RENAISSANCE Capital Africa has raised its valuation of Dangote Petroleum Refinery and Petrochemicals to N700.41 per share, citing stronger-than-expected earnings and improved refining margins in the first nine months of 2026.
The revised valuation is 33.4 percent above the refinery’s initial public offering (IPO) price of N525 per share, suggesting potential upside for investors subscribing to the share offer at the stated price.
In an update dated October 16, the investment firm increased its previous valuation of N619.47 per share by 13.1 percent, following the refinery’s stronger financial performance for the nine months ended September 30, 2026.
However, after factoring in the proceeds from the IPO and the additional shares to be issued, Renaissance Capital’s valuation comes to N694.28 per share, representing a 32.2 percent premium to the offer price.
The valuation implies an equity value of about $63 billion based on the refinery’s existing shares, although the final figure depends on the assumptions used in the assessment.
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Profit jumps to $4.73bn
Dangote Refinery recorded a net profit of $4.73 billion in the first nine months of 2026, compared with a loss of $117.2 million in the corresponding period of 2025.
Revenue surged 144.5 percent year-on-year to $22.48 billion, exceeding Renaissance Capital’s estimate of $21.07 billion.
Earnings before interest, taxes, depreciation and amortisation (EBITDA), a measure of operating profitability, rose to $5.52 billion from $627.6 million a year earlier. The figure was also significantly higher than the investment firm’s forecast of $4.10 billion.
The refinery’s EBITDA margin, which means the share of revenue remaining after operating costs, before interest, taxes, depreciation and amortisation, increased to 24.6 percent from 6.8 percent.
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Net profit also surpassed Renaissance Capital’s estimate of $2.82 billion, while the company’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 results beat expectations
The investment firm attributed much of the earnings outperformance to the third quarter (Q3), when revenue reached $8.57 billion, 19.7 percent above its estimate.
EBITDA rose to $2.92 billion, almost double Renaissance Capital’s forecast of $1.50 billion and higher than the $2.60 billion recorded in the first half (H1) of the year.
The EBITDA margin also expanded to 34.1 percent in Q3, compared with 18.7 percent in H1.
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Cash operating costs stood at $5.65 billion, broadly in line with the investment firm’s projections. This suggests that improved refining margins, rather than a significant reduction in operating expenses, were the main driver of the stronger earnings.
Renaissance Capital, however, noted that delays in crude oil cost recognition and hedging activities may also have contributed to the results.
Global refining margins lift earnings
The refinery benefited from a sharp rise in international refining margins during Q3, particularly in the Atlantic Basin.
In the United States, Gulf Coast margins for jet fuel and gasoil averaged $75.59 and $72.57 per barrel, respectively, compared with $56.40 and $44.40 in the second quarter (Q2).
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The US Gulf Coast refining margin reached $62.08 per barrel in September, the highest level in Renaissance Capital’s data series, which began in July 2025.
Dangote Refinery was positioned to benefit from these conditions because petrol, diesel and jet fuel accounted for 86 percent of its Q2 product yield.
Renaissance Capital also noted that about 88 percent of the refinery’s June jet fuel output exceeded domestic Nigerian demand and was sold internationally. The company ranked among Europe’s largest jet fuel suppliers in July and August.
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Firm raises 2026 earnings forecasts
Following the stronger results, Renaissance Capital raised its full-year 2026 gross refining margin forecast to $35.81 per barrel from $27.55.
It also increased its revenue projection by 7.4 percent to $30.24 billion and raised its EBITDA forecast by 34.6 percent to $7.24 billion.
Its net income forecast rose by 47.4 percent to $5.32 billion on a run-rate basis. Using the reported nine-month profit and its fourth-quarter (Q4) estimate, the firm projected full-year net income of $5.98 billion.
However, Renaissance Capital expects profitability to moderate in Q4. Its forecast implies Q4 EBITDA of $1.72 billion, 41 percent below Q3 result, as refining margins are expected to ease.
The firm left its 2027 to 2029 refining margin and EBITDA forecasts unchanged, saying it did not want to assume that unusually strong margins would persist over the longer term.
It added that only about 8.5 percent of the increase in its per-share valuation came from revisions to its 2026 earnings forecasts. The remainder reflected the refinery’s net cash position, a later valuation date and changes to exchange-rate and discount-rate assumptions.
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IPO price below industry peers
At the offer price of N525 per share, Renaissance Capital estimated the refinery’s pre-listing market capitalisation at N63.07 trillion, equivalent to $47.22 billion using an exchange rate of N1,335.50 to the dollar.
After accounting for 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 figures are below the 7.74 times weighted average for the refining companies used as industry peers in the firm’s analysis.
Renaissance Capital’s own valuation, however, implies a multiple of 8.61 times estimated 2026 EBITDA, above the peer average. The firm attributed this premium to Dangote Refinery’s scale and relatively low cash operating costs, which management estimates at $2.40 to $2.50 per barrel.
The comparison suggests that the IPO price is relatively attractive under Renaissance Capital’s assumptions, although the valuation depends on the refinery sustaining strong earnings and delivering its expansion plans.
Expansion plans could change valuation
Renaissance Capital’s base-case valuation assumes the refinery’s planned second train will begin operations in January 2030, doubling capacity from about 700,000 barrels per day to approximately 1.4 million barrels per day.
Management is targeting a 2029 start-up and estimates expansion capital expenditure at about $14.3 billion, with IPO proceeds expected to provide part of the funding.
The investment firm estimated that commissioning the second train in 2029 would raise its valuation to N731.80 per share. A delay until 2031, however, would reduce the valuation to N671.83 per share.
The estimates highlight how the timing of the expansion could affect the refinery’s projected future earnings and the value investors place on the business.
Refining margins, tax and FX pose risks
Renaissance Capital identified refining margins, taxation and foreign exchange (FX) movements as key risks to its valuation.
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The firm described developments in the Middle East as a major uncertainty for global refining margins, warning that an easing of tensions could reduce the unusually high margins supporting current earnings.
It also noted that the refinery’s valuation depends heavily on its projected long-term cash flows, with terminal value accounting for 72.1 percent of enterprise value. This makes the assessment sensitive to assumptions about how long the business can sustain strong profitability.
On taxation, Renaissance Capital used an effective tax rate of 12.1 percent, below the 15 percent minimum rate provided by management.
Foreign exchange movements could also affect the naira value of the shares. The firm estimated that every 1 percent movement in the naira would change its naira-denominated valuation by approximately N7 per share.
The investment firm cautioned that the refinery’s latest results announcement provided headline financial figures without detailed information on production volumes, realised prices or costs below EBITDA. It said it would review its estimates when the full nine-month accounts become available.
Renaissance Capital said its report was for information purposes only, was not independent investment research and did not constitute a recommendation to buy or sell securities.
