October 31, 2025/Cordros Report
We update our view on Guinness Nigeria Plc (GUINNESS) following their recently released results. In Q3-25, the brewer recorded gross and EBITDA margins expansions of 66bps y/y and 33bps y/y to 37.1% and 20.9%, respectively, reflecting strong topline growth (+64.7% y/y) and improved cost efficiency, amid FX stability, and easing inflationary pressures. Looking ahead, while we expect a Q4 uplift from festive-led demand recovery, margin progression will likely remain moderate due to sustained input cost pressures and a higher-than-expected tax run rate. Thus, we lower our revenue estimate to NGN724.91 billion (Previous: NGN756.21 billion) to account for slower-than-expected volume rebound. Accordingly, we revise our year-end target price to NGN171.34/s (Previous: NGN176.35/s) and maintain a “HOLD” rating, as near-term upside appears largely priced in. On our estimates, GUINNESS trades at 2025E P/E and EV/EBITDA multiples of 5.0x and 2.2x, respectively.
Slower volume recovery and cost pressures weigh on earnings outlook: We have revised our 2025E revenue forecast to NGN724.91 billion (previous: NGN756.21 billion) following softer-than-expected volume recovery, driven by sustained consumer price sensitivity and slower market off-take after earlier price adjustments. We now project gross and EBITDA margins of 32.9% (Previous: 33.9%) and 14.9% (previous: 15.6%) for the period, as we believe lingering pressures from elevated logistics and packaging costs will continue to weigh on profitability. We have also raised our effective tax rate assumption to 42.0% (previous: 30.0%) to align with the 15M-25 run-rate. Overall, these revisions reduce our 2025E EPS estimate to NGN16.06 (Previous: NGN22.55 | 12M-24: loss per share of NGN25.00).
Leverage metrics strengthen on improved earnings and equity base: We expect GUINNESS’s leverage position to improve moderately by year end, supported by stronger earnings and a healthier equity base. Although total borrowings are projected to increase to NGN63.57 billion (2024FY: NGN40.13 billion), shareholders’ equity is forecast to expand materially to NGN53.54 billion (2024FY: NGN2.16 billion) on the back of profitability recovery. Consequently, the debt-to-equity ratio is expected to decline sharply to 1.2x by 18M-25 (2024FY: 18.6x), indicating a more sustainable capital structure. Meanwhile, a stronger EBITDA generation (NGN108.08 billion vs. NGN35.49 billion in 2024FY) should keep the net debt/EBITDA ratio comfortably low at 0.5x by 18M-25 (12M-25: 1.0x), underscoring the company’s ample debt-servicing capacity despite temporary cash flow pressures.
Valuation: Our target price is NGN171.34/s, derived from an equal blend of DCF and sector-relative valuation estimates. Our DCF FV (NGN120.00/s) is derived from an equal blend of FCFF (NGN126.49/s) and FCFE (NGN115.20/s) estimates, assuming a 19.4% WACC, and 4.0% terminal growth rate. On P/E (TP: NGN217.18/s), we utilised the 2025E Middle East & African (MEA) peer average multiple of 18.4x and applied this to our annualized EPS estimate of NGN10.70. For EV/EBITDA (TP: NGN226.49/s), we utilised the 2025E MEA peer average (7.7x).
