In this report, we discuss the investment case for Lafarge Africa. Having been usurped as the second largest producer in Nigeria, now trailing BUA Cement (SELL; TP: N44.60) in capacity, Lafarge Africa sought to reinvent itself as a player focused solely on the Nigerian market. Its intention is to deliver strong revenue growth and healthy margins after the acquisition and later divestment of Lafarge South Africa Holdings (LSAH) and its stake in Ghana’s Continental Blue Investment (CBI).

Now the third-largest cement manufacturer in Nigeria, Lafarge Africa has managed to grow revenue by a CAGR of 17.30% between 2019 and 2021. Supported by increased public-private demand for housing and commercial construction, it has enjoyed rising cement prices to compensate for flat volume sales.

Nonetheless, despite no plans to expand capacity, our view is that opportunities abound for volume and price growth over the forecast years, 2022F- 2027F onwards, following the ongoing debottlenecking exercise in its Ashaka and Ewekoro plants.

We measure Lafarge Africa’s valuation to be at a significant discount compared with its emerging market peers. Consequently, we recommend Lafarge Africa (WAPCO) as a BUY with a Target Price (TP) of N39.23, a 56.9% upside potential.

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