DangCem's Q1'21 earnings beat our forecast by around 6%. However, a higher effective tax rate of 31% vs. the 20% we were modelling masks the significant y/y growth delivered by the firm during the quarter. Q1 results were hinged on improved cement volume sales across all its markets (excluding Ethiopia; -4% y/y to 116k tonnes), relatively higher average realised prices from lower discounts and cost control efforts. Looking forward, the continent's recovery from the pandemic suggests a solid '21f performance for DangCem. From an economic standpoint, the IMF projects an average GDP growth rate of +3.4% over the next two years for all 10 countries where DangCem operates.
This compares with a contraction of -1.6% in 2020. For sales, we have raised our '21f forecast by c.15% to NGN1.3trn. Our estimate is driven by the following assumptions: 1) a +16% y/y growth in cement volumes to c.29.8 million tons (mt) and 2) an upward adjustment to pricing of c.10% y/y. For volumes, we expect growth in Nigeria would be key to achieving 21f targets. We deduce from competitors' Q1 '21 results, that DangCem widened its local market share. Regardless, the Nigerian cement market continues to benefit from growing construction and housing activity. We forecast an EBITDA of NGN674.7bn for '21f, underpinned by an EBITDA margin estimate of 51.3% for the period. The key downside risk to our outlook is the possibility of yet another wave of the covid pandemic in key markets. Overall, we have raised our EPS forecast over the '21-22f period by around 21%.
Our new price target of N260.0 is up by only 9% because we have raised our risk-free rate assumption by 150bps to 12.5% to reflect the higher yield environment. At current levels, our new price target implies a potential upside of 19.8%. DangCem is trading on an '21f EV/EBITDA of 6.6x vs global (8.4x) and emerging peers (8.2x). Year to date, DangCem shares have shed -11.4% vs. the NSE ASI's -2.0% decline. We retain our Neutral rating.
Record EBITDA reported in Q1 '21, driven by higher cement volume sales and pricing