Nigeria | NGX

BUACEMENT embarked on an aggressive capacity rollout between 2018 and 2022, growing from 5 million metric tonnes (MT) at the start of the period to 11.0MT in January 2022, aided by the 6.0MT capacity expansion across its Kalambaina plant in Sokoto and Obu plant in Edo. Its management took the capacity expansion drive further in 2023 by commencing an additional 6.0MT plant capacity project, following a $500 million capital raise from the International Finance Corporation (IFC). This project should raise the total installed capacity to 17.0MT by 2024, boost economies of scale potential, and drive down cash costs per ton.

In this report, we adjusted our revenue and earnings forecast upwards to reflect increased optimism in both the power and hospitality businesses and capture the potential impact of the commencement of the company's oil and gas business on valuation. For the former, the likely increases in available capacity and foreign earnings from the exportation of power to the West African power pool amidst an even weaker Naira support our optimism. Increases in the average daily rate (ADR) for the hotel business (+38.0% YoY) would also help with revenue accretion for the hotel business. Similarly, aided by valuation by parts, we incorporate potential earnings accretion from the commencement of the oil and gas business, which we valued using NAV. Our parts valuation resulted in a target price of N7.75 and a BUY recommendation on the stock

The Afrinvest weekly sentiment weakened to 1.7x (previously at 2.0x). This week, we expect market performance to be dictated by Q3’23 earnings release.

The outlook for Nigeria’s telecoms market remains positive. An increasing shift towards more advanced technologies, a relatively untapped internet market, an underserved rural population, and favorable demographics are all factors that suggest the Nigerian telecoms market still has untapped potential and will likely retain its foothold as Africa’s largest mobile market for some time to come. That said, the country’s economic struggles such as high levels of inflation and FX volatility continue to undermine the profits of industry players.

ZENITHBANK's non-interest revenue (NIR) will take centre stage in driving its FY'23 earnings performance. We expect NIR to contribute c.60.0% (vs 66.3% in H1’23) of operating income at N1.3 trillion. The robustness of NIR contribution is anchored on the materiality of its H1'23 FX revaluation gain of N355.6 billion. Positively for NIR, we expect this robustness of FX gains to mask the noticeable weakness in net fee and commission income (-7.8% YoY in H1'23).

In FY’23, STANBIC’s earnings will likely cross the N100 billion mark to c.N125.5 billion based on the improvement in operating income. Unlike most banks in H1'23, STANBIC's relatively modest FX gains of c.N14.0 billion (on the bank's <$50 million net-open position), even though supportive, was not at the forefront of the earnings drive. Ex-revaluation gain, the bank's most noticeable tailwind emerged from the improvement of NII (+44.3% to N72.7 billion) and from the impact of FX liberalisation on trading income as the bank recorded a c.2.0x growth in trading income to N30.7billion.