Chemical and Allied Products Plc (CAP) released its FY2017 financial scorecard, which showed a 4.40% YoY growth in revenue to N7.11bn. Cost of sales, which grew at a much faster rate of 10.35%, drove the cost-to sales up to 54.32% from 51.39% recorded in FY2016. In line with the significant increase in cost, ProfitBefore-Tax and Profit-After-Tax declined by 5.01% and 6.53% to NGN2.18bn and NGN1.50bn respectively.
In terms of its margins, the company performance also remained pressured, as gross margin and net margin both declined to 45.68% (vs.48.61% in 2016) and 21.07% (vs.23.53% in 2016) accordingly. Based on a forecast EPS of NGN2.47 (reviewed from NGN2.42) and a target PE if 15x, we arrived at a Dec2018 target price of NGN37.05 (previously NGN36.31). This represents a discount of 4.39% from the closing price of NGN38.75 on the 20thof April 2018. We therefore recommend a “HOLD”.