11 PLC FY'17 - Earnings beat despite y/y profit decline
11 PLC (Formerly Mobil Oil Nigeria) reported an 8% y/y decline in FY’17 PAT (₦7.5 billion), translating to an EPS of ₦20.85. Considering the tough operating environment of the Nigerian petroleum downstream sector over the course of the year, we see the full year numbers quite impressive as the reported PAT (amongst all other profit lines) came in 15% ahead of our estimate. It is noteworthy that the single digit y/y decline was due to an extraordinary expense of ₦2.2 billion earlier in the year. Also impressively, the Board of Directors declared a dividend of ₦8.00/share (same as prior year) and ahead of our ₦6.00 expectation.
In line with our outlook for the downstream segment, we expect MOBIL to remain largely dependent on NNPC for PMS supplies in 2018 as landing cost remains above the regulated pump-price. As such we see limited upside for revenue growth even as we do not expect deregulation of the sector in the near term. We forecast a relatively flat growth in FY’18 EBIT and revise our FY’18 PAT estimate to ₦8.9 billion (Previous: ₦7.7 billion). Our target price has also been revised higher to ₦233.22 (Previous: ₦197.31), partly driven by lower risk free rate assumption
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