By Darasimi Adebisi
Domestic and foreign investors have invested N598.12 billion in the stock of Dangote Cement Plc on the Nigerian Exchange Limited (NGX) in the first 9 months of 2021.
With impressive earnings in half year ended June 30, 2021, the cement manufacturing company stock price on the NGX hits 52-week high yesterday.
This means the stock of the cement manufacturing company has appreciated by 14.3 per cent to N280 (N4.77trillion) as at September 30, 2021 from N244.90 (N4.17trillion) it opened for trading this year.
Appreciation in Dangote Cement share price impacted positively on NGX Industrial index that gained nearly two per cent 2,089.38 basis points as at September 30, 2021 from 2,052.33 basis points it closed in 2020.
With a dividend of N272.65billion in 2020 financial year, Dangote Cement made the highest returns to investors on the NGX.
The company’s unaudited result and accounts for half year ended June 30, 2021 (H1) showed impressive performance in revenue and modest performance in net finance that impacted positively on profit before tax and profit after tax.
The company’s double-digit increase in revenue was largely driven by higher sales volumes, as well as improved cost management during the period, which drove margin expansion.
The cement manufacturing recorded increase in volume of both cement and clinker volumes to 14,550,000 tonnes in H1 2021 from 11,674,000 tonnes to drive revenue from sales of cement & clinker to N690.55billion in H1 2021 from N476.84billion reported in H1 2020.
During the H1 2021 period, Dangote Cement revenue increased by 44.8 per cent to N690.5billionn from N476.85billion recorded in H1 2020, supported by a 26.1per cent surge in volumes sold to 15,277 metric tonnes in H1 2021 from 12,114 metric tonnes and 14.5 per cent increase in revenue-per-tonne to N45,133.66 which was attributed to lower rebates and price increment during the period.
The impressive growth was reflected in both the Nigerian and Pan-African market segments, as sales volumes were up by 33.2per cent and 15.5 per cent, respectively.
With decline in finances, Profit Before Tax rose by 72.7 per cent to N281.3billion in H1 2021 from N162.85 billion in H1 2020.
Notably, a 141.2 per cent increase in tax income to N89.6biillion in H1 2021 from N36.71billion in H1 2020, dragged profit to N181.6billion in H1 2021 from N126.14billion reported in H1 2020.
Earnings per share (EPS) increased to N11.21 kobo in H1 2021 from N7.45 kobo in H1 2020.
According to analysts at United Capital, “Going into H2 2021, we remain optimistic on Dangote Cement and expect the company to sustain double-digit growth, albeit at a slower pace relative to H2 2020, given the relatively high base from the period.
“On a macro-scale, we are optimistic about economic recovery in Nigeria and Sub-Saharan Africa, as well as sustained cement demand, which has driven capacity expansion plans. Additionally, price increases in the first half of the year will help sustain top line growth and margins, as costs remain pressured.
“Furthermore, we see further room for price increments during H2-2021 as demand remains strong and inflationary pressures persist. However, risks to a more robust H2 2021 performance include disruptive rains in Q3-2021, an intensified third wave of Covid-19 in SSA and attendant lockdowns, persistent disruptions in global supply chains, higher freight prices, further naira devaluation and elevated inflationary pressures.
However, we observe that Dangote cement has done particularly well in the face of rising expenses and this bolsters our optimistic outlook.Specifically, we project FY 2021 Revenue growth of 28.7per cent to N1,330.9billion (prev. N1,168.3billion) and expect EPS to grow by 31.9 per cent to N21.4/s in FY 2021.
They, however, recommended that investors should HOLD the stocks of Dangote Cement with upgraded target price.
“We updated our forecasts for Dangote cement in light of the H1 2021 numbers which exceeded our expectations, as well as our optimistic prognosis for cement demand in H2-2021.Accordingly, we raise our target price on Dangote cement to N270.28 (previous: N253.70). This revision reflects our expectation of upbeat sales volumes, further price increases and sustained cost management, as well as favourable adjustments in computing the cost of equity. Our target price implies a HOLD rating and an upside potential of 11.9 per cent, ”they said.