August 27, 2026/Cordros Report
We update our view on OKOMUOIL following the release of its H1-26 results. During the period, revenue declined by 3.5% y/y to NGN125.29 billion, while EPS fell by 16.4% y/y to NGN41.65, largely reflecting industry-wide weakness in crude palm oil prices. For 2026E, we expect the subdued performance to persist through the remainder of the year, as near term pricing pressures are likely to outweigh the anticipated improvement in volumes. Accordingly, we set a year-end target price of NGN848.47/share, implying a 40.2% downside from the current market price of NGN1,418.00/share, and assign a SELL rating on the stock. Our view is underpinned by (1) a 20.9% y/y decline in average realised CPO prices to NGN1.84 million/tonne, reflecting sustained pressure from illegal imports and tariff waivers, and (2) persistent input-cost pressures, with elevated fuel and fertiliser costs exacerbated by the ongoing US-Iran conflict. We expect these headwinds to more than offset projected growth in CPO (+14.7% y/y) and processed rubber (+4.2% y/y) volumes. Consequently, we forecast revenue to decline by 7.1% y/y, with the weaker topline and elevated cost pressures driving a 391bps y/y contraction in EBITDA margin to 46.2%. Concurrently, we expect EPS to decline by 9.2% y/y to NGN55.14 in 2026E. We also forecast DPS of NGN36.11, implying a dividend yield of 2.5%. On our 2026E estimates, OKOMUOIL is trading at 25.7x P/E and 15.9x EV/EBITDA, vs MEA peer averages of 16.1x and 12.1x, respectively.
Earnings to moderate as weaker CPO prices offset volume growth: We expect OKOMUOIL’s operating performance to moderate in 2026E, largely reflecting sector-wide CPO price weakness amid increased illegal imports and import tariff waivers. We believe this will outweigh volume growth supported by improving plantation yields, stable FFB output and continued efficiency gains. Accordingly, we expect revenue to decline by 7.1% y/y, reflecting a 9.3% y/y decline in CPO revenue segment (85.0% of total revenue) which more than offsets the projected 7.0% y/y growth in rubber revenue (14.8% of total revenue). For the CPO segment, we forecast a 20.9% y/y decline in average realised prices which will outweigh a projected 14.7% y/y increase in production volumes to 85,000 tonnes. Conversely, rubber growth will be supported by a 4.2% y/y increase in production to 10,500 tonnes alongside a 2.6% y/y increase in realised prices. On costs, we expect pressures to persist, with the US-Iran conflict exacerbating energy and fertiliser costs. Consequently, we forecast EBITDA margin to contract by 391bps y/y to 46.2% (2025FY: 50.1%), while EPS declines by 9.2% y/y to NGN55.14.
Net cash position supports balance sheet strength: We expect OKOMUOIL’s balance sheet to strengthen over our forecast horizon, supported by sustained cash generation. Net debt/EBITDA improved from 0.3x in 2023FY to 0.1x in 2024FY, while interest coverage rose from 10.2x to 12.6x. In 2025FY, net debt/EBITDA remained at 0.1x, while interest coverage strengthened to 20.2x. By 2026E, we forecast a shift to a NGN4.63 billion net cash position, taking net debt/EBITDA to (0.05x), although interest coverage moderates to 16.2x on weaker earnings. In 2027E, we expect net cash to increase to NGN12.45 billion, with net debt/EBITDA improving to (0.14x) and interest coverage recovering to 20.1x.
Valuation: Our target price is NGN848.47/s, derived from a 50/50 blend of DCF and sector relative valuation estimates. Our DCF FV is an equal blend of FCFF (NGN778.82/s) and FCFE (NGN644.89/s) estimates, assuming a 16.6% WACC, 18.7% CoE and 4.0% terminal growth rate. Our multiple-based FV blends EV/EBITDA (NGN1,082.44/s) and P/E (NGN887.74/s) estimates, applying MEA peer averages for both factors (of 16.1x and 12.1x, respectively) as multipliers.