DANGCEM | Dangote Cement 9M 2023 Earnings Review: Pan African operations to the rescue

    Dangote Cement’s operations were affected negatively by the election uncertainty and cash unavailability which impacted business operations in Q1 2023. The company also noted that the significant FX devaluation in Q2 2023 also hampered sales volumes. Consequently, the group sales volume declined 2.3% y/y to 20.29m MT in 9M 2023. However, the combination of increases in prices and strong volume growth from its Pan African operations came to the rescue, resulting in Revenue growth of 28.7% y/y in 9M 2023. We believe constrained purchasing power and low CAPEX expenditure by the government continue to affect sales volumes across the whole industry.

    Dangote cement controls the largest market share in the industry (61.2%) and is well-positioned to meet increased demand when industry volumes pick up. Also, we are optimistic that the Pan-African region will continue to support the company’s topline. The management announced the commencement of operations at its 0.45Mta grinding plant in Ghana and noted that the company has reached an advanced stage in the deployment of 1.5Mta grinding plant in Cote d’Ivoire. Clinker export to Cote d’Ivoire is also expected to commence in 2024.

    We forecast total price increase of 20%, which will be the main driver of the group’s topline performance for 2023e (14.4% price growth ytd) while we expect a marginal 5% increase in volume due to the identified concerns. We maintain our price target of N428.36/s, with a BUY recommendation. We arrived at our target price using a blend of DCF and Relative valuation in the ratio of 50:50. Current Price: N328/s.


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