Event

Following the easing of the domestic headwinds (cash scarcity and electioneering activities) that had dominated the first quarter, revenue for Q2 2023 came in higher by 38% year-on-year to N544.11 billion from N394.86 billion in Q2 2022. The management attributed the growth to improved volume sales (Q2 2023: 7.15mn tonnes vs Q2 2022: 6.96 tonnes) despite decline in capacity utilisation (Q2 2023: 23% vs Q2 2022: 26%).

The devaluation of the Nigerian currency led to a 363% jump in FX loss to NGN103.84 billion. The Group’s FX loss, coupled with a 67% rise in finance costs negatively impacted the Group’s profitability. Thus, profit before tax declined by 14% year-on-year to N93.04 billion from N108.49 billion. However, changes in deferred tax assets led to lower recognized tax which resulted in a 4% growth in the profit after tax to N69.10 billion.

Outlook

Following improved performance in Q2 2023, we revised our revenue projection to N1.90 trillion (previously N1.73 trillion). Our optimistic is premised on rising infrastructural activities and developmental projects in Pan-African region, which are expected to bolster cement demand for the rest of the year. We also anticipate higher volume sales for the rest of the year.

Overall, our fair value estimate of the stock is N328.45. At the current market price, the stock trades at 15.26x to our estimated EPS – versus a 13.92x justified P/E. By implication, we see a -9% price return. In addition to an estimated 6% dividend yield, the stock’s total return stands at -3%. We retain our HOLD recommendation.

Please follow the link “Dangote Cement Plc Q2 2023 – Improved Volume Sales Support Margin Growth” to view the whole report.

Thank you.