BK Capital analysts have reaffirmed their “Buy” rating on Bralirwa, expressing continued confidence in Rwanda’s largest brewery as a strong investment opportunity. “Significant growth in revenue driven by sales volume and price increase is supporting operating leverage gains, with rising margins, cashflow and profitability,” they said in their 2024 half-year valuation analysis. ALSO READ: Bralirwa's net profit grew 15% in HY1 2024 Bralirwa registered a net profit of Rwf15 billion in the first half of 2024, a 15 per cent increase compared to the same period last year. The Rwanda Stock Exchange-listed company’s revenue increased by 19 per cent to Rwf102 billion, driven by a sales volume growth of 9 per cent. This is despite of elevated cost of sales and finance brought about by inflationary pressures. “We are confident that underlying trends supporting Bralirwa’s growth remain largely intact,” analysts said. However, they cautioned that the present inflationary pressures pose risk to the cost of production sensitivity as well as continuous foreign exchange weakness implications on profit margins. ALSO READ: Bralirwa records slight increase in profit margin in 2023 Buy rating BK Capital used two metrics to make a case for their rating of Bralirwa. Enterprise value to earnings before interest, taxes, depreciation, and amortisation (EV/EBITDA), as well as price-to-earnings ratio (P/E ratio). In their analysis, they indicated that Braliwa’s EV/EBITDA, a measure of the company’s valuation relative to its profitability, was 0.5 times. This implies that the company is valued at 0.5 times its 2023 EBITDA. They also suggested that Bralirwa’s P/E ratio, a measure of the company's stock price relative to its earnings per share, currently stands at 6, which means its stock price is 6 times its 2023 earnings per share. In both the two metrics, they suggest that the firm is still undervalued compared to its peers in the region. Bralirwa’s P/E ratio of 6 and EV/EBITDA of 0.5 are way below those of major breweries in Botswana, Morocco, Tunisia, Mauritius, Kenya, Tanzania, and Nigeria. Meanwhile, BK Capital analysts have set a price target of Rwf255 for Bralirwa’s stock. This implies that they believe the stock price could increase by 31.2 per cent from its current price level. Bralirwa’s counter closed Thursday last week at Rwf197.
