August 14, 2025/Cordros Report
In this note, we update our estimates and outlook on NASCON Allied Industries Plc (NASCON). As we noted in our summary, the producer’s number remained resilient driven by increased sales and sustained efficiency gains, despite heightened consumer price sensitivity. Specifically, we like that NASCON was able to implement meaningful cost levers particularly in Q2-25, which helped preserve operating efficiency despite increased price sensitivity and softer profit performance on a quarterly basis. In line with the preceding, we maintain our positive outlook on NASCON for 2025E and raise our year-end target price to NGN112.24/s (previous: NGN64.79/s) and maintain our “HOLD” rating. The increase in our target price reflects our expectations of a stronger growth outturn than earlier envisaged, following sustained cost efficiencies and better-than-expected sales resilience amid consumer headwinds. Also, our revised TP reflects efficiency gains for the producer as we retain our expectations of milder cost pressures. Given our expectation of sustained profitability, we forecast a DPS of NGN6.87 for 2025E, equating to a dividend yield of 7.6% based on the current price (NGN90.50/s). On our estimates, NASCON currently trades at a 2025E P/E and EV/EBITDA of 3.5x and 1.9x – compared to MEA peer average of 7.6x and 6.2x, respectively.
Strong cost discipline to defend margins through 2025FY: We retain our 2025E revenue growth forecast of 39.6%, underpinned by robust pricing gains and strengthened B2B framework in its core portfolio – salts (+42.1% y/y). Growth in the seasoning segment is projected at a modest +0.4% y/y, constrained by management’s low-price strategy to deepen market penetration amid heightened competition. Over the medium term, we model an average growth of 16.6%% in 2025 – 2029E. We raise our 2025E gross margin forecast by 750bps to 52.1% (previous: 44.6%), as we account for slower growth in costs (+24.1% y/y | 2024FY: +77.7% y/y). The margin uplift, coupled with softer growth in operating expenses (+4bps y/y | 2024FY: +29.2% y/y) drives our 2025E EBITDA margin projection to 34.1% (previous: 21.7%). Consequently, we revise our 2025E EPS estimate upwards to NGN15.26 (previous: NGN8.92) translating to a growth of 164.6% from 2024FY (NGN5.77). Over 2025 – 2029E, we project an EPS CAGR of 90.5%.
Robust FCF to Support Higher Dividend Payouts: Following the strong Q2-25 performance, we now forecast a 2025E free cash flow margin of 18.8% (previous: 8.0% | 2024FY: 1.6%), reflecting stronger operating cash generation and more efficient capital allocation. Over 2025–2029E, we expect NASCON’s FCF margin to average 21.8%, well above the five-year historical average of 10.7%. We reiterate that NASCON’s robust free cash flow profile provides a solid foundation for sustainable dividend distributions, with our 2025E DPS estimate at NGN6.87/s (previous: NGN2.68/s; 2024FY: NGN2.00/s).
Valuation: Our target price is NGN112.24/s derived from an equal blend of a DCF and sector relative valuation approach (EV/EBITDA). Our DCF FV is derived from an equal blend of FCFF (NGN103.80/s) and FCFE (NGN90.93/s), assuming a 27.3% WACC and a 4.0% terminal growth rate. Similarly, our multiple-based FV was derived from a blend of EV/EBITDA (NGN138.04/s) and P/E (NGN116.31/s) multiples, utilising Bloomberg’s Middle East and African peer median for both factors (6.2x and 7.6x) as multipliers.
