August 13, 2026/Cordros Report
In this note, we update our 2026E estimates and outlook for HBM Nigeria Plc (HBMNG) following the release of its H1-26 results. The company delivered a strong performance, with revenue and EPS increasing by 31.2% y/y and 57.0% y/y, respectively, supported by higher volumes (c. +9.4% y/y), stronger pricing (c. +20.0% y/y) and improved cost efficiencies. Following our review, we raise our 2026E revenue growth forecast to 35.6% y/y (Prev.: 33.2% y/y) and EPS estimate to NGN28.58 (Prev.: NGN27.23). The revisions primarily reflect a stronger pricing outlook, with our average realised price assumption raised to c.NGN204,000.00/tonne (Prev.: c.NGN196,000.00/tonne), more than offsetting a downward revision to our sales volume forecast to 7.09Mt (Prev.: 7.25Mt). Our higher pricing assumption reflects energy-related cost pass-through, while the lower volume forecast captures seasonal moderation in construction activity during the rainy season. Accordingly, we raise our year-end target price to NGN426.95/s (Prev.: NGN368.25/s), implying a 22.0% upside from the current market price of NGN350.00/s, and upgrade our rating to “BUY” (Prev.: HOLD). We also raise our 2026E total DPS forecast to NGN26.00/s (Prev.: NGN10.00/s), following the company’s surprise NGN16.00/s interim dividend declaration. We believe the payout provides an early indication of the new ownership approach to shareholder returns which alongside the stronger earnings outlook improves the stock’s overall return profile. Based on our revised 2026E estimates, HBMNG trades at 12.2x P/E and 8.3x EV/EBITDA vs. MEA peer averages of 15.0x and 11.5x, respectively.
Pricing strength underpins higher revenue and EPS forecast: We revise our 2026E revenue growth forecast to 35.6% y/y (Prev.: +33.2% y/y), driven by a higher realised price assumption of c.NGN204,064.00/t (+20.6% y/y | Prev.: +15.8% y/y to NGN196,000.00/t), which more than offsets our lower sales volume forecast of 7.09Mt (+12.5% y/y | Prev.: +15.0% y/y to 7.25Mt). Meanwhile, we retain our COGS and OPEX growth forecasts at 23.3% y/y and 23.6% y/y, respectively, with our energy (+14.5% y/y), raw material (+42.4% y/y) and distribution (+16.7% y/y) cost assumptions unchanged. Reflecting these revisions, we now forecast EBITDA margin to expand by 499bps y/y to 45.0% (Prev.: +396bps y/y to 44.0%), while EPS is expected to grow by 68.5% y/y to NGN28.58/share (Prev.: +60.6% y/y to NGN27.23/share).
Surprise interim dividend signals higher payouts ahead: HBMNG surprised with an interim dividend of NGN16.00/share, exceeding H1-26 EPS of NGN12.93/share, with management attributing the payout to its strong cash position and balance-sheet strength rather than earnings alone. Notably, the distribution comes despite elevated capex requirements, highlighting the company’s financial flexibility. Accordingly, we raise our 2026E DPS forecast to NGN26.00/share (+160.0% y/y), implying a 91.0% payout ratio. Beyond 2026E, we expect distributions to remain robust, with payout ratios projected to average c.80.0% over 2026E – 2030E (2021–2025 average: 46.0%).
Valuation: Our target price is NGN426.95/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 (NGN402.63/s) and FCFE (NGN399.16/s) estimates, assuming a 22.0% WACC, 22.0% CoE and 4.0% terminal growth rate. Similarly, our multiple based FV was derived from a blend of EV/EBITDA (NGN477.35/s) and P/E (NGN428.67/s) estimates, utilising MEA peer averages for both factors (11.5x and 15.0x, respectively) as multipliers.