April 22, 2026/Cordros Report
We update our 2026E estimates for BUA Cement Plc (BUACEMENT) following the release of its 2025FY results. During the period, the company reported revenue growth of 34.6% y/y, largely price-driven amid volume softness, alongside a 16.75ppts y/y expansion in adjusted EBITDA margin to 47.8% and EPS growth of 381.7% y/y to NGN10.51. For 2026E, we expect continued topline expansion, supported by further price adjustments (+15.3% y/y) and a modest recovery in volumes (+2.9% y/y) as construction activity improves. Higher cement prices primarily reflect cost passthrough, given persistent cost pressures, particularly on energy. We forecast revenue growth of 18.7% y/y, EBITDA margin contraction of 93bps y/y to 46.8%, and EPS growth of 22.5% y/y to NGN12.87. Consequently, we raise our target price to NGN142.70/s, but maintain our SELL rating, as the stock continues to trade at a premium to our fair value estimate, implying a 55.0% downside from its current price (NGN317.00/s). Additionally, we forecast a 2026E DPS of NGN12.25, implying a dividend yield of 3.9% at current price (NGN317.00). On our 2026E estimates, BUACEMENT trades at 24.6x P/E and 16.7x EV/EBITDA, vs MEA peer averages of 12.7x and 8.3x, respectively.
Higher pricing to drive earnings growth: We forecast revenue growth of 18.7% y/y in 2026E, driven by a 15.3% y/y increase in average realised prices to c. NGN167,000.00 and a 2.9% y/y rise in sales volumes to c.8.34 million tonnes. On costs, we model a 16.7% y/y increase in cost of sales and a 34.3% y/y rise in OPEX. The increase in COGS is driven primarily by higher energy costs (+37.7% y/y; 50.1% of COGS), reflecting elevated oil prices, and raw material costs (+19.1% y/y; 16.9% of COGS). Meanwhile, OPEX growth is largely driven by higher distribution expenses (+53.0% y/y | 58.3% of OPEX). As a result, we expect a 93bps y/y contraction in EBITDA margin to 46.8%, as the increase in operating costs outpaces topline expansion. Below the operating line, we model a 17.1% y/y increase in finance costs to NGN65.94 billion, driven by a higher debt balance as the company is likely to draw down the outstanding c. USD200.00 million IFC facility to support its expansion plans. Finally, we project EPS growth of 22.5% y/y to NGN12.87.
Valuation premium difficult to justify: We see no fundamental basis for BUACEMENT’s premium valuation relative to peers. The stock trades at 24.6x 2026E P/E and 16.7x EV/EBITDA, materially above local peers average at 10.5x and 6.3x, despite a weaker near term operating outlook. For 2026E, we forecast revenue growth of 18.7% vs 21.2% for peers and EBITDA growth of 16.4% vs 22.1%, alongside a 93bps y/y contraction in EBITDA margin, in contrast to a 32bps expansion for peers. EPS growth of 22.5% also trails peer average of 30.1%. Structurally, BUACEMENT remains more exposed to energy cost volatility, with limited adoption of alternative fuels, while peers benefit from better cost optimisation and commercial flexibility. In our view, the current valuation premium is not supported by the company’s relative positioning, earnings quality, or operating outlook.
Valuation: Our target price is NGN142.70/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 (NGN164.09/s) and FCFE (NGN99.39/s) estimates, assuming a 18.5% WACC, 29.4% CoE and 4.0% terminal growth rate. Similarly, our multiple based FV was derived from a blend of EV/EBITDA (NGN154.79/s) and P/E (NGN163.51/s) estimates, utilising MEA peer averages for both factors (8.3x and 12.7x, respectively) as multipliers.
