June 19, 2026/Cordros Report
We update our 2026E estimates for BUA Cement Plc (BUACEMENT) following the release of its Q1-26 results. The company reported revenue growth of 22.1% y/y, driven by higher cement prices and growth in bulk cement volume, EBITDA margin expansion of 871bps y/y to 53.9% and EPS of NGN5.21 (+117.4% y/y). Following our review, we revise our 2026E revenue growth estimate to +25.4% y/y (Prev.: +18.7% y/y) and EPS estimate to NGN16.82 (Prev.: NGN12.87).
These revisions reflect upward adjustments to our volume and price assumptions and a more favourable cost outlook. Accordingly, we raise our target price to NGN273.08/s (Prev.: NGN142.70/s) following the increase in our earnings forecasts.
However, we maintain our “SELL” rating, as the stock continues to trade at a substantial premium to both our intrinsic value estimate and peer valuations, leaving the risk reward skewed to the downside despite the company’s improving operating performance. We also forecast a 2026E DPS of NGN15.00, translating to a dividend yield of 4.0%. On our 2026E estimates, BUACEMENT is trading at a 2026E P/E of 22.5x and EV/EBITDA of 16.7x relative to MEA peer averages of 15.0x and 11.5x, respectively.
Improved pricing and volume outlook drive earnings upgrade: We revise our 2026E revenue growth forecast to 25.4% y/y (Prev.: +18.7% y/y) reflecting a slight uptick in projected sales volumes to 8.40Mt (Prev.:8.34Mt) and a higher realized price assumption of c.NGN175,000.00/t (Prev.: c.NGN168,000.00/t). Meanwhile, COGS growth is now projected at 12.5% y/y (Prev.: +16.9% y/y) and OPEX at 25.2% y/y (Prev.: +34.3% y/y). The revision to our COGS estimate is driven primarily by a lower energy cost growth assumption of +27.5% y/y (Prev: +37.7% y/y), as we expect more material benefits from the introduction of solid fuel at the Obu plant, and relative FX stability on related input costs. For OPEX, the downward revision reflects lower expected growth in distribution expenses (+35.3% y/y | Prev.: +53.0% y/y), as growth in fuel costs proves less severe than previously anticipated. Consequently, we expect EBITDA margin to expand by 417bps y/y to 52.0% (Prev.: -93bps to 46.8%). Furthermore, we project net finance income of NGN24.94 billion and EPS growth of 60.0% y/y to NGN16.82 (Prev.: +22.5% y/y to NGN12.87).
Return on capital continues to strengthen: BUACEMENT’s returns profile is expected to strengthen further in the near term. ROIC (return on invested capital) increased from 19.7% in 2024 to 42.4% in 2025 (2021–2025 average: 23.7%) and we forecast a further increase to 58.1% in 2026E, above the local peer average of 52.3%. The projected ROIC also remains well ahead of the company’s 18.6% WACC, indicating that earnings growth continues to outpace growth in the capital employed to generate those returns. The improvement is expected to be driven by stronger revenue growth and margin expansion, while the company’s deleveraging trajectory should moderate growth in invested capital. Beyond 2026E, we expect ROIC to remain elevated, averaging 92.2% over our 2026E–2030E forecast horizon.
Valuation: Our target price is NGN273.08/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 (NGN310.50/s) and FCFE (NGN257.69/s) estimates, assuming an 18.6% WACC, 23.3% CoE and 4.0% terminal growth rate. Similarly, our multiple based FV was derived from a blend of EV/EBITDA (NGN260.87/s) and P/E (NGN252.26/s) estimates, utilising MEA peer averages for both factors (11.5x and 15.0x, respectively) as multipliers.
