NB Plc: Analysts Raise Estimates Over Improved Fundamentals

Admin 20-Nov-2020 Business

Alexis Uchendu

Nigerian Breweries Plc estimates have been upgraded by Chapel Hill Denham’s analyst Abiola Gbemisola as a result of sustained volume recovery experience in third quarter (Q3) 2020.
The upgrade signposts improved fundamentals as explained by the equity research note. This is however considered as positive for equities investors.
NB Plc.’s share price has maintained uptrend in the last 7-trading session at the local bourse.
The stock printed at ₦60.50 per share from ₦54 low in the period. Analysts have however projected to see the brewer’s stock in a stable upswing.
According to analyst note, Nigerian Breweries 2020 revenue is now expected at ₦315.23 billion as against ₦304.30 billion earlier estimated.
Chapel Hill Denham retained BUY rating on NB Plc.’s share with 12-month target price raised to ₦76.81 from previously ₦52.27.
It was stated that the new revenue expectation is due to NB’s resilient results in 9M-2020  particularly in Q3-2020, where it delivered a 25.5% year on year and 19.8% quarter on quarter growth in revenue.
“We believe this was driven by robust growth in beer volumes, following the re-opening of on-trade consumption channels in Q3-2020, alongside an increase in the average price of NB’s portfolio”, Chapel Hill Denham’s analyst Gbemisola stated.
Explaining further, Chapel Hill Denham expects NB to maintain its fast recovery in Q4-2020 and in financial year 2021.
The firm then projects 2021 revenue at ₦347.25 billion.
“Our estimates for 2021 implies a conservative 2.0% increase in the average price of NB’s portfolio and an 8.0% increase in beer volume.” analyst stated.
Meanwhile, NB Plc earnings before interest tax depreciation and amortisation (EBITDA) in 2020 has been raised to ₦65.72 billion from ₦56.46 billion that was previously estimated.
But, analyst Gbemisola hinted that higher finance costs is expected to pressure profitability, thus profit after tax has been forecast to ₦9.20 billion from prior estimate of ₦10.35 billion.
Chapel Hill Denham’s analyst Gbemisola increased the projected cost of sales for NB in 2020 to ₦192.12 billion from ₦188.67 billion previously and ₦191.76 billion in 2019.
This was due to the impact of Naira devaluation and of course FX scarcity.
On operating expenses, the firm marginally increased forecast to ₦90.27 billion from ₦89.65 billion previously expected, in line with the 9M-2020 run-rate of ₦90.49 billion.

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