August 12, 2025/Cordros Report
In this report, we update our 2025E outlook for Presco Plc following a strong H1-25 performance. The company posted a 125.8% y/y increase in revenue, supported by higher production volumes and favourable domestic CPO pricing. EBITDA margin expanded by 475bps y/y to 66.7%, reflecting strong operating leverage and disciplined cost control, while EPS rose by 128.1% y/y to NGN88.72. Following this strong performance, we have revised our year-end target price upward by 15.6% to NGN1,581.59/share (Prev.: NGN1,367.87/share) and maintained our “HOLD” rating. The upward revision reflects our improved expectations for sustained output growth, and continued cost efficiency. On our estimates, Presco trades at 9.3x P/E and 5.6x EV/EBITDA, representing a discount to MEA peer averages of 11.8x and 7.6x, respectively.
Volumes & pricing to drive topline growth: We forecast PRESCO’s revenue to expand by 89.9% y/y in 2025E (Prev.: +46.9%), driven by stronger volumes and favourable pricing. The stronger-than-anticipated output from its Ghanaian subsidiary, GOPDC, alongside resilient domestic demand, is expected to underpin this performance. Total production is projected to rise by 15.1% y/y to 230,047 metric tonnes, reflecting improved mill efficiency and the ramp-up of new plantations. Domestic crude palm oil (CPO) prices are expected to remain elevated at NGN1.71 million/mt (2024FY: NGN1.13 million/mt), supported by structural supply-demand imbalances, sustained import constraints, and continued policy support for local sourcing, despite recent signs of naira stabilization. We also anticipate operating leverage benefits, with EBITDA margin expanding by 280bps to 71.3% (2024FY: 68.5%), driven by cost discipline, scale efficiencies, and moderating inflation. As a result, we project EPS to rise by 119.3% y/y to NGN166.81 in 2025E (2024FY: NGN76.07), implying a strong 23.0% CAGR over 2026 – 2030FY.
Premium valuation to hold on better margins: We expect PRESCO to sustain its valuation premium to OKOMUOIL through the rest of the year, anchored by superior profitability metrics, stronger earnings momentum, and clear strategic growth drivers. PRESCO’s EBITDA margin stands at 68.5% compared to OKOMUOIL’s 51.8%, with our 2025E forecasts pointing to a further widening to 71.3% (OKOMUOIL: 51.1%). EPS growth has also outpaced on a 5-year CAGR basis (PRESCO: +25.0% vs OKOMUOIL: +17.9%), underpinned by higher operational leverage, yield improvements, and scale efficiencies. The valuation premium is further reinforced by optimism around the acquisition of Ghana Oil Palm Development Company (GOPDC), expanding regional reach, and diversifying earnings. Although OKOMUOIL leads on FCF margins (2025E: 26.9% vs PRESCO: 18.9%) and dividend yields (2025E: 5.5% vs PRESCO: 4.4%), we believe investors will continue to reward PRESCO’s superior margins, expansion runway, and pricing power. For us, these structural advantages should sustain outperformance over the forecast period, even against OKOMUOIL’s stronger cash generation and shareholder returns.
Valuation: We revise our fair value estimate upward to NGN1,581.59/share, derived from an equal blend of DCF and relative valuation methods. DCF-based valuation is based on FCFF (NGN1,264.41/share) and FCFE (NGN994.67/share), using a WACC of 26.1%, cost of equity of 28.2%, and a terminal growth rate of 4.0%. Relative valuation applies Bloomberg MEA peer averages of 11.8x P/E and 7.6x EV/EBITDA, resulting in implied values of NGN1,961.10/share and NGN2,106.18/share, respectively.
