August 14, 2026/Cordros Report
Following the release of Dangote Sugar Refinery Plc’s (DANGSUGAR) H1-26 results, we set our expectations for the remainder of the year. Although revenue declined by 8.9% y/y, a significant improvement in operating profitability, evidenced by gross and EBITDA margin expansion of 526bps y/y and 905bps y/y, respectively, supported a strong earnings recovery. Thus, H1-26 EPS rebounded to NGN3.42 from a loss per share of NGN2.00 in H1-25. Based on the H1-26 performance and our outlook for the remainder of the year, we forecast 2026E revenue to decline by 5.4% y/y. Nevertheless, stronger operating leverage is expected to drive a further improvement in profitability, with gross and EBITDA margins projected to expand by 10.80ppts y/y and 12.87ppts y/y to 25.6% and 30.1%, respectively. Consequently, we project 2026E EPS of NGN6.35, marking the group’s return to profitability following three consecutive years of losses. On this basis, we model a target price (TP) of NGN84.48/share, indicating a “BUY” rating at current market price of NGN70.00/share. On our estimates, DANGSUGAR currently trades at 2026E P/E and EV/EBITDA multiples of 11.0x and 6.1x relative to MEA peer average of 12.6x and 9.2x.
Profitability recovery underpinned by margin expansion: We forecast DANGSUGAR’s revenue to decline by 5.4% y/y in 2026E (2026–2030E CAGR: 6.3%), reflecting weaker volume offtake (-9.9% y/y) and more moderate pricing growth (+5.0% y/y) following the aggressive repricing cycle of 2023–2025. Nevertheless, materially lower raw material costs (-36.5% y/y), driven by lower imported sugar input costs, should drive significant margin expansion, with gross and EBITDA margins forecast to improve by 10.80ppts y/y and 12.87ppts y/y to 25.6% and 30.1%, respectively, further supported by continued cost discipline and operational efficiencies. We also expect improving FX stability and lower trade finance utilisation to reduce net finance costs by 55.1% y/y, supporting an earnings recovery, with 2026E EPS rebounding to NGN6.35 from a loss per share of NGN5.28 in 2025A.
Stronger cash generation drives FCF recovery: We forecast DANGSUGAR’s free cash flow (FCF) to return to positive territory at NGN127.39 billion in 2026E (2025A: negative NGN31.12 billion), supported by a strong recovery in operating cash flow to NGN195.58 billion (2025A: NGN13.68 billion) on stronger operating profitability and better working capital efficiency. The stronger cash generation should improve financial flexibility and reduce outstanding letters of credit to NGN243.72 billion from NGN355.12 billion in 2025A. Beyond 2026E, we expect FCF generation to remain structurally stronger, with FCF margin averaging 12.3% over 2026–2030E, compared with a 1.5% average deficit over 2021–2025A.
Valuation: Our target price is NGN84.48/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 (NGN72.53/s) and FCFE (NGN64.26/s), providing methodological balance, assuming an 18.6% WACC, 25.2% cost of equity and a 4.0% terminal growth rate. Similarly, our relative valuation FV was derived from a blend of EV/EBITDA (NGN121.14/s) and P/E (NGN79.98/s) based values, utilising Bloomberg’s Middle East and African peer average multiples (9.2x and 12.6x).