Thursday, April 07, 2011; Vetiva Research
Vetiva Research has issued its Cadbury Nigeria Plc’s (‘Cadbury’) FY'10 Earnings Release Report.
Find below the highlights:
- Cadbury’s Turnover figure of N29.2 billion were largely in line with our estimate of N28.9 billion (variance of 0.9%), coming in higher by 14.0% YoY, while Earnings fell below our forecast of N2.14 billion (PBT) and N1.49 billion (PAT) to N1.95 billion and N1.17 billion respectively. Before Tax Earnings fell short by 8.7% and After Tax Earnings fell short by 21.9%.
- On a QoQ basis, We note that after tax earnings dipped from N1.27 billion in Q3’10 to N1.17 billion (FY’10). Although the company is yet to give details on this performance, we infer, from the numbers, that the dip is as a result of differences in tax allocation between Q3 and Q4
Analysis of result
- Q4’10 sales figure of N8.5 billion contributed the highest to cumulative turnover, coming in 22.6% higher than Q3’10 sales figure of N6.9 billion. This shows that Cadbury’s sales surged within the three months to December; We suspect sales were driven by prime products Bournvita and Tom Tom.
- On a QoQ basis, Before Tax Earnings improved by 9.8% to N1.95 billion from N1.77 billion. However, we note that after tax earnings dipped from N1.27 billion in Q3’10 to N1.17 billion (FY’10). Although the company is yet to give details on this performance, we infer, from the numbers, that the dip is as a result of differences in tax allocation between Q3 and Q4.
- Cadbury’s parent company, Kraft Foods SA has disclosed its plans to invest N8 billion in a new Bournvita manufacturing facility in Lagos, as part of its commitment to the Nigerian market.
Valuation and Recommendation
- Our FY’11 projection for Turnover now stands at N33.5billion which would translate to a 15% growth in Sales over FY’10 figure, and After Tax Earnings has been revised to N1.4 billion from N2.5 billion, implying a growth of 16.6% over FY’10.
- Our investment case is further underpinned by the company’s plans toward expansion of its production plants in a bid to meet growing demand in the Nigerian market.
- Our Target Price range for Cadbury stands at N23.90- N26.58 which gives a mid-point of N25.24 and an upside potential of 20.8%. Hence our ‘Accumulate’ rating on the stock.