BUA Cement’s +27.92% y/y Revenue growth in 9M 2023 was primarily driven by an increase in price and sales volumes. BUA Cement reported increases in prices in 9M 2023 with average cement price rising by 21.4% to N68,540/ton from N56,468/ton in 9M 2022 while sales volumes closed 9M 2023 at 4.90 million MT from 4.65 MT in 9M 2022, indicating a 6.52% increase. Net Income increased by 2.8% y/y to N76.07bn in 9M 2023 from N74.02bn in 9M 2022.
The constrained purchasing power of private players and low CAPEX expenditure by the government amidst the challenging macroeconomic environment has continued to affect volume growth in the industry. To aid volume growth, BUA Cement reduced ex-factory price in Q3. We estimate a 20% y/y (19% ytd) growth in price per tonne for the year while projecting a 10% y/y volume growth. Overall, we expect Revenue from the Nigerian operations to increase by 25% y/y to N451.89bn in FY 2023 from the N360.99bn recorded in FY 2022.
We believe costs associated with its production capacity expansion drive will impact profitability negatively in the short to medium term. We also believe the market has priced in the expected growth from the capacity expansion drive. We maintain our Sell recommendation on the stock and our price target of N80.50/s which implies a 24.77% downside potential from the last closing price of N107/s. We arrived at our target price using a blend of DCF and Relative valuation in the ratio of 50:50.