Analysts at FutureView Financial Services Limited, an investment banking company in Nigeria, have projected that the share price of Dangote Cement Plc will soon hit a high of N237. They have, therefore, recommended the shares to investors for purchase, saying it has significant upside potential considering its current market value.
The shares of the cement manufacturing giant closed at N140.20 per share on the Nigerian bourse on Monday, and given the price projection of FutureView analysts, investors buying now stand the chance of reaping capital gain of about 69 percent at the end of the year.
According to the analysts, they arrived at the N237 price using Dividend Discount Model (DDM) valuation metric.
Making an investment case for Dangote Cement shares, they said “With the high level of expansion and increasing capacity, Dangote Cement is poised to be the largest cement producer in Africa. Moreover, the use of gas to power most of its plants will yield economies of scale in terms of reduced operating costs and increased profitability.”
Analysing the operations of the company, they said Dangote Cement shipped about 2.4 metric tones (mt) of cement in Q3’12, which is an increase of 7.7 per cent compared with 2.3mt shipped in Q3’11.
“The production level represents utilisation rate of 51 per cent based on the current capacity of 19mtpa. Obajana Cement factory is Dangote’s largest cement plant with production capacity of 10.25mt.
The cement industry was affected by the flooding mid-year though the effect of the disaster is now abated,” they said.
The company had recorded a turnover of N208.2 billion in Q3 of 2012, up by 19.8 per cent from N173.8 billion recorded in the corresponding period of 2011.
Profit before tax rose from N106.517 billion to N130.634 billion while profit after tax grew by 15 per cent from N92.187 billion to N106.438 billion in 2012.
Dangote Cement is Nigeria’s leading cement producer with three plants in Nigeria and plans to expand in 13 other African countries. The Group is a fully integrated quarry-to-depot producer with installed production capacity of 19mtpa (metric tonnes per annum) in Nigeria by the end of 2012,to be increased to as much as 35.25mtpa in 2015.