UAC OF NIGERIA PLC - FY’16 earnings trump estimates

UACN recorded a strong 29% q/q revenue growth in the seasonally strong fourth quarter of 2016, outperforming Vetiva and Consensus estimates by 22% and 29% respectively. With this, FY’16 topline rose 15% y/y to ₦84.6 billion, nearing the record high ₦85.6 billion revenue achieved in 2014. Looking at the segmental breakdown, the Group’s topline performance was supported by growth in the Food & Beverages (up 18% y/y), Real Estate (up 25% y/y) and Logistics (up 9% y/y) segments. The Paints segment (second largest topline contributor) however recorded lower revenue, down 4% y/y.

We forecast a 10% topline growth for FY’17, majorly hinged on continued support from the Feeds businesses. Also, given that UACN sources over 90% of its inputs locally, we estimate a mild improvement in gross margin to 21.0% (FY’16: 20.5%, Previous: 22.5%). Thus, our FY’17 EPS forecast is little changed at ₦2.17 (Previous: ₦2.20). Our 12-month target price for UACN is marginally raised to ₦30.91 (Previous: ₦30.33).