Q12024 Total Unaudited Financial Result | Total’s Bottomline Thrives Amidst Elevated Costs
Q1:2024 revealed a robust revenue growth of 99.47% year-on-year (YoY) for Total, compared to 38.59% YoY in Q1:2023. This remarkable performance was driven by growth across all revenue streams with Petroleum products (+108.24% YoY to NGN218.56bn) leading the pack and Lubricants & others (+69.10% to NGN51.27bn) following. We attribute this surge in revenue to the elevated cost of petroleum products. This may be attributed to the fuel subsidy removal, as well as elevated crude prices (average of USD83.00pb in Q1:2024 vs USD81.24pb in Q1:2023).
Operating profit (EBIT) experienced significant growth over the period rising by 156.63% YoY to NGN18.69bn (compared to +9.82% YoY in Q1:2023). The surge in EBIT is largely attributed to a strong top line performance, offsetting increases in cost. For context, administrative expenses (+84.97% YoY to NGN14.43bn) and Selling and Distribution costs (+294.82% YoY to NGN3.62bn) soared higher in Q1:2024. Furthermore, Net finance costs also rose substantially by 115.25% YoY to NGN1.84bn. However, amidst these cost increases, Profit before tax (PBT) and Profit after tax (PAT) recorded growth over the period, gaining 162.16% YoY to reach NGN16.84bn and 176.23% YoY to reach NGN11.50bn, respectively. Consequently, this resulted in an uptick in Gross and Net profit margin from 11.10% and 3.08% in Q1:2023 to 13.01% and 4.26%, respectively, in Q1:2024.
Total demonstrates resilience in its bottom line, despite facing elevated costs due to persistent inflation. This strength is primarily driven by a significant expansion in the company's revenue. We maintain a positive outlook, confident in Total's ability to navigate cost challenges effectively. This confidence stems from the company's strong fundamentals, supported by robust revenue growth fueled by high pump prices. Furthermore, we anticipate increased government efforts to attract investment into the sector, creating a tailwind for Total. This expectation is based on recent government incentives for the gas and midstream sectors, suggesting a broader push for energy self-sustainability. However, a potential downside lingers. Increased supply from the Dangote refinery could intensify competition in the downstream sector, potentially squeezing margins. Based on this assessment, we have slightly revised our target price upwards to NGN412.68, representing an upside potential of 23.48% compared to the closing price of NGN334.20 on May 23, 2024. Given our positive outlook, we recommend buying this 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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