August 12, 2026/Cordros Report
We update our view on PRESCO following the release of its H1-26 results. The period was challenging, reflecting softer domestic crude palm oil prices and elevated operating costs. Accordingly, revenue was broadly flat (+0.2% y/y), while EBITDA margin remained stable at 66.8% (+20bps y/y) and EPS declined by 20.2% y/y to NGN71.00/s. For 2026E, we remain cautious as we expect the current operating pressures to persist through the remainder of the year. On this basis, we model a year-end TP of NGN1,526.14/s, implying a 25.7% downside from the current price of NGN2,055.30/s, and we assign a “SELL” rating on the stock. Our view is underpinned by: (1) muted 2026E revenue growth of 0.6% y/y, as a 16.7% y/y decline in average realised CPO prices largely offsets a 17.7% y/y volume growth; (2) a 13.24ppts y/y contraction in EBITDA margin to 57.3%, reflecting faster growth in COGS (+9.8% y/y) and OPEX (+40.2% y/y); and (3) a 15.8% y/y decline in EPS to NGN102.18/s, reflecting margin compression and a 16.7% y/y increase in shares outstanding following the rights issue completed in Dec-25. We also forecast 2026E DPS of c.NGN37.00/s (Interim: NGN25.00/s; Final: NGN12.00/s), implying a dividend yield of 1.8%. On our 2026E estimates, PRESCO trades at 20.1x P/E and 12.6x EV/EBITDA, compared with MEA peer averages of 16.1x and 12.1x, respectively.
Pricing weakness and margin compression to weigh on earnings: We forecast a modest 0.6% y/y increase in revenue in 2026E (2026E–2030E CAGR: 20.9%), as 17.7% y/y volume growth only partly offsets a 16.7% y/y decline in realised CPO prices. We expect volumes to benefit from a recovery in domestic demand, while pricing remains pressured by softer CPO prices and increased import competition. On costs, we forecast COGS and OPEX to rise by 9.8% y/y and 40.2% y/y, respectively, reflecting higher production, transport, selling and staff costs. Consequently, we expect EBITDA margin to contract by 13.4ppts y/y to 57.3%. Below the operating line, we project a swing to net finance income of NGN1.08 billion (2025: net finance cost of NGN36.97 billion), supported by a 56.3% y/y decline in finance costs on a lower debt balance. Nonetheless, we forecast PBT decline of 4.3% y/y, while EPS is projected to decline by 15.8% y/y.
Near-term pressure masks a stronger long-term outlook: PRESCO faces near-term pressure from weaker domestic CPO pricing and rising import competition, which should temper earnings growth. However, we remain constructive on the medium- to long-term outlook, supported by recent acquisitions and greenfield investments that expand the company’s future production base. Given the palm oil maturity cycle, these assets should contribute more meaningfully over the next five to seven years as plantations approach peak yields. Importantly, PRESCO continues to generate healthy cash flows from existing operations, providing the financial capacity to fund these investments and positioning the company for a stronger production and earnings profile over time.
Valuation: Our target price is NGN1,526.14, derived from a 50/50 blend of DCF and sector relative valuation estimates. Our DCF FV is derived from an equal blend of FCFF (NGN1,409.68) and FCFE (NGN1,079.24) estimates, assuming a 17.5% WACC, 18.8% CoE and 4.0% terminal growth rate. Similarly, our multiple-based FV was derived from a blend of EV/EBITDA (NGN1,970.55) and P/E (NGN1,645.09) estimates, utilising MEA peer averages for both factors (12.1x and 16.1x, respectively) as multipliers.