Event

Dangote Cement Plc (‘The Group’) margins came under pressure yet again in FY 2023 amid sales volume decline. Nevertheless, effective price increases offset the negative volume performance. The Group achieved double-digit growth in revenue to N2.21trn from N1.62bn in FY 2022 (36% year-on-year), therefore, the Group’s average price per tonne rose by 39% to N80,942 from N58,282 in 2022.

The Group experienced a significant surge in net finance cost, growing by 209% year-on-year to N283.56bn from N91.66bn in FY 2022. The rise was primarily propelled by a substantial increase in finance cost, which escalated by 139% year-on-year to N310.96bn from N130.37bn in FY 2022. Despite the surge, profit before tax was up by 6% year-on-year to N553.10bn from N524.00bn in FY 2022.

Outlook

We anticipate further price increases to safeguard profit margins in the face of the prevailing inflationary environment. We anticipate the Group operating margins to remain stable, driven by robust double-digit revenue growth and ongoing efforts to control costs. However, there are concerns regarding inflationary pressures on energy expenses.

Valuation

Overall, we revised our fair value upwards to N426.09 from N351.73. However, we have downgraded our recommendation to a SELL from a HOLD. We believe that the stock is overvalued at current levels. We arrived at our target price using a blend of DCF, DDM and Residual Income Model.

Please follow the link “Dangote Cement Plc FY 2023 – Volume Growth in the Pan-African Market Drove Overall Performance” to view the whole report.

Thank you.