Report
Victor Dima
EUR 44.50 For Business Accounts Only

Dangote Sugar (BUY, TP NGN 8.80/share) - Price increases drive Q1 17A sales growth of 83% y/y; Raise TP to NGN 8.8/share


  • Price increases (>100%) drive 83% y/y sales growth in Q1 17A, despite 19% y/y drop in volumes. Margins remain subdued on raw sugar price inflation.
  • Global sugar prices trending lower (down 21% YTD) which may start impacting sales growth in H2 17e, and as a result we expect positive top line momentum to turn negative in H2 17e (to -20% y/y in H2 17e vs. +50% y/y in H1 17e). Low raw sugar price to aid gross margin, provided FX remains stable.
  • We increase our FY 17e/18e EPS by 19%/12% driven by higher sales growth and higher investment income as company continues to grow its cash balances. Our TP increases by 13% to NGN 8.8/share from NGN 7.8/share.
  • DANGSUGA remains our top pick in Nigerian consumer sector. With early signs of consumer demand revival in Nigeria, 70% sugar market share, high FCF yield (c.12% FY 17e), one of the best dividend yields in the sector (9.7% FY 17e) and attractive valuation, we reiterate BUY.


Underlying
Dangote Sugar

Provider
Arqaam Capital
Arqaam Capital

Established in 2007, Arqaam Capital is a specialist emerging markets investment bank, bringing regional and international product offerings to the emerging markets. Arqaam Capital combines international best practice with expertise in the markets in which we operate. Our primary role is to provide financial intermediation and create investment opportunities for frontier and emerging markets investors looking to invest in their own markets and abroad, as well as international investors seeking opportunities in target frontier and emerging markets. Arqaam Capital is headquartered in the Dubai International Financial Centre (DIFC), with additional offices in Libya, Lebanon, Egypt, and South Africa. 

Arqaam Capital's research platform provides the largest coverage footprint of MENA equities and one of the largest on the African continent with a total of 300 stocks under coverage. Arqaam Capital is ranked as one of the leading research providers in the region - a reflection of its broad coverage universe, its in-depth and high quality research, as well the compelling investment ideas that the team generates. The analysts closely analyze their sectors and issue in-depth company and sector research while the strategy team connects the micro with the macro, focusing on index analysis, macroeconomics and strategy research. 

Analysts
Victor Dima

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