August 14, 2025/Cordros Report
In this report, we revise our outlook and estimates for TOTAL for 2025E following the review of their H1-25 results. The company delivered a weak performance during the period, with revenue declining by 20.0% y/y, driven by broad-based declines across business segments. EBITDA margin contracted by 371bps y/y to 3.4%, compounded by the 34.9% y/y increase in operating expenses. Consequently, the company posted a loss per share of NGN8.41, reflecting the impact of weaker revenue and elevated finance cost (+65.5% y/y). We expect revenue to remain under pressure in H2-25, reflecting our outlook for continued weakness in sales volumes, which we believe was the primary contributor to the revenue decline in H1-25. Consequently, we revise our TP downwards by 26.3% to NGN480.00/s (Previous: NGN651.59/s) and downgrade our rating to a “SELL” (Previously: “HOLD”). Based on our estimates, TOTAL trades at a 2025E EV/EBITDA of 9.7x, representing a discount to the MEA peer average of 9.9x
Revenue decline to weigh on earnings: We forecast an 18.4% y/y decline in TOTAL’s revenue for 2025E, primarily driven by lower sales volumes, amid modest product price increases. Specifically, we estimate a 33.6% y/y drop in volumes, primarily reflecting softer demand for TOTAL’s products amid intensified price competition, which has led to a loss of market share. On pricing, we forecast the average PMS price for 2025E at NGN898.08 (2024FY: NGN873.75), based on our assumptions of average Brent crude price of USD66.00/bbl, and exchange rate of NGN1,588.00/USD. We expect the cost of sales to decline at a faster pace than revenue (-18.9% y/y), leading to a 60bps y/y expansion in gross margin to 11.7%. However, we forecast a contraction in EBITDA margin to 3.2% in 2025E (2024FY: 6.6%), largely due to the normalization of the other income line, which in 2024FY included a one-off gain (NGN25.03 billion) from the writeback of technical assistance provisions. Additionally, we expect the 10.2% y/y increase in OPEX to further contribute to the EBITDA margin contraction. Overall, we expect a 94.2% y/y decline in EPS to NGN4.71 in 2025E (2024FY: NGN80.99).
Operational weakness to drive debt uptick: With sales expected to remain subdued, we anticipate continued pressure on TOTAL’s cash generation through the remainder of the year. This liquidity strain is compounded by adverse working capital movements, particularly elevated outflows from payables, partly driven by foreign exchange-related adjustments, which has significantly weighed on operating cash flow. As a result, we expect the company to rely more heavily on debt to sustain operations. Specifically, we project working capital to remain negative at NGN107.04 billion (2024FY: NGN79.51 billion), translating to a negative cash flow from operations of NGN81.26 billion (vs positive cashflow from operation of NGN10.06 billion in 2024FY). Accordingly, we forecast TOTAL’s bank overdraft to rise to NGN202.67 billion in 2025E (2024FY:NGN115.70 billion).
Valuation: Our year-end target price is NGN480.00/s, derived from a 50/50 blend of DCF and sector-relative valuation estimates (EV/EBITDA). Our DCF FV is derived from an equal blend of FCFF (NGN216.19/s) and FCFE (NGN257.11/s) estimates, assuming a 24.1% WACC, 28.5% CoE and a 4.0% terminal growth rate. Similarly, our multiple-based FV (NGN723.35/s) was derived from an EV/EBITDA multiple, utilizing Bloomberg’s Middle East and African peer mean of 9.9x as multiplier.
