Presco Plc’s near-term earnings are facing pressure from stagnant revenue growth, higher operating costs and an increase in its number of shares following its recently concluded rights issue, CardinalStone Research said.
The research house revised its 12-month target price for Presco to N2,140.25 and downgraded its recommendation to HOLD from BUY, implying 4.64 percent upside from its N2,045.30 reference price.
Presco’s H1 2026 revenue was virtually unchanged year-on-year at N198.8 billion, despite global crude palm oil prices maintaining an upward trend. Malaysian benchmark CPO averaged $1,089.35 per tonne in H1 2026, up 9.6 percent year-on-year, while global CPO prices were up 18.1 percent year-to-date.
CardinalStone attributed the weak revenue growth largely to the Ghanaian segment, where lower fresh fruit bunch yields resulted from delayed seasonal rains and the lingering effects of a previous dry spell.
Higher global CPO prices also did not pass through to Ghanaian domestic prices because pricing is based on import parity in cedi terms. The Ghanaian cedi appreciated 26.3 percent against the dollar in H1 2026, reducing the price of imported and smuggled products.
In Nigeria, smuggling and a reduction in the CPO import tariff from 35 percent to 28.75 percent also capped revenue momentum. CardinalStone revised its FY2026 average CPO price assumption to N1.9 million per tonne, compared with about N1.8 million in H1.
Cost pressures added to the earnings challenge. Total operating expenses increased 11.4 percent year-on-year to N75.8 billion, while transportation costs rose 32.5 percent.
Average diesel prices cited by CardinalStone increased 133.8 percent year-to-date, while fertiliser prices also rose amid the Middle East conflict.
CardinalStone expects FY2026 core EBITDA and EBIT margins to decline to 61.6 percent and 56 percent, respectively, before recovering in 2027 as greenfield investments contribute to volumes.
Presco’s balance sheet actually strengthened despite the stagnancy, with total borrowings falling 62.3 percent to N119.5 billion in H1 2026 from N317.3 billion at FY2025. CardinalStone expects further moderation in leverage, including potential redemption of the company’s N82.9 billion bond.
For the longer term, CardinalStone highlighted Presco’s expansion programme, including the 22,500-hectare Saro Oil Palm acquisition and the Ato mill.
The first phase of the mill, costing about $77 million, has a processing capacity of 60 tonnes per hour and is expected to be completed in Q4 2026. Subsequent phases are expected to take capacity to 180 tonnes per hour over four to five years.
CardinalStone forecasts Presco’s revenue at N358.7 billion in FY2026, up 8.5 percent, and N430.8 billion in FY2027, up 20.1 percent.
Chinwe Michael is a financial inclusion advocate and economy journalist who uses compelling storytelling to drive awareness. With a background in Banking and Finance and experience across accounting, media, and education, she applies sharp analysis and attention to detail to every piece. She simplifies complex financial and economy concepts into engaging content for Africa and global audience. Chinwe also doubles as a speaker with global recognition for her expertise.
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