August 7, 2025/Cordros Report
In this report, we update our outlook and estimate for C & I Leasing Plc (CILEASING) for 2025E following the release of H1-25 financials. During the period gross earnings grew moderately by 12.5% y/y, driven by improved broad-based demand in marine and fleet management services. Following our review, we raise our year-end target price (TP) by 17.9% to NGN8.82/s (Prev: NGN7.48/s) but downgrade our rating to a “HOLD” (from “BUY”). The upward revision in our TP is primarily driven by an 8.0% cut to our OPEX forecast and a downward adjustment in our expected effective tax rate to 40.2% (Prev: 68.0%), in line with 2024FY rate. Sequentially, we now forecast 2025E EPS at NGN0.52 (Prev: NGN0.42) and total dividend per share of NGN0.10, implying a 1.3% dividend yield based on the last closing price of NGN7.61 (06 August). Based on our estimates, CILEASING is trading at a 2025E P/E of 14.6x and an EV/EBITDA of 3.5x.
Revenue growth and lower tax rate drive earnings upgrade: We now forecast a 12.8% y/y increase in gross earnings to NGN41.46 billion in 2025E (Prev: 15.7%), primarily reflecting our expectation of sustained naira stability (NGN1,588.00 by year-end vs. prior NGN1,700.00), which should moderate exchange rate conversion gains. Across major income lines, we project broad-based growth – lease income (+13.7% y/y), net outsourcing income (+21.6% y/y), and tracking income (+13.1% y/y). Meanwhile, direct expenses are now projected to rise by 30.2% y/y (Prev: +35.6% y/y), primarily driven by a 32.4% increase in lease expenses. This reflects higher costs associated with lease asset maintenance—including marine and fleet operations (fueling, spares)—and lease insurance. Consequently, we anticipate an EBITDA margin contraction of 405bps y/y to 45.3% (Prev: 47.7%), resulting from the faster pace of growth in direct expenses relative to revenue. Finally, we revise our 2025E EPS forecast upward to NGN0.52 (previously NGN0.42), reflecting a lower projected effective tax rate of 40.2% (Prev: 68.0%). This adjustment aligns with the audited 2024 tax rate and is primarily driven by deferred tax reversals and tax-exempt income. Over the 2025–2029E horizon, we model a 5-year EPS CAGR of 24.8%.
Leverage metrics are expected to improve over our forecast horizon: We expect a gradual improvement in CILEASING’s leverage metrics over the forecast period. Precisely, net debt-to-equity ratio is expected to decline from an average of 1.9x (2020–2024) to an average of 0.7x (2025E–2029E), reflecting our view that balance sheet growth will outpace debt accumulation. Similarly, net debt-to-EBITDA ratio is projected to improve from 3.5x over 2020–2024 to 1.9x over 2025E–2029E, supported by stronger operating profitability. Meanwhile, interest coverage is forecast to rise from 1.0x (2020–2024) to 1.2x (2025E–2029E), driven by robust earnings growth and anticipated easing in financing costs. Nonetheless, we note that these ratios remain relatively weak, indicating lingering pressure on the company’s ability to comfortably meet interest obligations.
Valuation: Our target price is NGN8.82/s, derived from an 80/20 blend of DCF and sector-relative (P/E & EV/EBITDA) valuation estimates. Our DCF FV is derived from an equal blend of FCFF (NGN9.73/s) and FCFE (NGN7.63/s) estimates, assuming a 17.2% WACC, 26.8% CoE, and a 4.0% terminal growth rate. For EV/EBITDA, we utilised the 2025E Bloomberg Middle East & African (MEA) Oil & Gas servicing peer average (4.2x) and derived a fair value estimate of NGN11.78/s. On P/E, we utilised the Bloomberg MEA peer average 2025E multiple of 13.3x. Applying this to our 2025E EPS estimate of NGN0.52/s gives a FV of NGN6.95/s.
