Aradel Holdings Plc (ARADEL) began the year with solid results, reporting a 33.5% YoY increase in PAT for Q1'25. This performance was supported by a 69.8% YoY rise in revenue to $131.4 million, reflecting stronger oil production levels, improved utilisation of the Trans Niger Pipeline (TNP), minimal crude losses, and additional value from the Alternative Crude Evacuation (ACE) system. This production growth offset the impact of a weaker average realised oil price (-8.5% YoY to $77.90/bbl). However, we expect FY'25 earnings to soften due to the combined effect of oil price decline and higher royalty charges, both of which are likely to weigh on margins. We have also reduced our projected mean realisable oil price across our forecast horizon to $69.00/bbl (compared to $74.60/bbl previously) in line with the materially weaker oil price outlook. Consequently, the implied net impact on discounted future cashflows and the mild depreciation of the Naira (-2.7% to N1,580.00 since our last publication) have resulted in a new 12-month Target Price ("TP") of N840.35 (vs N1,095.30 previously). We retain a BUY recommendation on the ticker.
