by 11.01ppts y/y to 54.8% (Q2-25: +29.48ppts y/y to 51.2%) despite higher OPEX (+160.4% y/y). EPS rose sharply by 135.4% y/y to NGN49.83 (Q2-25: NGN27.05). Given the strong result, we revise our year-end target price upwards by 38.0% to NGN1,137.98/share (Prev.: NGN824.35/share) and maintain our “HOLD” rating. The upward revision reflects our reassessment of revenue growth expectations, underpinned by stronger domestic CPO pricing amid steady production volumes despite a modest decline in projected EBITDA margin due to rising input and maintenance costs. On our estimates, OKOMUOIL trades at forward P/E and EV/EBITDA multiples of 14.4x and 8.4x, respectively, relative to MEA peer averages of 21.8x and 9.5x.
Price-led upside to sustain 2025FY profitability: We now project 81.7% y/y revenue growth for 2025E (Prev.: 27.3% y/y), reflecting strong domestic pricing. In our recent engagement with management, it was confirmed that CPO prices are trending well above internal projections, reaching the highest levels in the company’s history. This is driven by robust domestic demand and tight supply, with all output readily absorbed. Given that no price correction is anticipated in the near term, we have revised our average CPO price forecast to NGN2.74 million/tonne (Prev.: NGN1.69 million/tonne). On volumes, we project processed CPO output to rise by 10.3% y/y to 75,820 tonnes (2024FY: 68,721 tonnes), supported by sustained harvesting activity and stable estate productivity. For the rubber segment, we maintain our previous volume and price estimates, with a projected 8.0% y/y volume growth to 9,931 tonnes and average price of NGN2.84 million/tonne, broadly in line with Q2-25 trends and stable international demand. Despite the strong topline growth, EBITDA margin is projected to decline by 235bps y/y to 49.5% in 2025E (Prev.: 51.8%), pressured by rising input costs, increased maintenance expenses, and lean-season production constraints. Operating expenses are expected to grow by 14.4% y/y (Prev.: +51.8% y/y), reflecting scale-up efforts to support higher output. Overall, EPS is projected to increase by 74.4% y/y to NGN73.04 (2024FY: NGN41.89)
Strong FCF generation underscores long-term value: We anticipate that OKOMUOIL will sustain its strong internal funding capacity through 2025E and beyond, reinforcing its long-term value proposition. Free cash flow (FCF) is projected to grow by 48.2% y/y to NGN60.91 billion in 2025E (2024FY: NGN41.10 billion), supported by elevated operating cash flows and a relatively modest capital expenditure profile. This results in an estimated FCF margin of 31.6% (2023FY: 27.7%). Looking further ahead (2025E–2029E), we forecast an average FCF margin of 26.8%, highlighting the company’s strong capacity to fund dividend distributions and reinvestment initiatives organically, without relying on external debt.
Valuation: We estimate a year-end target price of NGN1,137.98/share, using a blend of DCF (50.0%) and relative valuation (50.0%) methodologies. Our DCF fair value was derived using the FCFF (NGN958.05/share) and FCFE (NGN805.66/share) methods, based on a 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 (9.5x) and derived a fair value estimate of NGN1,194.45/share. On P/E, we applied the 2025E MEA peer average multiple of 21.8x to our 2025E EPS estimate of NGN73.04/share, resulting in a fair value of NGN1,593.77/share.
