Period Estimated: Quarter Ended 30^th September 2020
Rating: Hold
Current Market Price: N185.18

Latest Dividend: N16.00
Year High: N185.00
Year Low: N116.00
Fair Value: N180.33
Equity Analyst:  Tunde Segun Jeariogbe

Key Investment Ratios

• In this report, we consider the nine-month financials of Dangote Cement Plc during the period ended 30^th September, 2020, compared same with similar numbers released at the end of the 2019 third quarter to establish growth. Full year numbers were however explored for valuation and necessary recommendations.
• Generally, the income statement revealed an improved performance, when put side by side the numbers released in the comparable quarter of 2019.

DANGOTE CEMENT
Bourse	Nigerian Stock Exchange
Code Name	DANGCEM
Sector	INDUSTRIAL GOODS
Market Classification	PREMIUM BOARD
Nature of Business	Production and Sale of Cement
Date of Incorporation	November 4th 1992
Date Listed	October 26th 2010
End of Accounting Year	December 31st
Website	www.dangotecement.com
Registrar	United Securities Limited
Auditor	Ahmed Zakari & Co. , Deloitte Nigeria
Share Price@Relsd (N)	174.50
Earnings per Share	12.24
Intrinsic Value(N)	180.33
Share Outstanding	17,040,507,405
Market Capitalisation	2,973,568,542,173

Company figures

• The Turnover reported for the first nine months of 2020 operations is estimated at N761.44 billion, same as 12.01% above the N679.79 billion posted in the corresponding quarter
• Similarly, Cost of Sales inched up 9.49% to N317.54 billion, versus N290.01 billion in the comparable quarter.
• Operating Profit for the period was valued at N287.92 billion, same as 24.38% above the N231.48 billion estimate in 2019 nine months business session.
• Operating Expenses used through the period is valued at N159.41 billion, a marginal drop from the N160.34 billion posted in the corresponding quarter.
• Finance Cost stood at N34.29 billion, 13.73% below the N39.78 billion reported at the end of the 2019 third quarter.
• Profit before Tax was estimated at N271.96 billion, as against N197.68 billion achieved at the end of the first nine months of 2019 business session.
• Tax Expense allowance grew by 46.03% to N63.27 billion, versus N43.33 billion in the corresponding quarter.
• Thus, a total of N192.96 billion was reported as Profit for the period, same as 35.31% above the N142.61 billion earned at the end of 2019 third quarter.

DANGOTE CEMENT
Statement of Comprehensive Income
	2020(Mill)	2019(Mill)	%CHG
Turnover	761,444	679,791	12.01
Cost of Sales	317,540	290,015	9.49
Operating Profit	287,928	231,482	24.38
OPEX	159,414	160,342	-0.58
DEPRECIATION	67,087	71,741	-6.49
FINANCE COST	34,298	39,786	-13.79
NET FINANCE INCOME	(15,968)	(33,802)	-52.76
PBT	271,960	197,680	37.58
TAX	63,275	43,330	46.03
PAT	208,658	154,350	35.18
TOTAL COMP INCOME	192,968	142,617	35.31
Statement of Financial Position
Current Assets	489,837	355,162	37.92
Non Current Assets	1,359,055	1,288,995	5.44
Total Assets	1,848,892	1,644,157	12.45
Current Liabilities	756,765	517,888	46.13
Non Current Liabilities	273,852	269,687	1.54
Total Liabilities	1,030,617	787,575	30.86
Net Assets	818,275	856,582	-4.47
Retained Earnings	712,968	731,154	-2.49
Shares Outstanding	17,040,507,405	17,040,507,405

• Current Assets at the end of the 2020 third quarter is valued at N489.83 billion, 37.92% above the N355.16 billion in the corresponding quarter.
• Non-Current Assets stood at N1.35 trillion, a 5.44% improvement over the N1.28 trillion in 2019.
• Current-Liabilities was valued for N756.76 billion, compared to N517.88 billion in the corresponding quarter.
• Non-Current Liabilities grew by a marginal 1.54% to N273.85 billion, as against N269.68 billion in the comparable quarter.
• Net Assets dropped by a marginal 4.47% to N818.27 billion, as against N856.58 billion in the comparable quarter.
• Retained Earnings reduced by 2.49% at N712.96 billion, as against N731.15 billion in 2019.

Financial Strength/Solvency Ratios

• Debt Ratio is currently estimated at 55.74%, same as 16.37% above the 47.90% estimated in the corresponding quarter of 2019, which implies that Total Liabilities is same as 55.74% of Total Assets at the end of the quarter.
• Total Debt-to-Equity was equally estimated at 125.95% as against 91.94% estimated in the comparable quarter. Implying that more debt was used through the just concluded period.
• It was established that Equity is same as 44.26% of Dangote Cement’s Assets Value, estimate, compared to the 2019 third quarter which yielded 52.10%, representing 15.05% drop in investors’ interest within the two quarters under comparison.
• Nevertheless, going by the estimated beta value, we can conclude that Dangote Cement’s shares are fairly more liquid than its industry peers traded on the Nigerian Stock Exchange.

Financial Strength/Solvency Ratio
TICKERS	2020	2019	%CHG
Debt Ratio	55.74%	47.90%	16.37
Total Debt to Equity Ratio (MRQ)	125.95%	91.94%	36.99
Equity Ratio	44.26%	52.10%	-15.05
TICKERS	2020	Industrial Average	%CHG
Beta Value	0.80	0.52	53.85

Profitability Ratios

• EBITDA margin estimated for the quarter stood at 37.81%, an 11.05% improvement over the 34.05% estimated in the 2019 third quarter earnings.
• Pre-Tax Margin is valued at 35.72%, same as a 22.82% improvement over the 29.08% estimate in 2019.
• Cost of Sales is 41.70% of Turnover, just 2.25% below the 42.66% estimated in 2019, a confirmation of the management’s effort at controlling direct costs.
• Return on Equity stood at 25.50%, an improvement over the 18.02% achieved in 2019. This is undoubtedly an impressive returns
• See below for details.

PROFITABILITY RATIOS
TICKERS	2020	2019	%CHG
EBITDA MARGIN	37.81%	34.05%	11.05
PRE-TAX MARGIN	35.72%	29.08%	22.82
EFFECTIVE TAX RATE	30.32%	28.07%	8.02
CS TO TO	41.70%	42.66%	-2.25
ROE	25.50%	18.02%	41.51
ROA	11.29%	9.39%	20.22

Efficiency Ratios

• Operating Expenses to Turnover value is same as 20.94%, an 11.24% improvement in management efficiency, from the 23.59% estimated for 2019 third quarter financial indices.
• Turnover to Total Assets Ratios stood at 41.48% against 41.35% a marginal improvement in management efficiency within the two periods under review.
• Working Capital Ratio which indicates a company’s effectiveness in using working capital was estimated at -2.85x a 31.71% decline from the -4.18x estimated in 2019
• See below for details.

EFFICIENCY RATIOS
	2020	2019	%Chg
OPEX tO TO	20.94%	23.59%	-11.24
TO tO TA	41.18%	41.35%	-0.39
Working Capital Turnover	(2.85)	(4.18)	-31.71
Working Capital Ratio	0.65	0.69	-5.62

Investment/Valuation Ratios

• At the end of the 2020 third quarter, the earnings per share of Dangote Cement grew by 35.18% to N12.24 from the previously estimated N9.06 each.
• Our nine-month adjusted P/E-Ratio dropped by 13.37%, after rising to 14.25x from 16.45x, an indicating positive investor sentiments for Dangote Cement shares.
• The said Earnings per Share yielded 7.02% of the current market price of Dangote Cement shares on the exchange as of the time the result was presented.
• The Book Value is currently estimated at N48.02 each, far below the market value of the company, representing huge premium investors are paying due to market sentiments/preference for the company as noted above.
• Further confirming the seemingly over-priced status of Dangote Cement shares on the NSE is the Price to Book Value which is far above unity (3.63x).

Investment/Valuation Ratios
Tickers	2020	2019	%Chg
Price at Released date	174.50	149.00	17.11
EPS	12.24	9.06	35.18
TCIP/SHARE	11.32	8.37	35.31
P/E-Ratio	14.25	16.45	-13.37
Earnings Yield	7.02%	6.08%	15.43
BV/Share	48.02	50.27	-4.47
PBV	3.63	2.96	22.60

Valuation

Despite the commendable improvement observed in the performance indices of Dangote Cement, we maintain our preservative valuation approach, while placing a fair value on each unit of its shares. Nevertheless, we improve our growth expectations over the half-year valuation. Thus, we have valued each units of Dangote Cement’s share price at N180.33 and have therefore rated it a Hold.