June 22, 2026/Cordros Report
In this note, we update our estimates and outlook for NASCON Allied Industries Plc (NASCON) for 2026E. In Q1-26, the company reported EPS growth of 30.5% y/y to NGN14.63 despite a 6.0% y/y decline in revenue. The EPS growth was driven by a significant improvement in cost efficiency, as cost-to-sales margin declined by 922bps y/y to 48.0% (Q1-25: 57.2%) on -24.0% y/y decline in raw materials input costs. Following our review, we update our 2026E estimates, anchored on: (1) improving operating leverage, (2) normalization of CAPEX intensity to 1.0% (2025FY: 15.5%) following the completion of the group’s logistics-led investment cycle in 2025FY, (3) structurally stronger free cash flow generation, and (4) a sustainable shareholder return profile over 2026-2030E. That said, we model a target price of NGN204.16/share, implying a 7.0% downside to the current market price of NGN219.50/share, and therefore maintain our “HOLD” recommendation on the stock. On our estimates, NASCON currently trades at a 2026E P/E and EV/EBITDA of 12.9x and 8.5x compared to MEA peer average of 17.9x and 9.2x, respectively.
Volume recovery and efficiency gains to drive earnings growth: We project 2026E revenue growth of 15.3% y/y (2026–2030E CAGR: 9.7%), supported by 8.7% volume growth and an estimated 10.0% average price increase across the salt and seasoning segments. On the cost side, continued localisation efforts, a more stable FX environment, and easing imported input cost pressures should drive a 418bps improvement in the COGS ratio to 47.4% (2025A: 51.6%), supporting margin expansion. Consequently, gross margin is forecast to expand by 418bps y/y to 52.6%. Below the gross profit line, OPEX-to-sales ratio of 19.3% (2025FY: 19.4%) is expected to lag revenue growth, supporting a 636bps expansion in EBITDA margin to 36.2% and reflecting improving operating leverage. With net finance costs expected to remain modest at NGN5.39 billion in 2026E (2025FY: NGN5.35 billion), we expect the improvement in operating profitability to translate efficiently into stronger earnings visibility and bottom-line growth. Accordingly, we project 2026E EPS at NGN17.01, representing growth of 37.1% y/y.
Strong Cash Generation Supports Deleveraging: The group’s borrowings have declined sharply following a sustained deleveraging cycle, falling from NGN5.53 billion in 2023FY to NGN2.86 billion in 2024FY and further to NGN66.53 million in 2025FY, driven by strong internal cash generation. This trend has persisted into 2026, with borrowings moderating slightly to NGN65.04 million in Q1-26. Given our expectation of robust operating cash flows (CAGR: +5.1%) and normalized capital expenditure (CAGR: -42.6%) over 2026-2030E, we expect borrowings to remain largely negligible through 2030E, reinforcing the group’s strong balance sheet and financial flexibility.
Valuation: Our target price is NGN204.16/s derived from an equal blend of a DCF and sector relative valuation approach (P/E & EV/EBITDA). Our DCF FV is derived from an equal blend of FCFF (NGN150.51/s) and FCFE (NGN124.03/s), assuming a 22.3% WACC, 23.2% cost of equity, and a 4.0% terminal growth rate. Similarly, our multiple-based FV was derived from a blend of EV/EBITDA (NGN237.56/s) and P/E (NGN304.55/s) multiples, utilising Bloomberg’s Middle East and African peer median for both factors (9.2x and 17.9x) as multipliers.