Dangote Sugar Refinery Stock Rated Neutral as Sales Were Flattish YoY at N44.4bn in Q3’17


Thursday, October 26, 2017 /2:52PM / FBNQuest Research

: Dangote Sugar Refinery reports Q3 2017 results

: Positive reaction by the market likely

: 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%

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 sales missed 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 

Dangote Sugar Refinery Q3 2017 results: actual vs. FBNQuest Research estimates (N millions)
Proshare Nigeria Pvt. Ltd.
Source: NSE, FBNQuest Research estimates  

Related News

1.       DANGSUGAR Declares N26.5 billion PAT in Q3 2017 Result,(SP:N14.56k)

2.      Dangote Sugar Refinery Plc - Outlook Still Favourable

3.      DANGSUGAR Plc -Target Price Upgrade on Strong H1’17 Earnings and margin Uplift

4.      DANGSUGAR Declares N17.10 billion PAT inQ2'17 Result,(SP:N10.86k)

5.       Dangote Sugar Refinery Q1 2017 Sales of N59.5bn Grew by 83% YoY

6.      Dangote Sugar Refinery Plc - Update After Speaking with Management

7.      DANGSUGAR Declares N14.40 billion PAT in 2016 Audited Result,(SP:N0.50k)

8.     Dangote Sugar Refinery Plc - Recommendation Upgraded

9.      Dangote Sugar Refinery Plc - Production costs surge, caps earnings growth

10.  DANGSUGAR Declares N10.12billion PAT in Q3 2016 Result SP N6.25k

11.   Increase in Selling Price to Cushion Dangote Sugar Plc Cost Pressures

12.  Dangote Sugar Refinery’s Rising costs Weigh on Growth Outlook

13.  DANGSUGAR Declares N7.38billion PAT in Q2 2016 Result SP N7.00k

14.  Dangote Sugar Refinery Plc Q2 16 - Interest savings on debt pay-down saves the day

Dangote Sugar Refinery Operating Expenses Grow by 28% YoY in Q2'16
Related News