Total Nigeria Q3 2021 Results Review: Outperform Rating Retained


Thursday November 25, 2021 / 10:48 AM / by FBNQuest Research / Header Image Credit:  Total Nigeria


EPS forecast for '21f raised by c.60%, reflecting firm crude oil prices

Total's Q3 results came in stronger than expected. Sales of NGN90.9bn beat our forecast by 19%. On a y/y basis, Total's sales doubled, driven by strong numbers from both white products (+98% y/y) and lubricants segments (+88% y/y). While both segments continue to benefit from elevated pricing because of higher crude oil prices (a key raw material), white products sales were boosted by wholesale arrangements and a recovery in air travel. Looking ahead, we expect a solid Q4 performance.


Our view is based on the following reasons, 1) crude oil prices are likely to stay elevated, driven by OPEC+ supply-side management; and 2) data from the Nigerian Bureau of Statistics, which indicate that air travel (both domestic & foreign) is recovering steadily from the pandemic. In Q2 '21, domestic and foreign passenger traffic grew 50% y/y and 22x y/y respectively, while remaining well below pre-pandemic figures. From a policy perspective, the minister of finance recently stated that the FG will seek to officially end fuel subsidies next year. While this is commendable, we believe it will be difficult to push through because 2022 is a year prior to federal elections.


Given our optimistic views, we have raised our sales estimate for FY'21 by 11% to NGN329.5bn. We have also adjusted our gross margin forecast by +230bps to 16.8%, reflecting higher margins from deregulated products such as AGO, ATK, lubes and DPK. Ultimately, our EPS forecast for '21f is up c.60% to NGN51.3. Beyond this year, we maintain a more cautious view with a milder average upward adjustment to earnings for '22f and '23f. Our EPS outlook over the '22-23f period is up by around 8%. Our new price target of NGN340.0 is up by around 13%. We maintain our Outperform rating on the stock.


Q3 '21 results ahead of expectations

Total posted solid Q3 '21 results. Earnings of NGN5.3bn were up 343% y/y and 4% q/q respectively. Improved profitability was helped by a triple-digit y/y sales growth and a contraction in finance costs which more than offset rising operating expenses (+17% y/y to NGN8.1bn). Compared with our estimates, sales came in ahead by around 19% while earnings beat by 85%. Total proposed an interim dividend of N4.00, in line with our estimate.


Proshare Nigeria Pvt. Ltd.

 Proshare Nigeria Pvt. Ltd.

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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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