BUA cement’s +17.2% y/y Revenue growth in H1 2023 was primarily driven by an upward price adjustment amidst stable sales volumes. Bua Cement reported increases in prices in H1 2023 with average cement price rising to N67,192/ton in H1 2023 from N56,454/ton in H1 2022 while sales volumes closed H1 2023 at 3.29 million MT from the 3.34MT recorded in H1 2022, indicating a 1.5% decrease. Net Income increased by 3.7% y/y to N63.62bn in H1 2023 from N61.36bn in H1 2022
We believe price adjustments would be necessary to support profit margins in H2, though we note that management has stated its intention to reduce prices. In our view, a reduction in prices will lead to a decline in Revenue amidst low sales volumes. We estimate a 9% y/y growth in price per tonne for 2023e while projecting a 5% 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 are concerned about the company's capacity to effectively manage its costs, particularly its selling and distribution costs and we believe this will hamper bottom line performance. We maintain our Sell recommendation on the stock and our price target of N80.50/s. Our price target implies a 16% downside potential from the last closing price of N96.15/s. We arrived at our target price using a blend of DCF and Relative valuation in the ratio of 50:50.
