August 14, 2025/Cordros Report

We update our views on Guinness Nigeria Plc (GUINNESS) following the release of their 12M-25 unaudited results. After posting a NGN54.77 billion loss in 12M-24, GUINNESS delivered a 12M-25 PAT of NGN16.20 billion, marking strong earnings rebound driven by a combination of aggressive price-led growth, product mix optimisation, and enhanced cost efficiency. Our revised forecasts now reflect lower cost pressures in 2025E relative to 2024FY, aided by the company’s containment efforts in 12M-25, which are expected to drive a gross margin of 33.9% (2024FY: 30.5%) and an EBITDA margin of 15.6% (2024FY: 12.0%). Additionally, operating cash flow is projected to increase to NGN78.83 billion in 2025E (2024FY: NGN34.12 billion). These factors underpin our higher EPS forecast (NGN22.55 vs. NGN7.39 in 12M-25 and a loss per share of NGN25.00 in 2024FY), as well as an upward revision of our year-end target price to NGN176.35/s (previous: NGN87.59/s). We retain our “HOLD” rating as the stock trades near our fair value.  Our medium-term view remains anchored on Tolaram-led supply chain efficiencies, local sourcing, and cost synergies. On our estimates, GUINNESS is currently trading at a 2025E P/E and EV/EBITDA multiples of 3.5x and 1.9x, respectively. 

Earnings rebound on cost efficiency and gradual volume gains: We project revenue of NGN756.21 billion in 2025E for GUINNESS, supported by modest volume growth across key product categories, including RTDs (e.g., Smirnoff Ice), Guinness Stout, and Malta Guinness. The brewer also benefits from operational synergies under Tolaram’s management, particularly around energy efficiency, procurement, and manufacturing cost optimisation. These efforts, alongside increased local sourcing (65.0%) and bulk sorghum purchases, are expected to drive margin expansion. A relatively stable currency and disinflationary trends further strengthen the margin outlook. Accordingly, we project a gross margin of 33.9% in 2025E (vs. 29.9% in 12M-25 and 30.5% in 2024FY), and an EBITDA margin of 15.6% (vs. 11.8% in 12M-25 and 12.0% in 2024FY). Overall, we expect a strong earnings recovery, with EPS estimated at NGN22.55 in 2025E (vs. NGN7.39 in 12M-25 and a loss per share of NGN25.00 in 2024FY).

Stronger equity base to ease leverage concerns: GUINNESS’ equity position is expected to strengthen materially, rising from NGN2.16 billion in 2024FY to NGN61.14 billion in 2025E, reflecting the reversal of accumulated losses as the business returns to profitability. This rebound in equity will serve as a critical anchor for deleveraging, with the company’s debt-to-equity ratio projected to fall sharply to 1.0x in 2025E from a 2024FY peak of 18.6x—caused by FX-induced losses and capital erosion. Over the 2020–2024FY period, the average leverage ratio stood at 4.1x, but we expect a significant moderation over the medium term, averaging 0.6x between 2025E and 2029E, driven by improved earnings quality, stronger free cash flow generation, and a more resilient capital structure.

Valuation: Our target price is NGN176.35/s, derived from an equal blend of DCF and sector-relative valuation estimates. Our DCF FV (NGN117.26/s) is derived from an equal blend of FCFF (NGN136.96/s) and FCFE (NGN97.56/s) estimates, assuming a 20.1% WACC, and 4.0% terminal growth rate. On P/E (TP: NGN277.27/s), we utilised the 2025E Middle East & African (MEA) peer average multiple of 18.4x and applied this to our annualised EPS estimate of NGN15.03. For EV/EBITDA (TP: NGN193.61/s), we utilised the 2025E MEA peer average (7.7x).