Nigeria | NGX

In its recently released audited results, Nestle Nigeria Plc grew topline by 22.6% y/y to N351.8bn in FY 2021 from N287.1bn in FY 2020. In Q4 alone, growth in Revenue was relatively flattish, up marginally by 0.1% q/q to N90.2bn. The food sub-segment, which contributed 59.2% of the total Revenue, recorded double-digit growth in the period, up 21.3% to N208.3bn in FY 2021. Similarly, the beverages sub-segment which accounted for 40.8% of Revenue grew 24.4% y/y to N143.5bn. Export sales increased, up 19.9% to N5.3bn in 2021 from N4.4bn in 2020.

In its recently released audited FY 2021 results, Lafarge reported a 27.1% y/y increase in Revenue to N293.1bn from N230.6bn in FY 2020. On a q/q basis, Revenue was down marginally by 0.4% to N73.9bn in Q4 2021 from N74.2bn in Q3 2021. The broad-based growth in Cement Sales (up 26.1% y/y to N285.1bn), sale of Aggregates & Concrete (up 77.7% y/y to N7.6bn) and Others (up 231.1% y/y to N0.3bn) drove the improved topline performance in FY 2021. While no information has been provided on the Revenue breakdown, we believe, just as in the previous quarters of the year, that both growth in price and volume supported the Revenue growth, with the former being stronger than the latter. The persistent inflationary pressures presented opportunity for the company to implement higher prices as of 9M 2021 to neutralize the cost impact.

Based on its recently released FY 2021 results, Dangote Cement sustained the upbeat it started the year with, recording a solid 33.8% y/y growth in Revenue to N1.38tn in FY 2021 from N1.03bn in FY 2020. The actual full-year Revenue is slightly ahead of our 2021 estimates by 3.7%. In Q4 2021, performance was moderately better compared to Q3 2021 as Revenue was up by 9.0% q/q to N361.5bn. In line with our prognosis, Q4 revenue was the highest in the year as the quarter is historically proven to be the best quarter for the cement players. One, the early dry season in Q4 is best suited for construction and housing developments in Nigeria. Moreso, the euphoria towards completing many residential homes before the yuletide season amidst the newly launched 3MT Okpella plant to capture growing cement demand must have also aided growth. Specifically, Revenue from the Nigerian operations increased by 38.7% y/y to N993.4bn in FY 2021 on the back of higher realized prices (+18.1% y/y) and strong volume growth (+16.8% y/y). Similarly, for the Pan African region, Revenue increased by 24.7% y/y to N397.3bn in FY 2021 owing to better price per tonne (+14.6% y/y) and volume growth (+8.8% y/y).

We raise our 12-month Target Price (TP) for GUINNESS to N74.60 (versus N45.17 previously), following material adjustments to our model. These revisions reflected better-than-expected H1'21/22 results and positive disclosures from the recent conference call that may have raised hopes for better shareholder rewards in the near-to-medium term. GUINNESS’ EV/EBITDA has been hovering in undervalued territory since May 2019. In 2020, the multiple even went below one standard deviation away from its five-year mean EV/EBITDA following the impact of COVID on the business. This undervaluation and the recent turnaround in operating performances support our TP upgrade and “HOLD” recommendation on the stock. ...

We expect the strong top-line growth witnessed in FY’21 (22.9%YoY) to subsist in the current financial year, with data revenues likely to remain the key driver. Specifically, data is likely to outperform other revenue sources like voice with a 45.0% YoY out-turn on the impact of increasing penetration. Voice revenue is expected to grow by a tamer 6.0%, supported by the growing subscriber base and increased network penetration. All in, we expect top-line growth of 18.9% in FY’22E. In our view, the key themes to watch out for in 2022 are as shown below:

The global economy continued its post-pandemic recovery in 2021, with the continued rollout of vaccines and accommodative monetary and fiscal policies. However, most developed countries hit a soft patch from Q3-2021 due to a number of factors. To begin with, the arrival of more transmissible coronavirus strains (most notably Delta and Omicron) pressured consumer spending. Furthermore, as the economic rebound strengthened, government intervention and other stimulus packages decreased. Rising inflationary pressures also caused significant constraints across countries. For instance, US Consumer prices rose by 7.0% in Dec-2021, the highest estimate in three decades, with the US Federal Reserve acknowledging the persistent inflationary pressures and commencing asset purchase tapering before the end of the year. The post-pandemic acceleration in inflation appears to be distinct from previous inflation episodes, as it stems from pandemic-led supply chain disruptions. This will largely determine policy direction across global economies in 2022, which will likely be a year of policy normalisation.