BUA Foods set for 85% profit jump as price cuts drive demand, analysts say

BUA Foods Plc is poised for a sharp earnings expansion in 2025, as strategic price cuts and expanded capacity across product segments spark higher volumes and margin gains, according to analysts at CardinalStone.

Earnings per share are projected to rise 1.8 times in full-year 2025, with revenue climbing to N1.77 trillion ($1.2 billion), up 15.9 percent from N1.53 trillion in 2024. Analysts attribute the surge to BUA’s aggressive pricing strategy, increased rice production, product innovation and a ramp-up in West African exports.

“Price reductions initiated in Q1’25 have begun to translate into improved demand,” CardinalStone said in a note dated June 18. “This prompted BUA Foods to raise production volumes and launch new SKUs like 25kg macaroni and 1kg semolina.”

Rice output jumped to 11,131 metric tons in Q1 2025, compared with just 765 tons a year earlier. Export sales, particularly to neighboring countries, are also expected to boost foreign currency inflows and diversify revenue streams.

Beyond top line growth, margin expansion is another tailwind. BUA’s cost-to-sales ratio fell to 63.6 percent in Q1’25 from 67.7 percent a year earlier, supported by forward hedging and moderating input costs. Gross margin is expected to improve to 36 percent, while EBIT margin may rise to 31.6 percent.

Read also: BUA Foods’ Q1 profit surges 124% as rice, flour sales soar

Still, CardinalStone downgraded the stock to “Sell” from “Hold” despite the positive outlook, citing valuation concerns. “At a P/E of 39.1x and EV/EBITDA of 28.8x, BUA Foods is trading at a significant premium to MEA peers, which average 13.9x and 10.5x respectively,” the report said.

The analysts raised their 12-month target price to N453.76, about 5.5 percent below the current market price of N480. Shares of BUA Foods have climbed 40 percent this year, hitting a 52-week high.

A leaner balance sheet may also strengthen investor confidence. Debt-to-equity is forecast to fall to 40 percent from 91 percent in 2024, while interest cover is projected to jump to 20.4x from just 2.3x.

“Improved liquidity, higher margins and stronger governance of working capital support our view of a robust financial outlook,” the analysts said.

Dividend per share is projected to almost double to N24.01, offering a forward yield of 5 percent.