BUA Cement Plc has kicked off FY-26 on a strong footing, delivering a powerful set of quarterly results that reflect sustained pricing strength, improved volumes, and significant margin expansion.
The company reported a 22.1% year-on-year revenue growth, driven by higher cement prices and increased bulk cement sales volumes. The performance reinforces the group’s ability to maintain pricing discipline in a competitive and cost-sensitive environment.
Profitability metrics also showed marked improvement, with EBITDA margin expanding by 871 basis points year-on-year to 53.9%, underscoring stronger operational efficiency and easing cost pressures across key production inputs. Earnings per share surged by 117.4% year-on-year to NGN5.21, signalling robust bottom-line momentum.
Following the results, analysts revised their FY-2026 outlook upward, upgrading revenue growth expectations to 25.4% (previously 18.7%) and increasing EPS projections to NGN16.82 (previously NGN12.87). The revision reflects stronger-than-expected pricing power, modest volume improvements, and a more favourable cost environment.
Cost assumptions were also meaningfully adjusted. COGS growth is now projected at 12.5%, down from earlier estimates, while OPEX growth has been revised to 25.2%, reflecting easing logistics and energy-related pressures. Analysts attribute the improved outlook partly to expected efficiency gains from the use of solid fuel at the Obu plant and relative FX stability.
As a result, EBITDA margin is now forecast to expand further to 52.0% in FY-26, reinforcing the company’s strong operating leverage. Net finance income is projected at NGN24.94 billion, supporting an expected EPS growth of 60% year-on-year.
Despite this upward revision cycle, analysts maintained a “SELL” rating, citing valuation concerns as the stock continues to trade at a significant premium relative to both intrinsic value and regional peers.
Stronger Returns Profile Signals Structural Efficiency Gains
BUA Cement’s capital efficiency continues to strengthen, with ROIC rising sharply from 19.7% in 2024 to 42.4% in 2025, well above its historical average of 23.7%.
Looking ahead, ROIC is projected to further improve to 58.1% in 2026, significantly outperforming the estimated peer average of 52.3%. Analysts note that this reflects a combination of stronger earnings growth, improved margins, and a gradually stabilising capital base.
Importantly, ROIC remains well above the company’s estimated 18.6% WACC, indicating continued value creation. Over the medium term, ROIC is expected to remain elevated, averaging 92.2% between 2026 and 2030, driven by efficiency gains and disciplined capital allocation.
Valuation: Higher Target Price, But Premium Raises Concerns
Following the earnings revision, analysts increased their target price to NGN273.08 per share (previously NGN142.70), supported by both DCF and peer-based valuation adjustments.
However, despite the upgrade, BUA Cement continues to trade at elevated levels, with a 2026E P/E of 22.5x and EV/EBITDA of 16.7x, compared to MEA peer averages of 15.0x and 11.5x respectively.
Analysts argue that while fundamentals are improving, the current valuation leaves limited upside potential and a less attractive risk-reward profile.
Expert Reactions: Economists Weigh In
Reacting to The Ameh News question on whether the upgraded outlook justifies a change in market sentiment, Celestine Ukpong, an economist, noted that BUA Cement’s performance reflects broader cyclical strength in the construction and industrial materials sector.
“What we are seeing is a classic case of strong pricing power meeting improving operational efficiency. However, markets often move ahead of fundamentals, and valuation gaps like this tend to correct over time,” Ukpong said.
He added that while earnings growth is impressive, investors should remain cautious about “overpaying for growth that is already well anticipated in the market.”
Similarly, Peter Adebayo, FCA and financial analyst, described the results as “technically strong but valuation-stretched.”
“BUA Cement is executing very well operationally—there is no doubt about that. The margin expansion and ROIC trajectory are solid. But when you compare its multiples to regional peers, the premium is difficult to justify without a sharper earnings acceleration,” Adebayo said.
He further stressed that the stock’s medium-term upside would depend on sustained cost advantages and continued demand resilience in the Nigerian construction sector.
Dividend Outlook
For FY-2026, analysts project a dividend per share of NGN15.00, translating to a 4.0% dividend yield, providing moderate income support amid elevated valuation levels.
Conclusion
BUA Cement’s Q1-26 results reinforce a strong operational turnaround story driven by pricing power, volume growth, and improving efficiency. However, despite upgraded earnings forecasts and a higher target price, analysts and economists remain cautious, highlighting that valuation premiums may limit near-term upside.
BUA Cement posts strong Q1-26 growth with rising revenue, margins, and EPS, prompting earnings upgrades, while analysts and economists warn of valuation risks.
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