Ahead of the full year (FY) 2023 earnings season, Nigeria’s stock investors have since this year been cherry-picking stocks with strong fundamentals as they hunt for value or growth, even as they also scout for dividends.
While more investors are still looking for stocks to buy, Meristem research analysts said its bank stock to buy in 2024 and the target price is Zenith Bank (N46.09). However, they want investors to HOLD Access Corporation, ETI, GTCO, Stanbic IBTC, Sterling, and UBA. Though, Access Corporation, FBN Holdings, FCMB Group, Fidelity Bank, and UBA have been rated stocks to buy in 2024 by Lagos-based United Capital analysts. This is even as CardinalStone Research analysts asked investors to buy shares of Access Corporation, GTCO, United Bank for Africa, and Zenith Bank.
They asked investors to buy shares of Dangote Cement, Lafarge Africa while urging them to hold that of BUA Cement. Other stocks in Meristem analysts’ BUY list are major consumer goods stocks. These stocks and their target prices are Guinness (N74.51), Nigerian Breweries (N47.46), Cadbury (N26.37), Flour Mills (N40.17), Nascon (N67.17), Nestle (N1,325.07) and Unilever (N17.90).
With target price of N427.9 in 2024, Meristem analysts also want investors to buy Total Energies. In the Healthcare sector, Fidson is another stock to buy with target price of N22.48, while May & Baker with a 2024 target price of N6.92 is rated a BUY. Dangote Cement is also a stock to buy with a target price of N402.51.
Investors are also asked to buy Lafarge Africa considering target price of N58.43. Chemical and Allied Products is rated a BUY with target price of N33.53, while Berger Paints is another stock investors are asked to buy as its price is targeted to reach N19.06 this 2024. AIICO, Lasaco, and Axa Mansard are also stocks to buy as the analysts’ target prices for these stocks are N 1.53, N3.21, and N 6.30 respectively.
In its economic outlook for 2024, the Bismarck Rewane-led Financial Derivatives Company noted that NGX has transitioned from a Lagos-based fringe player to a global player, adding that the Nigerian equities market outperformed others in 2023; “Performance boosted by new listings of capitalised stocks, policy reforms and lower interest rates”
After a successful outing in 2023 which pushed return higher at 45.90 percent, the market has risen this year by 11.06 percent, trailing Argentina as the world’s second best, driven by record positive closes. However, analysts still expect to see, at different intervals, profit booking and mild sell-offs.
“We attribute the optimism in the market to the traditional January rally as well as investors taking position ahead of the earnings release and dividend declarations for the just-concluded year. We expect this rally to continue this month, though we may see some corrections further down the line,” according to Coronation research analysts in their January 8 note to investors.
Also, Meristem research analysts in their 2024 outlook said, “Our analysis for 2024 portends a positive return for the equities market, hinged on the expectation of improved corporate earnings, industry consolidations and increased equity listing during the year. Based on our forecast, we project a 13 percent return for the local bourse.”
Meristem analysts said, “While the banks continue to work consciously to shore up their capital base amidst the rapidly expanding risk-weighted assets, the newly appointed CBN governor – Olayemi Cardoso – hinted that the Nigerian banks will be very instrumental in driving the $1trillion economy projected by the Tinubu-led administration. As such, a recapitalisation exercise for Nigerian banks is expected”.
“As it stands, banks with regional, national, and international licences have capital requirements of N10billion, N25billion, and N50billion. From our estimate, we believe the CBN could increase the minimum capital requirement by 10x.
“This implies that the above licenses’ capital requirements could rise to N100billion, N250billion and N500billion. From our projections, we firmly believe the top-tier banks, including Access Corporation, GTCO, FBNH,
Zenith Bank and UBA, are well-capitalised as they all maintain an equity base over N1trillion. For the other banks, we posit that we would likely see more capital raised through the right issues or additional Tier-1 bonds. We also highlight the likelihood of business consolidation activities, especially relating to regional banks,” Meristem research analysts said.
“On a broad scale, we project that the consumer goods sector will likely improve mildly in 2024. This is hinged on revenue projections (driven by anticipated price increases, expansions in product portfolio, and investments). However, we note that challenges like mounting cost pressures and the continued weakening of the Naira remain a significant downside to our overall outlook. We also project modest earnings growth in 2024, which hinges on the projections for revenue and the low base effect from 2023,” the analyst said.
“Banking earnings touched new highs in nine months (9M) 2023, aided by material revaluation gains driven by the policy reforms on FX management that led to significant currency depreciation. In 2024, after-tax earnings may be relatively contained due to an expected tamer naira weakening (versus in 2023) as the CBN intensifies efforts to stabilise the naira.
“Nonetheless, we see legroom for robust banking core-operating performance in 2024 due to the following reasons: Sustained hawkish disposition of the CBN – in line with recent guidance on sustained tightening until Q2’24; reinstatement of orthodox monetary practices and continued CRR normalisation, and robust trading and fixed income earnings on the resumption of OMO auctions and higher bank placement rates,” said Philip Anegbe-led team of CardinalStone Research analysts.
They have asked investors to buy shares of Access Corporation, GTCO, United Bank for Africa, and Zenith Bank.
“After the currency-induced plunge in the bottom line of Nigerian FMCG companies, the sector may be set for a slight recovery in 2024 despite projected tamer revenue growth and elevated borrowings. Our optimism is supported by debt restructuring campaigns, aggressive cost optimisation, and capacity expansion, all of which bode well for earnings,” according to CardinalStone Research analysts. They want investors to Guinness Nigeria as they set target price of N73.56 for the stock.
“As Nigeria’s cement industry reflects on a challenging 2023, characterised by demand-stifling events like the cash crunch orchestrated by a poorly executed currency redesign policy, the material currency devaluation, and bouts of heavy rainfall, its hope for a gradual recovery in 2024 feeds off the return to relative macroeconomic normalcy and early gains from tough policy reforms,” the analysts said.
They asked investors to buy shares of Dangote Cement, Lafarge Africa while urging them to hold that of BUA Cement.
“In 2024, the Nigerian cement industry is expected to benefit from renewed government focus on infrastructure development and construction projects, which could stimulate demand for cement products. With increased budget allocations to critical sectors and ambitious infrastructure initiatives (N1.32 trillion to infrastructure, which represents 5 percent of the total FG 2024 budget), the construction industry is likely to experience a resurgence.
“Cement manufacturers, in response, are beginning to recalibrate their production strategies in the form of capacity expansion and improved efficiency to meet the anticipated rise in demand. While challenges may persist, the outlook for Nigeria’s cement industry in 2024 is one of cautious optimism, with potential growth opportunities emerging amidst the recovery phase,” according to Philip Anegbe-led team of CardinalStone Research analysts.
