Event

In Q3 2023, Nascon Allied Industries Plc (‘the Company’) reported a revenue growth of 35% to N20.95 billion from N15.48 billion in Q3 2022. Further analysis of the financial report showed a 14% contraction in raw materials consumption, indicating a discernable reduction in the volume sold in the period. To this effect, we attribute the revenue growth primarily to strategic price increases in the reporting period. Profit after tax soared by an impressive 285% to N5.19 billion in Q3 2023 from N1.35 billion in Q3 2022. The Company declared an interim dividend of N1.00 per share.

Outlook

The Company’s challenges with volume sales compelled us to project further price increases as a strategy for the management to protect margins and remain profitable for the year.

We retain our SELL recommendation for the stock. Incorporating the lower-than-expected revenue in Q3 2023, we slightly revise our fair value to N37.02 (previous: N36.99), representing a 6.73x justified price-to-earnings ratio. At the current price of N54.00, the market values the stock at 9.82x forward price-to-earnings ratio. We believe the stock is currently overvalued, and we see a 31% price downside for the stock. With an estimated 5% dividend yield, we estimate that the stock offers a -27% total return.

Please follow the link “NASCON Q3 2023 – Yet Again, Price Increases Sustain Robust Margins” to view the whole report.

Thank you.