The strong brand loyalty of NESTLE, export expansion, and easing cost pressures support a return to profitability in 2025, with projected profit after tax (PAT) at N92.7 billion, according to Cardinal Stone Partners.
Potential asset revaluation could also strengthen the company’s books, with positive passthrough to valuation, according to Cardinal Stone Partners analysts, who have a BUY rating on NESTLE with a 12-month Target Price of N1,518.20 (vs N1,099.89 previously), reflecting a 51.8% upside.
The PAT estimate hinges on expectation that devaluation-induced FX losses, which negatively impacted Full Year (FY( 2023 and FY 2024, will be minimal in FY 2025. This PAT expectation implies an earnings per share (EPS) of N117.0 per share and a PAT margin of 7.0%.
Revenue to grow by 38.7% in FY’25
NESTLE, with a reputation for quality and safety, has carved a niche for itself in the Nigerian consumer market by offering a wide range of some of the most recognizable brands in Nigeria, such as Maggi, Milo, and Cerelac.
These strong brands create a loyal customer base, enabling NESTLE to easily pass on some of its cost pressures to consumers in the form of higher prices.
Cardinal Stone price survey revealed that the prices of NESTLE products increased by an average of 76.8% in FY’24, providing a reasonable explanation for the 75.2% YoY growth in revenue.
While price increases may taper in 2025 (our survey suggests a mean price increase of 31.2% across NESTLE’s product portfolio in Q1’25) due to the company’s relatively stable cost profile and high base effects from last year, robust brand innovation strategies support projected revenue growth of 38.7% YoY.
Export drive to further support revenues
NESTLE’s strategic decision to leverage recent currency devaluations for export expansion also supports optimism about revenues.
According to the company’s earnings release, export revenue surged by 455.8% YoY to N6.5 billion in FY’24.
According to management, this expansion is driven by the introduction of popular local brands like Maggi, Milo, Golden Morn, and Cerelac to new West African markets and positions NESTLE Nigeria for further growth and diversification.
Looking ahead, growth in the export segment of the business is expected to continue to outpace that of the domestic market. This trajectory should result in a c.5.0% export contribution to revenue by 2028 (vs c.1.0% currently).
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