Renaissance Capital Africa (RCA) has raised its valuation of Dangote Petroleum Refinery and Petrochemicals FZE to N700.41 per share, representing a 33.4% premium to the N525 IPO offer price.
The upward revision follows stronger-than-expected earnings for the nine months ended September 2026, as the refinery’s revenue, earnings before interest, taxes, depreciation and amortisation (EBITDA), and net profit exceeded the investment firm’s estimates.
This is according to a company update dated October 16, 2026, titled “Stronger refining margins drive earnings outperformance.”
Increase from earlier valuation
The new valuation represents a 13.1% increase from RCA’s earlier estimate of N619.47 per share and implies an equity value of $63 billion based on 120.13 billion existing shares.
- “The result is an upward revision of DCF value by 13.1% to NGN700.41/share, 33.4% above the NGN525 offer price.”
However, after accounting for net IPO proceeds of N2.11 trillion and 4.1 billion new shares, RCA’s valuation stands at N694.28 per share, representing a 32.2% premium to the offer price.
Nine-month profit rises to $4.73 billion
Dangote Refinery reported a net profit of $4.73 billion for the nine months ended September 30, 2026, reversing a net loss of $117.2 million recorded in the corresponding period of 2025.
- Revenue increased by 144.5% year-on-year to $22.48 billion, exceeding RCA’s estimate of $21.07 billion.
- EBITDA rose to $5.52 billion from $627.6 million a year earlier, surpassing RCA’s forecast of $4.10 billion. The EBITDA margin also widened to 24.6% from 6.8%.
Net profit exceeded RCA’s estimate of $2.82 billion, while the refinery’s financial position improved from net debt of $1.73 billion a year earlier to net cash of $650.8 million.
The company reported cash holdings of $6.69 billion during the period.
Third-quarter performance drives earnings outperformance
RCA said the earnings outperformance was largely driven by the third quarter, when revenue reached $8.57 billion, 19.7% above its estimate.
- EBITDA stood at $2.92 billion, 94.8% higher than RCA’s forecast of $1.50 billion. The quarterly figure also exceeded the $2.60 billion recorded in the first half of the year.
- The EBITDA margin rose to 34.1% in the third quarter, compared with 18.7% in the first half.
Cash operating costs of $5.65 billion were within 0.2% of RCA’s estimate, suggesting that improved refining margins, rather than lower operating costs, were the main driver of the stronger performance.
However, RCA noted that crude oil cost lags and hedging activities may also have contributed to the results.
Refining margins surge across key markets
RCA attributed the refinery’s earnings outperformance to a sharp increase in refining cracks during the third quarter, particularly across the Atlantic Basin.
US Gulf Coast jet fuel and gasoil cracks averaged $75.59 and $72.57 per barrel, respectively, compared with $56.40 and $44.40 in the second quarter.
- The US Gulf Coast refining margin reached $62.08 per barrel in September, the highest in RCA’s data series, which began in July 2025.
- In Rotterdam, which RCA considers the closest benchmark for Dangote Refinery’s Brent-linked crude, the average refining margin increased to $42.51 per barrel in the third quarter from $24.50 in the preceding quarter.
- RCA cited the Organisation of the Petroleum Exporting Countries (OPEC) as attributing the rally to tight supplies of middle distillates across the Atlantic Basin.
- Factors supporting the increase included supply losses in Eastern Europe, strong US diesel exports to Europe, low inventories and refinery maintenance.
- Dangote Refinery is positioned to benefit from the stronger margins, as petrol, diesel and jet fuel accounted for 86% of its second-quarter product yield.
RCA noted that about 88% of the refinery’s June jet fuel output exceeded Nigeria’s domestic demand and was sold to international buyers. The firm also said Dangote Refinery reported that it was Europe’s largest jet fuel supplier in July and August.
RCA raises 2026 earnings forecasts
Following the stronger results and improved refining margins, RCA raised its full-year 2026 gross refining margin forecast to $35.81 per barrel from $27.55.
The investment firm also increased its revenue forecast by 7.4% to $30.24 billion and raised its EBITDA projection by 34.6% to $7.24 billion.
- Its net income forecast increased by 47.4% to $5.32 billion on a run-rate basis. Using reported nine-month profit and its fourth-quarter estimate, RCA projected full-year net income of $5.98 billion.
- The revised forecasts imply fourth-quarter EBITDA of $1.72 billion, 41% below the third-quarter figure, as the firm expects refining cracks to moderate.
- RCA left its 2027 to 2029 refining margin and EBITDA forecasts unchanged, noting that it did not want to extrapolate peak margins over the longer term.
The firm said only about 8.5% of the N80.94 per-share increase in its valuation came from changes to its 2026 forecasts. The remaining increase reflected the refinery’s net cash position, a later valuation date and adjustments to exchange-rate and discount-rate assumptions.
IPO price below peer valuation
At the N525 offer price, RCA estimated Dangote Refinery’s pre-listing market capitalisation at N63.07 trillion, equivalent to $47.22 billion at an exchange rate of N1,335.50 to the dollar.
- After deducting net cash, the offer price implies an enterprise value-to-EBITDA multiple of 6.43 times estimated 2026 earnings and 7.31 times projected 2027 earnings.
- Both multiples are below the 7.74 times weighted average for RCA’s refining industry peers.
- RCA’s own valuation, however, implies a multiple of 8.61 times 2026 EBITDA, a premium to peers that the firm attributes to Dangote Refinery’s scale and low cash operating costs.
Management estimates cash operating costs at between $2.40 and $2.50 per barrel.
Expansion timeline could affect valuation
RCA’s base-case valuation assumes the refinery’s second train will be commissioned in January 2030, increasing capacity from about 700,000 barrels per day to approximately 1.4 million barrels per day.
- Management is targeting start-up in 2029, with expansion capital expenditure estimated at about $14.3 billion, partly to be funded through IPO proceeds.
- RCA estimated that commissioning the second train in 2029 would raise its valuation to N731.80 per share, while a delay until 2031 would reduce it to N671.83 per share.
The firm cautioned that the refinery’s latest results announcement provided headline financial figures without details on production volumes, realised prices or a breakdown of costs below EBITDA.
It said it would revisit its estimates when the full nine-month accounts are published.
Key risks to valuation
RCA identified refining margins, taxation and foreign exchange movements as key factors that could affect its valuation.
- The firm described the Middle East conflict as the largest swing factor for refining margins, noting that an easing of tensions could cause refining cracks to fall. It also highlighted the importance of terminal value, which accounts for 72.1% of enterprise value, making the valuation heavily dependent on how long elevated margins persist.
- On taxation, RCA assumes an effective tax rate of 12.1%, below the 15% minimum rate management has provided for.
Foreign exchange movements also pose a risk. RCA estimated that every 1% movement in the naira would change its naira-denominated valuation by approximately N7 per share.
The report stated that it was for information purposes only, was not independent investment research and did not constitute a recommendation to buy or sell securities.