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Conoil Plc: After hitting a 5 year high, is it still a Buy?



  • Conoil’s stock has experienced substantial growth, driven by consistent earnings and positive market sentiment in the oil and gas sector.
  • The company’s ability to generate revenue growth and its position within the industry has attracted investor interest.
  • While its higher price-to-sales ratio suggests a premium valuation, Conoil’s exposure to consistent earnings growth may still make it an appealing investment.

Conoil’s share price has experienced a remarkable surge, reaching a new 5-year high and surpassing the previous highest price of N34.25 per share recorded in the 2022 financial year.

In 2023 alone, the stock has witnessed an impressive increase of over 200%. This substantial growth can be attributed not only to the company’s consistent positive earnings but also to the recent announcement and subsequent removal of subsidies by President Bola Ahmed Tinubu.

This development has had a significant impact on the Oil and Gas Index, which has surged by more than 61% year-to-date.

The significant gains made by Conoil this year have raised concerns regarding the potential for investors to achieve favourable returns by purchasing the stock at its current price.

Let us take a closer look at whether Conoil, as an oil marketing company, is a suitable addition to long-term investors’ portfolios.

The latest results show a Consistent Earnings Trend

Conoil has showcased a consistent earnings trend, which has instilled optimism among investors. The company in late May 2023 announced growth trends, particularly evident in its revenue figures.

Comparing year-over-year data, Conoil achieved a 3.71% increase in revenue, rising from 126.73 billion in 2021 to 131.42 billion in 2022.

In addition, Conoil made significant improvements in its cost management. The company reduced the cost of goods sold as a percentage of sales, selling, general, and administrative expenses as a percentage of sales, and interest paid as a percentage of sales.

These efficiency gains contributed to a noteworthy net income growth of 60.82% YoY from 3.08 billion to 4.96 billion in 2022.

The fiscal 2023 Q1 results further demonstrate growth. Conoil’s fiscal 2023 Q1 results, covering the quarter that ended March 31, also demonstrate a promising growth trajectory for the company.

Despite a decline in revenue from its lubricant segment, Conoil achieved a commendable 34% growth in overall revenue, primarily driven by the revenue growth from its white products.

This substantial revenue increase had a significant impact on the company’s net income, resulting in a remarkable growth of 440% to N3.01 billion from N557 million in the previous period.

High Expectations for Further Growth:

Investors have maintained an interest in the oil and gas sector, driven by expectations of the potential removal of fuel subsidies in Nigeria. This positive sentiment has led to bullish trading and positive performance in the sector.

Conoil, along with other major oil marketing companies like Eterna Plc and MRS Oil Nigeria Plc, has witnessed significant increases in share prices.

In the four-day trading week that ended June 2, Conoil’s share price surged by 33%, closing at N69.9 and gaining N17.2. This upward movement indicates increased investor confidence and optimism regarding the company’s prospects.

Similarly, Eterna Plc witnessed a rise from N7 to N9.25, representing a 20.13% increase within the same period. Year to date, Eterna has seen substantial growth of 162%, highlighting its strong performance in the market.

MRS Oil Nigeria Plc, another prominent player in the oil marketing industry, observed a significant increase in its share price from N40.80 to N49.30, rising by N8.50 or 20.83% within one week. Year-to-date, the stock has seen an impressive growth of 460.28%, reflecting robust investor interest and positive market sentiment

The expectation of a more liberalized and competitive market and the opportunity for companies like Conoil, Eterna Plc, and MRS Oil Nigeria Plc to operate with greater pricing flexibility may have attracted investor attention. The positive sentiments in the market are expected to persist.

In the case of Conoil, there is anticipation for a rebound in the lubricant segment, building on the growth witnessed in the 2022 financial year.  Additionally, Conoil’s white products, which include products such as gasoline, diesel, and kerosene, which are commonly used by consumers, are expected to continue to spur revenue growth.

Price and Value

Conoil’s stock valuation has seen a significant increase in 2023 compared to the previous year. The price-to-sales (P/S) ratio, a valuation metric, has risen to 0.43, indicating that investors are willing to pay a higher premium for each unit of Conoil’s sales.

This indicates that investors are willing to pay a higher premium for each unit of Conoil’s sales compared to its valuation in the previous year and in comparison, to its peers such as Eterna and MRS Oil, which have P/S ratios of 0.20x and 0.24x, respectively.

The higher P/S ratio suggests that investors have confidence in Conoil’s growth potential or perceive the company to have a stronger competitive position within the industry. However, cautious investors may prefer to wait for a more favourable entry valuation.

Despite the higher P/S ratio, Conoil’s exposure to consistent earnings growth trends may still make it an attractive option for growth-focused investors.

Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Investors should conduct their research and analysis and consider other financial indicators before making investment decisions.