26, 2017 /2:52PM / FBNQuest Research
Event: Dangote Sugar Refinery
reports Q3 2017 results
Implications: Positive reaction by the
Positives: Q3 PBT and PAT of N14.0bn and N9.4bn up 236% y/y and 244% y/y
respectively; gross margin expanded 2153bps
y/y to 32.9%
Negatives: Sales were flattish y/y at N44.4bn
Dangote Sugar Refinery (DSR)
published its Q3 2017 results today which showed several positives across
the P&L. Although sales were flattish,
both PBT and PAT were up significantly, 236% y/y and 244% y/y, respectively. Profitability was driven by a marked
gross margin expansion of +2153bps y/y to 32.9%.
Although we were expecting a healthy gross
margin performance, the magnitude of the expansion comes as a surprise. We
believe production costs which were substantially lower y/y benefitted from
consistent gas supply through the quarter. A few weeks back management had
stated that gas (which is relatively cheaper than the alternative LPFO)
accounted for 100% of the Lagos Refinery’s fuel usage for July and August. Opex
which came in flattish y/y also helped.
Sequentially, sales declined q/q while PBT and PAT both fell by around 24% y/y.
Given that the month of Ramadan (seasonally DSR’s highest sales month) fell
within Q2, the q/q decline is unsurprising.
Compared with our estimates, while
our estimate by 16%, PBT beat our N12.6bn estimate by around
11%. The variance is
driven by the positive surprise on the gross margin line. On an annualised
basis, DSR’s 9M 2017 PBT is tracking well ahead of consensus full year estimate of N47.3bn. Year to date, DSR shares have gained +139%, outperforming the All Share Index by over 100%. At
current levels, on our published estimates, DSR shares are trading on a
2017E P/E multiple of 5.5x for flattish EPS in 2018E.
We rate the stock Neutral.
Our estimates are under review.
Conference call details: To be circulated
Sugar Refinery Q3 2017 results: actual vs. FBNQuest Research estimates (N millions)
NSE, FBNQuest Research estimates
1. DANGSUGAR Declares N26.5 billion PAT in Q3 2017
Sugar Refinery Plc - Outlook Still Favourable
-Target Price Upgrade on Strong H1’17 Earnings and margin Uplift
Declares N17.10 billion PAT inQ2'17 Result,(SP:N10.86k)
5. Dangote Sugar Refinery Q1 2017 Sales of N59.5bn Grew by
Dangote Sugar Refinery Plc - Update After Speaking with
DANGSUGAR Declares N14.40 billion PAT in 2016 Audited
Dangote Sugar Refinery Plc - Recommendation Upgraded
Dangote Sugar Refinery Plc - Production costs surge, caps
DANGSUGAR Declares N10.12billion PAT in Q3 2016 Result SP
Increase in Selling Price to Cushion Dangote Sugar Plc
Dangote Sugar Refinery’s Rising costs Weigh on Growth
DANGSUGAR Declares N7.38billion PAT in Q2 2016 Result SP
Dangote Sugar Refinery Plc Q2 16 - Interest savings on
debt pay-down saves the day
Dangote Sugar Refinery Operating Expenses Grow by 28% YoY