Nigeria | NGX

Major downstream player ARDOVA ("the company or the firm” from henceforth) released its unaudited financial result for H1-2021. It was evident to note, that the rebound in economic activities and improved margin efficiency drove double-digit y/y bottomline growth for the major petroleum product marketer. Revenue declined marginally by 0.6% y/y to N86.7bn in H1-2021, Cost margin improved to 91.5%, in H1-2021 from 94.9% in H1-2020, due to increased Lubricants sales and improved economies of scale. Furthermore, improved margin efficiency boosted Gross profit and Operating profit by37.8% and 188.3% y/y to print at N7.4bn and N2.6bn, respectively. Overall, the company recorded a Profit before and after tax of N2.6bn and N1.7bn respectively (vs Profit before and after-tax of N1.1bn and N1.0bn respectively in H1-2020). Earnings per share (EPS) increased to N1.36 in H1-2021, from N0.78 in H1-2020. Below, we highlight key details of the downstream operator’s performance and our expectations for H2-2021 and beyond.

DANGCEM’s H1'21 result reflects its superiority over domestic peers in  terms of capacity, market coverage, and cost management. We raise our  FY'21 earnings forecast to N366.5 billion (vs N333.1 billion previously) on  potential impact of higher than expected volumes and prices. Aided by  its strong cash position, the company is also likely to continue providing  the highest dividend yield within its sector. This dividend yield and  potential share buyback is likely to keep investors interested in the ticker.

Lafarge Africa Plc (“WAPCO” or “the Group”) published its H1-2021 financials recently. Revenue grew 20.3% y/y in the period, buoyed by improved sales volumes across its cement and aggregate segments, as well as higher pricing. The cement manufacturer’s key cost lines rose faster than sales, driving gross margin compression. Overall, WAPCO’s steady bottom line improvement remains highly encouraging as PAT expanded by 21.4% y/y to N28.3bn (110.0% q/q in Q2-2021) and net margin expanded by 18bps to 19.5%. We review the half year performance and provide our outlook on the business.

While PRESCO’s Q1’21 price-inspired revenue of N7.92 billion (47.5% YoY) was good, the Q2’21 sales of N13.5 billion (67.5% YoY) was a company record. In our view, the sustained rally in CPO prices suggests that this robust topline performance could subsist for the rest of the year. Aided by recent improvements in cost efficiency and moderation in leverage, we, therefore, raise our 12-month TP to N84.96 (vs N74.59 previously). Our new TP suggests a 17.0% upside relative to our reference price and a BUY recommendation on the ticker. ...

Last week, trading in the equities market was broadly tight with a bearish bias. Buyers appeared to remain cautious following the previous week’s rally while sellers were determined not to book profits following the sustained decline in fixed income yields. That said, the local bourse ended the week on a bearish note, posting a weekly loss of 0.1%. The All-Share Index closed the week at 39,483.1 points while YTD loss moderated to 1.8%. Similarly, investors’ wealth was pressured as market capitalisation dropped N20.5bn w/w to settle at N20.6tn. Activity level improved last week as average volume and value traded weakened by 46.2% w/w and 2.6% w/w to 173.0m units and N2.5tn, respectively.

Following the release of its H1’21 numbers and subsequent conversation with management, we retain our optimism for OKOMU, raising our FY’21 earnings forecast to N17.6 billion (vs N14.6 billion previously). Our PAT adjustment reflects higher than expected CPO prices and output. On the whole, the adjustments resulted in an increase in our 12-month target price to N131.55 (N111.25 previously) and a BUY rating on the counter.