CardinalStone has maintained its Buy rating on Nigerian Breweries Plc, setting a target price of N82.83 from a reference point of N67.00, following the company’s nine-month earnings results.
The analysts said the revised target reflects expectations of stronger earnings in 2026, driven by higher sales volumes, ongoing cost optimisation, and the absence of one-off impairment charges that affected Q3’25 performance.
“After a two-year pause in dividend payments due to challenging macroeconomic conditions, NB’s earnings recovery points to a possible resumption of dividends in FY’26,” the analysts added.
Although margins were softer in the third quarter due to higher costs, the company’s operational efficiency and strong balance sheet are expected to continue supporting earnings and overall financial stability.
Stronger margins
Looking ahead, CardinalStone expects Nigerian Breweries Plc to improve in fiscal year 2026 following the higher cost pressures observed in the third quarter of 2025, when the cost of goods sold (COGS) ratio rose to 66.2%.
While full-year 2025 gross, EBIT, and net margins were revised downward to 40.0%, 16.3%, and 8.7%, respectively, reflecting elevated input costs and a one-off impairment charge, these pressures are not expected to persist in the next fiscal year.
- Revenue is projected to reach N1.88 trillion, supported by improved sales volumes, ongoing cost optimisation, and the company’s extensive distribution network.
- Consequently, gross, EBIT, and net profit margins are forecast to improve to 40.5%, 16.7%, and 9.4%, respectively.
Nigerian Breweries’ cash conversion cycle, supported by favorable supplier credit terms and efficient cash management, is expected to continue reflecting liquidity and earnings stability.
Payable days are expected to remain robust due to the company’s bargaining power with suppliers and well-established procurement channels.
This disciplined working capital management is likely to sustain liquidity and operational efficiency while driving financial stability as Nigerian Breweries moves into 2026.
Dividend return
Following a two-year pause in dividend payments due to challenging macroeconomic conditions, Nigerian Breweries’ earnings recovery points to a potential resumption of dividends in 2026, according to CardinalStone.
The sharp devaluation of the Naira and elevated inflation over 2023–2024 had caused significant foreign exchange losses, which eroded retained earnings.
However, with profitability improving and currency pressures easing, retained earnings are expected to return to positive territory in 2026. “Even assuming a 60% dividend payout ratio, retained earnings could close the year at N32.2 billion,” the analysts revealed.
In its nine-month results, retained earnings remained negative at N85.5 billion, though this marked a notable improvement from the N169.7 billion deficit recorded in December 2024.
- Total equity also rose 17.8% to N546.5 billion.
- Total assets stood at N1.11 trillion, down slightly by 2.4%, with property, plant, and equipment valued at N564 billion, while inventories of N224.1 billion represented a significant portion.
