Dangote Cement Q2 2021 Results Review: Moving to Outperform from Neutral

Proshare

Wednesday, August 25, 2021 / 2:13 PM / by FBNQuest Research / Header Image Credit: The Africa Report

 

Negligible changes made to EPS outlook over the '21-22f period; PT up by 15%

DangCem's Q2 results were broadly in line with our expectations. However, following its Q2 '21 investor call, we have made slight adjustments to our forecast. Firstly, we have raised our sales forecast for FY '21f by 3% to NGN1.4trn, up +31% y/y, and driven by upward adjustments to pricing. We have raised our price forecast by 3% to c.N45,514/tonne for the group, to reflect lower rebates and higher recovery in transportation costs during the quarter.


Proshare Nigeria Pvt. Ltd.


We retain our cement production forecast of 29.8 million metric tonnes (mmt) for FY '21f. This year, DangCem has averaged cement sales of just below 5mmt (up +33% y/y) per quarter in Nigeria, while Pan African volume sales were up 16% y/y to 2.85mmt. We continue to see strong demand for the rest of the year, from real estate projects and road construction activities in Nigeria. Also, Q2 '21 volume sales growth in relatively smaller countries within the Pan African segment, such as Congo (+85% y/y) and Ghana (+82% y/y), remain supportive. We forecast a +19% y/y and +11% y/y elevation in cement volume sales for Nigeria and Pan Africa respectively for FY '21f.

 

Our projections imply a capacity utilisation of 57% for the group, which compares with an average of 62% for H1 '21, and taking into account the expected commissioning of a 3mmt plant at Okpella during this quarter. We have lowered our EBITDA margin estimate by -275bps to 49% as a result of higher freight charges, rising energy costs and inflationary pressures. Overall, our adjustments have led to negligible changes on our EPS outlook over the '21-22f period. We expect an earnings improvement of 37% y/y for FY '21f.

 

Our new price target of NGN297.8 is up 15% because we have rolled forward our valuation to 2022. Our price target implies a potential upside of 19% from current levels. Additionally, we expect DangCem's share buyback scheme to provide near-term support for its shares. Therefore, we have changed our recommendation on the stock to Outperform from Neutral. DangCem is trading on a '21f EV/EBITDA of 7.8x vs global peers (9.9x).

 

Q2 '21 EDITDA up 67% y/y to NGN173.1bn; helped by lower rebates and volume growth

DangCem reported Q2 earnings growth of 58% y/y to N102.5bn, slightly ahead of our estimate. All key P&L lines improved on a y/y basis. While sales grew by 57% y/y, PAT was up 58% y/y. DangCem posted double-digit y/y volume growth in both the Nigerian and Pan-African businesses. The firm posted strong EBITDA in Q2 for Nigeria (NGN153.3bn) and Pan-Africa (NGN23.5bn) respectively. In Q2, EBITDA margin for Nigeria and Pan-Africa of 60.2% and 22.3% compare with 59.5% and 22.8% for Q2 '21  respectively.


Proshare Nigeria Pvt. Ltd.


Related News

  1. Moody's Announces Completion of a Periodic Review of Ratings of Dangote Cement Plc
  2. Moody's Places Dangote Cement's B1 Ratings on Review for Downgrade

3.      Dangote Cement Plc Reports N192bn PAT in Q2 2021 Results,(Share Price:N248.00k)

4.      Dangote Cement Becomes First Nigerian Company to Report its Results Using XBRL

5.      SEC Approves the Share Buy-back Program Renewal of Dangote Cement Plc Until January 21, 2022

6.      Dangote Cement Acquires 2,000 Trucks for Distribution of Products

7.      Dangote Cement Plc Renews Its Share Buyback Programme

8.     Shareholders of Dangote Cement Plc Approve N272.6bn Dividend for FY 2020

9.      Dangote Cement Plc Releases 2020 Combined Annual and Sustainability Report

10.  DANGCEM Series 1 Fixed Rate Senior Unsecured Bonds, Under the NGN 300bn Programme Now Open

11.   Implications of Tranche 1 Share Buyback Programme by Dangote Cement

12.  Dangote Cement to Commence Tranche 1 Share Buyback Programme by December 30th 2020

13.  DANGCEM Board Proposes Share Buyback And Reverse Share Split To Its Shareholders

14.  Shareholders of Dangote Cement Plc Approve N272.6bn Dividend for FY 2020

15.  Dangote Sugar Declares N8.3bn PAT in Q1 2021 Result,(SP:N17.10k)

16.  Dangote Cement Restates Commitment to Closing Demand-Supply Gap

17.   Dangote Cement Q1 2021 Result: Revving up Revenues but Growing Debt

18.  Coastline Terminals: Dangote Group Does Not Own, Not Affiliated with ICTSI

19.  Dangote Cement Plc Releases 2020 Combined Annual and Sustainability Report

20. Dangote Cement Q1 2021 Results Review: Bullish Sentiments Remain Following Strong Q1 Performance

21.  Dangote Vs BUA; The Sugar Wars Unredacted

22. Dangote Cement Q4 2020 Results Review: Bullish Outlook for '21f Driven by Capacity Addition

23. Dangote Cement FY2020 Results: A Revenue Trot and Bottom-line Gallop

24. Dangote Cement Plc Contemplates Debt Funding Options Under Planned N300bn Bond Issuance Programme

25. Dangote Cement to Pay over N97bn in Corporate Tax for Financial Year 2020


Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP