In line with our expectations, Nigerian Breweries Plc (‘the Group’) reported a stellar performance in Q1 2022. Revenue grew by 30% YoY to N137.77bn. Operating profit grew by 64% YoY to N23.72bn while profit after tax spiked by 78% YoY to N13.61bn.

Effective Pricing Helps to Lift Net Margins to Highest Level Since Q1 2018

On the heels of rising input costs, amid higher prices in the global commodity market, the Group took price increases in Q1 2022. In addition, the Group doubled down on its strategy of selling more of premium brands. These efforts led to higher revenue and higher gross margins in Q1 2022. Gross margin expanded by 800 basis points to 45% in Q1 2022 (Q1 2021: 38%).

The profitability extended to the bottomline, on the back of operating efficiency. Although the operating expense margin also increased in Q1 2022, the magnitude of the increase was lower than the gross margin increase. For instance, while gross margin expanded by 800 basis points, the operating expense margin increased by 500 basis points.

Net finance cost declined by 1% YoY to N3.04bn in Q1 2022. The efficiency supported net profit growth of 78% YoY. We note that, in absolute terms; the profit recorded in Q1 2022 was the highest since Q1 2013. In terms of net margin, the performance in Q1 2022 was the highest since Q1 2018.


We slightly adjusted our EPS estimate for FY 2022 to N3.63 (previous: N3.48). The adjustment was premised on incorporation of the higher-than-anticipated Q1 2022 performance. We left our forecasts for the subsequent quarters relatively unchanged because we expect to see a slowdown in profitability growth, on the back of full reflection of higher global commodity prices on the Group’s costs. While we note that the Group effectively raised prices recently, we expect a slow revenue growth. This is due to our expectations that consumers will begin to respond negatively to higher prices. 

We estimate a N56.85 fair value for the stock, which implies a justified price-to-earnings (P/E) multiple of 15.68x. At the market price of N62.80, the stock trades at a 17.32x forward P/E. Therefore, we do not see any sustainable price upside at the market price. We recommend a HOLD. 

Please follow the link “Nigerian Breweries Q1 2022 – Off to a Strong Start”  to view the whole report.

Thank you.

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