March 16, 2026/Cordros Report
In this note, we update our 2026E estimates and outlook for Lafarge Africa Plc (WAPCO) following the release of its 2025FY results and subsequent management engagement. A key takeaway from the company’s earnings call was management’s confirmation that the 4.50MTPA capacity expansion at the Sagamu and Ashaka plants has commenced, with completion expected within 12 months and funding to be fully supported by internally generated cash. On the back of recent data and management discussions, we forecast 2026E revenue growth of 26.1% y/y, EBITDA margin of 40.1% (+10bps y/y), and EPS of NGN22.30 (+31.5% y/y). That said, we expect a free cash flow deficit of NGN18.67 billion in 2026E due to the planned USD250.00 million expansion capex spend, with capex intensity projected at 30.0%. Nonetheless, we raise our year-end target price to NGN240.54/share (Prev: NGN218.33/share). The uplift in our TP is primarily supported by profit expansion and stronger relative valuation outputs. However, we downgrade the stock to a “HOLD” given the limited upside of 12.5% from the current price (NGN213.90). Additionally, the higher capex is likely to constrain room for DPS growth; as such, we expect the company to maintain its 2025FY DPS of NGN10.00 in 2026E (Div yield: 4.7%). On our 2026E estimates, WAPCO is currently trading at 9.6x P/E and 5.9x EV/EBITDA, vs MEA peer averages of 14.1x and 9.5x, respectively.
Revenue and EPS growth of 26.1% and 31.5% expected in 2026E: We forecast revenue growth of 26.1% y/y in 2026E, underpinned by a 10.8% y/y increase in sales volumes to 6.98 million tonnes and a 13.8% y/y rise in average realised price to c.NGN192,500.00/tonne. Over 2026E–2030E, revenue is forecast to grow at a CAGR of 22.5%. We model a 24.9% y/y increase in cost of sales and a 24.3% y/y rise in OPEX. The increase in COGS reflects higher energy costs (+7.0% y/y | 33.1% of total COGS), alongside a sharper increase in raw material costs, (+37.7% y/y | 28.8% of COGS). For OPEX, growth is largely attributable to distribution expenses, which we expect to rise by 24.0% y/y (65.0% of OPEX). Consequently, we project a modest 10bps y/y EBITDA margin expansion to 40.1%. Below the operating line, we forecast a 50.3% y/y moderation in net finance gain to NGN9.56 billion, reflecting lower average investable cash balances through the year. Overall, we project EPS growth of 31.5% y/y to NGN22.30 (2026E – 2030E CAGR: 26.3%).
Elevated capex to weigh on free cash flow: We expect the c.USD250.00 million Sagamu and Ashaka expansion programme to push free cash flow into negative territory in 2026E. Our model implies a 440.5% y/y jump in capex to NGN403.30 billion (Capex intensity: 30.0%), reflecting the planned expansion spend alongside other recurring capital commitments. This sits above our projected operating cash flow of NGN384.63 billion. Consequently, we forecast free cash flow of negative NGN18.67 billion (FCF margin: -1.4%). That said, we see this as a conservative base case for now and acknowledge potential scope to revisit our capex assumptions later in the year.
Valuation: Our target price is NGN240.54/s, derived from a 60/40 blend of DCF and sector relative valuation estimates. Our DCF FV is derived from an equal blend of FCFF (NGN189.02/s) and FCFE (NGN180.44/s) estimates, assuming a 24.2% WACC, 24.2% CoE and 4.0% terminal growth rate. Similarly, our multiple based FV was derived from a blend of EV/EBITDA (NGN334.11/s) and P/E (NGN314.37/s) estimates, utilising MEA peer averages for both factors (9.5x and 14.1x, respectively) as multipliers.
