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JULIUS BERGER NIGERIA PLC Q1'21 Earnings Release - Infrastructure focus should further drive growth

Yesterday, Julius Berger released its Q1’21 results, reporting an impressive near-600% growth in PAT to ₦2.8 billion, also significantly higher than our ₦1.7 billion estimate. The outperformance was driven by a mild topline beat as well as a sizeable FX gain and a smaller-than-expected effective tax rate.

Revenue growth on full steam in spite of insecurity risk Following the reopening of the economy from the pandemic-driven lockdown in May 2020, the building materials and construction industries recorded a quicker-than-expected recovery, with topline surging as a result of strong public sector capex demand in the healthcare and transport space. Accordingly, the FG disbursed c.₦1.8 trillion for capital expenditure (according to Zainab Ahmad, the Federal Minister of Finance and Budget and Planning), the highest spend in over a decade. With the FG looking to consolidate on transport infrastructure spend in FY’21, we had expected a sizeable growth in topline in FY’21, leading to higher Revenue growth for JBERGER. In line with this, JBERGER reported a 27% y/y growth in Q1’21 topline to ₦71.2 billion, 3% ahead of our ₦69.3 billion estimate. Revenue remained driven by public sector spend with income from Government contracts accounting for 80% of topline. Adopting the Q1’21 run rate (as we expect public sector infrastructure spend to continue to drive topline), we raise our FY’21 forecast to ₦274.0 billion (Previous: ₦266.7 billion). However, we remain cautious of the insecurity situation in the country, highlighting that it could impact civil construction activities (the bulk of JBERGER’s revenues) in certain parts of the country by leading to longer construction timelines (due to safety measures), higher costs (increased private security expenses) and possibly distracting FG’s focus from Capex.