By Chukwuma Umeorah
Guinness Nigeria Plc is currently trading below its intrinsic value despite recording a significant turnaround in its financial performance, according to a new equity research report by CardinalStone. The report notes that the brewery firm’s stock remained undervalued relative to regional peers, even after a notable recovery in earnings and operational efficiency over the last twelve months.
CardinalStone upgraded its 12-month target price for Guinness to N181.38, representing a 55 per cent upside from the current reference price of N117.05. This revaluation was based on improved fundamentals, including a return to profitability, stronger solvency ratios, and better cost management. Despite these gains, the company is trading at an EV/EBITDA multiple of 5.2 times, well below the EMEA peer average of 8.4 times. The report stated that “our 12-month TP implies an exit P/E of 8.5x, which is at conservative discounts to Guinness’s last 5-year harmonic mean and median P/Es of 14.6x and 13.8x apiece.”
The firm reversed a prior loss to post a profit of N16.2 billion for the 12-month period ended June 2025, driven by stable sales volumes, improved pricing power, and tighter cost controls. The result marks a significant improvement from the N84 billion loss recorded in the previous period. Notably, the earnings uptrend was supported by stronger performance in the final quarter, which contributed an earnings per share (EPS) of N4.33, compared to a cumulative N3.07 in the preceding three quarters.
Guinness also recorded a substantial improvement in its solvency profile. Its debt-to-equity ratio fell from 18.6 times in the previous fiscal year to 3.5 times, reflecting equity growth from earnings as well as reduced foreign currency debt obligations. Analysts believe this improvement lays a more stable foundation for medium-term growth. “We particularly like the earnings support in the last quarter… Going forward, we expect this trend to persist,” the report stated.
CardinalStone projects further gains in profitability and margins, especially as the company transitions its financial year-end to December from June. The current reporting period will cover 18 months (July 2024 to December 2025), after which Guinness will revert to a 12-month cycle. Gross and EBIT margins were forecasted to rise to 33.0 per cent and 13.1 per cent, respectively, during the extended period, with further improvements to 37.0 per cent and 17.7 per cent in FY 2026.
These projections were underpinned by expanded market reach following the company’s acquisition by Tolaram, more efficient supply chain management, and a relatively stable macroeconomic environment.
However, the report flagged concerns about working capital pressures, noting that Guinness’s net operating cash flow declined to N30.43 billion in the review period, down from N80.15 billion in the comparable period.
This was attributed to increased inventories and receivables, a result of the company’s effort to frontload raw materials and accommodate business expansion. With a realised foreign exchange loss of N55.83 billion, capital expenditure of N26.17 billion, and debt repayments of over N61 billion, the company ended the period with a negative cash balance of N682.92 million and subsequently drew an overdraft of N4.73 billion.
Nonetheless, the outlook remained optimistic. Analysts expect a material recovery in the company’s cash position, supported by a lower foreign currency exposure and stronger revenue generation capacity. “Our optimism is hinged on the likely non-reoccurrence of the material realised foreign exchange loss following the repayment of the company’s FCY liabilities and is supported by a more stable foreign exchange outlook,” CardinalStone stated.
Pending return to dividends payout to shareholders, Guinness had projected a dividend per share of N6.37 for FY 2026, implying a 30 per cent payout ratio and a dividend yield of 5.4 per cent.
Despite the current undervaluation, analysts maintain a ‘Buy’ rating, highlighting the company’s return to financial health, stronger margins, and improved operational outlook as key investment positives.
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