Flour mills of Nigeria Plc’s (Flourmills) earnings have been growing steadily in recent years. In its H1 2024 (ended September 2023), the company reported a 33.87% y/y growth in Revenue to N964.65bn. This growth was driven by a combination of factors, including increased sales volumes, higher product prices, and improved operational efficiency.
However, the company’s Net Finance Cost of N32.84bn in H1 2024 completely eroded the earnings. Consequently, Flourmill reported a Loss Before Tax of N8.52bn in H1 2024. In view of this, we have revised our FY 2024 forecast as we expect FX losses to result in a Loss After Tax of N57.98bn compared with our Post tax profit forecast of N53.69bn previously.
We forecast Flourmills will grow its Revenue by 24.72% y/y to N1.92bn in 2024e supported by the launch and reintroduction of products such as golden penny choco spread, golden bites chin chin and bagco zerofly sacks. We also expect the company to return to profit in 2025e as we do not expect any further significant FX losses. We retain our BUY recommendation on Flour Mills of Nigeria Plc. With a target price of N36.36/s. We arrived at our target price using have the discounted cash flow method.