Analyst raises DSR EPS forecast, gross margin over 2018-19

Dangote Sugar Refinery has been projected to report growth 135 per cent earnings per share (EPS) in 2017E, with sales estimate growth of 15 per cent year on year to N204.1 billion going forward into 2018.

The growth forecast was released by FBNQuest in its company report, following DSR’s Q3 2017 result release. The projected sale growth is hinged on a recovery in unit volume sales 21per cent y/y to 790,000 tonnes, which is expected to offset further potential price reductions over the coming months.

According to the investment analysts company, Dangote Sugar Refinery’s (DSR) Q3 2017 earnings of N9.4bn beat its earlier forecast by 15 per cent, and have thus raised its EPS forecast over the 2017-2018E period by around 3 per cent. “Our new price target of N16.0 is up by a similar magnitude”

DSR’s Q3 PBT of N14.0billion grew by 236 per cent y/y, driven by lower production costs: Q3 2017 results showed several positives across the P&L. Although sales were flattish, both PBT and PAT were up significantly, 236 per cent y/y and 244 per cent y/y, respectively.

The company’s profitability was driven by a marked gross margin expansion of +2153bps y/y to 32.9 per cent. Although we were expecting a healthy gross margin performance, the magnitude of the expansion surprised positively.

DSR production costs, which were substantially lower y/y, benefitted from consistent gas supply through the quarter. Opex, which came in flattish y/y, also helped enhance the company’s Q3 2017 result.
It said that” sequentially, sales declined q/q, while PBT and PAT both fell by around 24% y/y. Compared with our estimates, while sales missed our estimate by 16%, PBT beat our N12.6bn estimate by around 11%.”
 

Bonny Amadi