FREE

NIGERIAN BREWERIES PLC 9M 20 - Increased demand strength stabilizes 9M Revenue

Revenue rebound fueled by lift in local demand
Much like Guinness Nigeria, Nigerian Breweries in its third quarter made a significant rebound in Revenue to ₦82.2 billion, surpassing both our Q3’20 expectation by 23% and its Q3’19 performance by 26%. Supported by this, 9M’20 Revenue came in flattish (+1% y/y), dragged by its dismal H1 results. Following the gradual easing in the economy in the past quarter and the phased return of social drinking activities, we believe that these Q3 numbers were mostly supported by increased volumes. Consequently, with Q4 traditionally being the strongest quarter due to the customary festivity – albeit at a mildly reduced scale due to the pandemic – we foresee this positive momentum carrying on in the quarter. Thus, we estimate a full year revenue figure of ₦326.2 billion, a 1% growth from FY’19.

Revenue to continue on a rebound trajectory
Despite the recent additional ₦20 billion commercial paper issuance in this quarter, we expect finance costs to remain slightly in line with the Q3 run rate, given the recent maturity of c.₦53 billion worth of CPs in November. Thus, we expect Finance costs to come in at ₦4.0 billion, dragging PBT and PAT to ₦14.5 billion and ₦10.0 billion, down 38% y/y respectively. Overall, we value NB at ₦50.88 and place a SELL rating on the stock. The company declared an interim dividend of ₦0.25 per share and keeping with its dividend trend, we expect a final dividend of ₦1.00 per share adding to a total of ₦1.25 per share and a dividend yield of 2.4%.