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H1:2023 BUACEMENT Earnings Note | Spiraling Finance Costs Limits Bottom-Line Growth

BUA Cement Plc. recently released its H1:2023 financial results, depicting a 17.24% YoY growth in revenue to NGN221.07bn. On the other hand, production cost of sales (adjusted for depreciation) rose by 17.42% YoY to NGN105.36bn while total operating costs (ex-dep) surged 46.26% YoY to NGN16.86bn. Furthermore, Net finance costs spiked 269.57% YoY to NGN10.52bn following the devaluation of Naira amid elevated interest rate environment in the period. Consequently, Profit Before Tax (PBT) and Profit After Tax (PAT) rose marginally by 2.75% YoY and 3.67% YoY to NGN76.43bn and NGN63.62bn respectively. Overall, net profit margin deteriorated to 28.78% YoY in H1:2023 (vs. 32.54% YoY in H1:2022).

We believe BUA Cement is poised for growth in its revenue and would feed into its bottom-line performance barring any significant devaluation later in the year. Hence, we retain our 2023FY target price of NGN110.81.

Provider
ARM Securities Limited
ARM Securities Limited

ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape. ​

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