H1:2024 Earnings Note |TotalEnergies Maintain Profitability Despite Mounting Cost pressures
In H1:2024, TotalEnergies experienced a significant surge in revenue, increasing by 92.98% year-on-year (YoY) to NGN529.94bn, compared to 31.38% YoY in the corresponding period of 2023. This impressive performance was driven by growth across both Petroleum products (+103.29% YoY to NGN642.64bn) and Lubricants and others (+67.60% YoY to NGN93.76bn) revenue streams. The surge in revenue growth over the period is attributable to the higher pump prices following the removal of the PMS subsidy in June 2023. Consequently, average PMS prices rose to NGN710.91/liter in H1:2024, compared to NGN356.06/liter in H1:2023. As a result, gross earnings increased by 83.86% YoY to NGN64.42bn (vs. 33.68% to NGN35.04bn in H1:2023).TotaEnergies Marketing Nigeria has consistently demonstrated resilience by maintaining strong profit margins despite elevated direct and indirect cost pressures, buoyed by rapidly rising prices. The company’s top line has exhibited robust growth, achieving a CAGR of 20.43% over the past six years. Looking ahead, while we remain confident in Total Energies' ability to manage these cost pressures, the recent government policy to sell crude oil to local refiners in Naira is expected to gradually moderate pump prices. This could potentially dampen top-line growth, although prices are likely to stay significantly higher than pre-subsidy removal levels. However, we anticipate that the government's focus on revitalizing the downstream and midstream sectors will likely stimulate greater investment and growth for the company, thereby fostering continued revenue expansion. Based on these factors, we have slightly adjusted our target price upward to NGN516.24. implying an upside potential of 20.70% compared to the closing price of NGN427.70 on August 06, 2024. Given our positive outlook, we recommend a ‘Buy’ rating for the stock.
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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