The share price of Lafarge Africa Plc’s has the potential to rise by as much as 57 per cent to hit N34.44 per share, after the cement company recorded double-digit growth in the bottom-line in the first half.
In its latest stock review, Cordros Securities stated that it has reviewed its pre-tax profit forecast for Lafarge Africa to N71.83 billion from previous estimate of N42.64 billion, translating to earnings per share of N3.43 as against prior estimate of N2.17.
Lafarge Africa’s first half report for the period ended June 30 2021 showed that second quarter 2021 standalone profit after tax grew by 25.7 percent to N19.19 billion while earnings per share settled at N1.19, bringing total first half earnings per share to N1.76.
It is indicated by the report that the double-digit growth in net profit was driven by a combination of topline growth of 29.4 percent and reduction in finance cost of 71.5 percent, of which offset the increases in operating expenses which rose by 61.3 percent and cost of sales which grew by 42.6 percent.
The report also stated that “Over the rest of the year, we expect sustained growth in earnings due to favourable price and volume mix and moderation in finance cost given its low leverage position;”
With the revised earnings per share of N3.43 for 2021, analysts opine that the dividend per share could be N1.55 by the end of the year, implying a dividend yield of 7.3 percent based on the price of N22 per share in recent days.
Analysts stated that the price increment and sustained volume growth will support revenue. Turnover had grown by 20 percent in first half on the back of improvement in cement sales and aggregate and concrete sales.
It is also noted that the double-digit growth in cement sales was price-driven given the higher increase in price per tonne compared to volumes. Without downplaying the strong demand from individual homebuilders as disclosed by management, analysts pointed out that low base in the prior-year further aided the volume growth.
The management of Lafarge Africa had noted that margins were pressured by the pass-through impact of the naira devaluation on dollar-denominated cost items, namely gas contracts, spare parts and strategic raw materials.