Total Nigeria Q2 2021 Results Review: Strong H1 Performance; On Track for a Record Year


Thursday, September 02, 2021 / 11:32 AM / FBNQuest Research / Header Image Credit: CIAPS


We retain Outperform rating on Total shares

Total's Q2 '21 results were strong across the P&L. Sales were up 132% y/y to NGN84.6bn, driven by a recovery in all segments. Although we had expected sales to compare favourably with last year because of lockdowns in Q2 '20, the magnitude of the y/y increase was surprising. For white products, Q2 '21 retail sales grew 18% y/y to NGN24.1bn while wholesale and aviation sales were up 470% y/y and 893% y/y to NGN28.1bn and NGN11.1bn respectively.

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As a result, we have raised our sales forecast for FY '21 by around 34% to NGN295.7bn. Other income, up 857% y/y to NGN1.6bn, was driven by fx gains of NGN622m and network income of NGN751m (up +160% y/y) from retail shops, rent and vendor management fees. This income line beat our estimate by c.60%. We have increased our forecast for this line by c.56% to NGN4.5bn for FY '21, primarily because we anticipate that network income will remain substantial through H2. For the balance sheet, we expect the y/y contraction in finance cost delivered so far will continue through the year. In H1, interest expenses were down -42% y/y. We retain the view, that Total's debt programme will provide more predictability for funding costs going forward.


Finally, our changes have ultimately led to a 79% elevation to our FY'21 EPS estimate to NGN32.0. On valuation, our new price target of NGN300.0 is up 39% because we have rolled forward our valuation to 2022. At current levels, our price target implies a potential upside of 51%. Total proposed an interim dividend of N4.00/share, which works out to a yield of 2%. This is the first interim dividend since 2019. For FY '21, we forecast a payout of c.60% compared with 100% in FY'19 and FY '20 respectively, which implies a dividend yield of 10%. Ytd, Total shares have returned +53.2% vs. the ASI's -2.7% decline. We retain our Outperform rating on the stock.

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Q2 '21 results ahead of expectations, PBT beat our estimate by 57%

Total's reported Q2 '21 earnings of NGN5.1bn, which compares with a loss of -N547m in Q2 '20. The results benefitted from a 132% y/y growth in sales, a gross margin expansion of +382bps y/y to 16.6% and a significant rise (+857% y/y) in other income to NGN1.6bn. Q2 PBT of NGN7.4bn compares with a loss before tax of -NGN387m in Q2 '20. On a quarterly basis, sales and PBT were up 27% q/q and 71% q/q respectively. Compared with our estimates, sales and PBT beat by 12% and 57% respectively.


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