KADUNA STATE UNIVERSITY
DEPARTMENT
BANKING AND FINANCE
LEVEL: 300
COURSE TITLE
FINANCIAL AND INVESTMENT ANALYSIS
COURSE CODE
BNF313
NAME
JUSTUS ROCK LAZARUS
MATRIC NO
KASU/22/BNF/1013
PRESENTED TO:
DR AYUBA IBRAHIM
1. BUA CEMENT PLC
2. Company Overview (10 Marks)
BUA Cement Plc is a leading Nigerian cement manufacturer and a subsidiary
of BUA Group. The company operates multiple cement plants across Nigeria,
including facilities in Edo and Sokoto states, with a combined installed
capacity exceeding 11 million metric tonnes per annum. BUA Cement plays a
pivotal role in Nigeria’s construction and infrastructure sectors, catering to
both domestic and regional markets.
Key Developments:
- Revenue Growth: Between 2022 and 2024, BUA Cement’s revenue
surged from ₦360.99 billion to ₦876.47 billion, marking a compound
annual growth rate (CAGR) of approximately 58%.
- Profitability Challenges: Despite revenue growth, the company faced
profitability pressures due to escalating costs, particularly from foreign
exchange losses and increased finance costs.
- Foreign Exchange Exposure: The depreciation of the Nigerian naira led
to significant foreign exchange losses, impacting net income.
- - Strategic Investments: BUA Cement secured a $291.1 million foreign
loan in 2023 to finance expansion projects, with a moratorium on
principal repayments until 2025.
-
- ---
-
- 3. Financial Statement Analysis
- Income Statement Highlights (₦ Billion):
- | Metric | 2022 | 2023 | 2024 |
- Revenu - - 360.9 - 459.9- 876.4 -
e 9 9 7
- Cost of - - 198.3 - 276.0- 576.2 -
Sales 8 4 1
- Gross - - 162.6 183.96 - 300.2 -
Profit 1 6
- Operati - 132.63 - 143.1 - 233.1 -
ng Profit 8 9
- Profit - - 120.1 - 67.23 - 99.63 -
Before Tax 5
- Profit - - 101.0 - - 73.91 -
After Tax 1 69.45
- Earning - - 2.98 - 2.05 - 2.18 -
s Per Share
(₦)
- - - - - -
- - - - - -
- Ratio Analysis:
-
- Profitability Ratios:
| Ratio | 2022 | 2023 | 2024 |
| Gross Margin (%) | 45.05 | 39.99 | 34.26 |
- | Operating Margin (%) | 36.74 | 31.13 | *Cash Flow Statement:*
- Detailed cash flow figures are not provided in the available data.
-
- Ratio Analysis:
-
- - Profitability Ratios:
- - Net Profit Margin:* 2022: 28.0%; 2023: 15.1%
- - Return on Assets (ROA):* 2022: 11.6%; 2023: 5.7%
- - Return on Equity (ROE):* 2022: 24.6%; 2023: 17.9%
-
- - Liquidity Ratios:
- - Specific current and quick ratios are not provided in the available
data.
-
- -Solvency Ratios:
- - Debt-to-Equity Ratio:* 2022: 0.31; 2023: 1.08
- - Interest Coverage Ratio:* 2022: 12.3x; 2023: 3.7x
-
- - *Efficiency Ratios:*
- - Specific asset turnover and inventory turnover ratios are not
provided in the available data.
-
- Interpretation:
- While BUA Cement's revenue grew by 27.4% in 2023, profitability
declined due to increased production costs and significant foreign
exchange losses. The company's debt levels rose substantially,
impacting solvency ratios and interest coverage.
-
- ---
-
- 4. Investment Valuation and Risk Assessment
- Valuation Models:
-
- - Price-to-Earnings (P/E) Ratio:
- - 2023 EPS: ₦2.05
- - Assuming a share price of ₦150, P/E Ratio: 73.2x
- - This high P/E suggests the stock may be overvalued relative to
earnings.
-
- Discounted Cash Flow (DCF) Analysis:
- - Detailed DCF analysis requires projections not provided in the
available data.26.61 |
- | Net Profit Margin (%) | 27.98 | 15.10 | 8.43 |
- | Return on Assets (%) | 10.35 | 8.56 | 10.46 |
- | Return on Equity (%) | 24.96 | 17.44 | 19.10 |
-
- Liquidity Ratios: - Efficiency Improvements: Asset turnover improved in
2024, indicating better utilization of assets to generate revenue.
Cash Flow Statement:
- - Solvency Ratios:
- - *Debt-to-Equity Ratio:* 2022: 0.31; 2023: 1.08
- - *Interest Coverage Ratio:* 2022: 12.3x; 2023: 3.7x
-
- Efficiency Ratios:
- - Specific asset turnover and inventory turnover ratios are not
provided in the available data.
-
- : investment
- While BUA Cement’ s revenue grew by 27.4% in 2023, profitability
declined due to increased production costs and significant foreign
exchange losses. The company’s debt levels rose substantially,
impacting solvency ratios and interest coverage.
-
- ---
-
4. Investment Valuation and Risk Assessment
-
- Valuation Models:
-
- - *Price-to-Earnings (P/E) Ratio:*
- - 2023 EPS: ₦2.05
- - Assuming a share price of ₦150, P/E Ratio: 73.2x
- - This high P/E suggests the stock may be overvalued relative to
earnings.
-
- - *Discounted Cash Flow (DCF) Analysis:*
- - Detailed DCF analysis requires projections not provided in the
available data.
Financial Risks:
- Increased debt levels and foreign exchange losses pose financial
challenges.
Industry-Related Risks:
- Intense competition and regulatory changes in the cement industry
may affect profitability.
5. Stock Performance and Market Analysis
Stock Price Trends:
- As of the latest available data, BUA Cement’s share price is ₦150.
- The stock remained flat despite profit declines, indicating market
resilience or investor confidence.
Comparison with Competitors:
- While specific competitor data is not provided, BUA Cement’s revenue
growth suggests a strong market position.
External Factors Affecting Investment Potential:
- Government infrastructure projects and urbanization in Nigeria may
drive cement demand.
- However, macroeconomic challenges and foreign exchange volatility
could impact future performance.
-
- 4. Investment Valuation and Risk Assessment (25 Marks)
-
- Valuation Models:
-
- Price-to-Earnings (P/E) Ratio:
- Year - EPS - Shar - P/E
(₦) e price Ratio
- 202 - 2.9 - 93.5 - 31.3
2 8 1 7
- 202 - 2.0 - 95.4 - 46.5
3 5 9 6
- 202 - 2.1 - 93.0 - 42.6
4 8 0 6
- Interpretation: The increasing P/E ratio suggests that investors are
paying more for each naira of earnings, which could indicate
overvaluation or expectations of future growth.
-
- Dividend Discount Model (DDM):
-
- Assuming a constant dividend growth rate:
-
- - 2024 Dividend per Share: ₦2.05
-
- - Required Rate of Return: 12%
-
- - Dividend Growth Rate: 5%
-
- Intrinsic Value = D1 / (r – g) = 2.05 / (0.12 – 0.05) = ₦29.29
-
- Interpretation: The intrinsic value is significantly lower than the current
market price, suggesting potential overvaluation.
-
- Risk Assessment:
- Market Risk:
- High inflation and currency volatility in Nigeria can impact operational
costs and profitability.
- Financial Risks:
- Increased debt levels and finance costs raise concerns about the
company’s financial stability.
- Industry-Related Risks:
- Intense competition from other cement manufacturers may pressure
market share and margins.
5. Stock Performance and Market Analysis (15 Marks)
Stock Price Trends:
- As of May 7, 2025, BUA Cement’s share price is ₦83.70.
- The stock has declined by approximately 10% year-to-date and 41.6%
over the past year.
Comparison with Competitors:
- While specific competitor data is not provided, the significant decline in
BUA Cement’s stock price suggests underperformance relative to industry
peers.
External Factors Affecting Investment Potential:
- Economic challenges in Nigeria, including inflation and currency
devaluation, can affect construction activity and cement demand.
- Government infrastructure projects may provide growth opportunities
Citations:
1. Simply Wall St: simplywall.st/community/narratives/ng/materials/ngse-
buacement/bua-cement-shares/bua-cement-plc-reports-64percent-increase-
in-profit-after-tax-to-n7391-billion-for-fy-2024-need-to-focus-more-on-
business?utm_source=chatgpt.com
2. Simply Wall St: simplywall.st/stocks/ng/materials/ngse-buacement/bua-
cement-shares/valuation?utm_source=chatgpt.com
3. Investing.com: www.investing.com/equities/bua-cement-plc-consensus-
estimates?utm_source=chatgpt.com
4. AFX: afx.kwayisi.org/ngx/buacement.html?utm_source=chatgpt.com
