June 3, 2026/Cordros Report
In this note, we update our 2026E estimates and outlook for Lafarge Africa Plc (WAPCO) following the release of its Q1-26 results. We now forecast 2026E revenue growth of 33.2% y/y (Prev.: +26.1% y/y), alongside EBITDA margin expansion of 396bps y/y to 44.0% (Prev.: +10bps y/y to 40.1%) and EPS growth of 60.6% y/y to NGN27.23/s (Prev.: +31.5% y/y to NGN22.30/s). The upward revision to our estimates primarily reflects a stronger demand outlook, with sales volumes now projected at 7.25 million tonnes (Prev.: 6.98 million tonnes), supported by increased fiscal spending, uptick in infrastructure & construction activities, and sustained demand for premium cement products. Profitability is also expected to benefit from ongoing cost efficiency initiatives, including increased use of alternative fuels and CNG trucks. Accordingly, we raise our target price to NGN368.25/s (Prev.: NGN240.54/s), implying an upside potential of 7.7% relative to the current market price of NGN342.00/s, and reiterate our “HOLD” rating on the stock. That said, we believe additional upside could emerge from further improvements in working capital efficiency, lower capex intensity (<25.0%), and stronger free cash flow conversion. Based on our revised 2026E estimates, WAPCO is currently trading at 12.6x P/E and 8.2x EV/EBITDA, vs. MEA peer averages of 15.0x and 11.5x, respectively.
Higher volume assumptions lifts earnings forecast: We revise our 2026E revenue growth forecast upwards to 33.2% y/y (Prev.: +26.1% y/y), reflecting higher projected sales volumes (+15.0% y/y to 7.25 Mt | Prev.: +10.8% y/y to 6.98 Mt) alongside an uptick to our price assumption (+15.8% y/y to NGN196,000.00/tonne | Prev.: +13.8% y/y to NGN192,500.00/tonne). At the same time, we now forecast a 23.3% y/y increase in COGS (Prev.: +24.6% y/y). The downward revision to our cost growth assumptions reflects lower projected production fixed costs (+21.7% y/y vs. +44.4% y/y prior) and maintenance expenses (+22.1% y/y vs. +40.2% y/y prior), which offset upward revisions to our energy cost (+14.5% y/y vs. +7.0% y/y prior) and raw material cost (+42.4% y/y vs. +37.7% y/y prior) assumptions. Consequently, we now expect EBITDA margin to expand by 396bps y/y to 44.0% (Prev.: +10bps y/y to 40.1%). Finally, we now forecast EPS growth of 60.6% y/y to NGN27.23/s (Prev.: +31.5% y/y to NGN22.30/s).
Free cash flow now expected to remain positive: We now expect WAPCO to maintain positive free cash flow generation in 2026E despite elevated expansion related capex. Our revised expectations reflect stronger OCF projections, supported by improved profitability and better working capital management. Specifically, we now forecast OCF of NGN474.35 billion (Prev.: NGN384.63 billion), while we revise our capex expectations lower to NGN390.52 billion (Prev.: NGN403.30 billion), reflecting a more moderate pace of expansion spending. Consequently, we now forecast free cash flow of NGN83.83 billion (FCF margin: 5.9%) in 2026E, compared to our prior expectation of negative NGN18.67 billion (FCF margin: -1.4%).
Valuation: Our target price is NGN368.25/s, derived from a 50/50 blend of DCF and sector relative valuation estimates. Our DCF FV is derived from an equal blend of FCFF (NGN302.20/s) and FCFE (NGN292.96/s) estimates, assuming a 22.0% WACC, and a 4.0% terminal growth rate. Similarly, our multiple based FV was derived from a blend of EV/EBITDA (NGN469.33/s) and P/E (NGN408.50/s) estimates, utilising MEA peer averages for both factors (11.5x and 15.0x, respectively) as multipliers.
