November 11, 2026/Cordros Report
We update our view on PRESCO following the release of its 9M-26 results. During the period, revenue increased by 0.7% y/y, as higher sales in Nigeria (+12.7% y/y) were largely offset by weaker sales in Ghana (-21.6% y/y). EBITDA margin moderated by 184bps y/y to 60.4%, while EPS declined by 14.0% y/y to NGN95.29. Following our review, we maintain our 2026E revenue growth forecast at 0.6% y/y, as our volume (+17.7% y/y) and price (-16.7% y/y) expectations remain unchanged. However, we raise our EBITDA margin forecast to 66.2% (Prev.: 57.3%) and our EPS forecast to NGN118.45 (Prev.: NGN102.18).
The upgrade reflects lower cost projections, as we now expect COGS and OPEX to grow by 0.8% y/y and 5.3% y/y, respectively (Prev.: +9.8% y/y and +40.2% y/y), given the cost discipline evident in 9M-26. Consequently, we raise our year-end target price to NGN1,670.44/s (Prev.: NGN1,526.14/s), implying a 0.8% upside from the current price of NGN1,656.80/s. Accordingly, we upgrade our rating to a “HOLD” (Prev.: “SELL”). We also raise our 2026E total DPS forecast to NGN43.59 (Prev.: NGN37.60), implying a dividend yield of 2.6%. On our 2026E estimates, PRESCO trades at 14.0x P/E and 8.7x EV/EBITDA, vs. MEA peer forward medians of 13.2x and 8.3x, respectively.
Lower cost projections drive EBITDA and earnings upgrade: We retain our revenue growth forecast at 0.6% y/y in 2026E (2026E-2030E CAGR: 20.7%), as our expectations around volumes (+17.7% y/y) and realised CPO prices (-16.7% y/y) remain unchanged. On costs, we downgrade our COGS and OPEX growth projections to 0.8% y/y and 5.3% y/y, respectively (Prev.: +9.8% y/y and +40.2% y/y, respectively). The downward revisions to our cost estimates are supported by the group’s focus on cost optimisation, as reflected in 9M-26, financials. Consequently, we now project EBITDA margin of 66.2% (-429bps y/y | Prev.: -13.40ppts y/y to 57.3%). Below the operating line, we project net finance cost to decline by 95.8% y/y to NGN1.57 billion (2025: NGN36.97 billion) supported by a lower debt balance (-62.2% y/y). Overall, we forecast PBT and PAT to grow by 10.9% y/y and 13.9% y/y, respectively (Prev.: -4.3% y/y and -1.8% y/y, respectively), while EPS is projected to decline by 2.4% y/y to NGN118.45 (Prev.: -15.8% y/y to NGN102.18) on an enlarged share base.
Cost discipline and deleveraging set up a stronger 2027E: Despite flat revenue, 9M-26 results showed PRESCO defending margins better than we had assumed, with gross margin broadly stable at 73.3% (9M-25: 73.6%) and parent company cost of sales down 6.2% y/y. Balance-sheet repair also remains on track, as total borrowings fell by 56.8% YTD to NGN137.12 billion, cutting 9M-26 net finance cost by 78.4% y/y to NGN5.68 billion. Looking ahead, we expect costs to stay contained in 2027E, with COGS and OPEX rising by 13.8% y/y and 7.6% y/y, respectively, as EBITDA margin expands by 32bps to 66.5%. In addition, we project a further 12.2% y/y decline in finance costs, which should swing the group to a net finance income of NGN11.62 billion (2026E: net finance cost of NGN1.57 billion), supporting a 37.2% y/y rebound in EPS to NGN162.57.
Valuation: Our target price is NGN1,670.44, derived from a 50/50 blend of DCF and sector relative valuation estimates. Our DCF FV is derived from an equal blend of FCFF (NGN1,913.06) and FCFE (NGN1,626.35) estimates, assuming an 18.0% WACC, 18.8% CoE and 4.0% terminal growth rate. Similarly, our multiple-based FV was derived from a blend of EV/EBITDA (NGN1,578.76) and P/E (NGN1,563.59) estimates, utilising the forward P/E (13.2x) and forward EV/EBITDA (8.3x) medians of our MEA peer group as multipliers.