Lafarge Africa reported Revenue growth of 8.6% y/y to N405.50bn for FY 2023 from N373.25bn in the prior period (FY 2022). Similarly, on a q/q basis, Revenue was up by 27.4% to N116.42bn in Q4 2023 from N91.40bn in Q3 2023. The broad-based growth in cement sales (up 8.5% to N392.57bn), aggregate and concrete sales (up 12% to N12.25bn), and other products (up 97.4% to N680m) contributed to the rise in topline growth in 2023.
In 2023, the average cement price from Lafarge Africa increased by 18.52% to N78,700 from N66,400 in 2022, while sales volume grew by 8.5% y/y to 5.04 million metric tonnes from 5.51 million metric tonnes in 2022. We anticipate that pricing will remain responsive to macroeconomic conditions, with a trend towards higher prices, particularly given the seller's market dynamics and the priority placed on margin protection. Therefore, our projection indicates a 7% y/y increase in price.
We also expect that the several distortions that affected growth in volumes in 2023 will be minimized in 2024, making us project a 10.6% increase in sales volume to average 5.58 million MT in 2024. Overall, driven by an increase in both price and volume, we project FY Revenue of N479.22bn in 2024e, an 18.2% y/y increase compared with the previous year (2023; N405.50bn). We forecast an increase in Net Finance Cost to N24.50bn in 2024bn from N21.04bn in 2023 assuming a 37.38% devaluation. Overall, we forecast growth in PBT of 29% to N101.75bn in 2024. An upside risk to our forecast would be a less pronounced devaluation of the Naira or even an appreciation compared to its closing position in 2023.
We maintain our price target of N45.96/s and a BUY recommendation as we believe the market is yet to fully price in the firm’s improved operating performance. Our price target implies a 27.67% upside potential from the last closing price of N36.00/s. We arrived at our target price using a blend of DCF and Relative valuation in the ratio of 50:50. The stock currently trades at an EV/EBITDA ratio of 3.29x, significantly lower than its industry average of 11.98x.
