NAHCO Plc – Equity Update (A High-Growth Performer Facing Early Signs of Cash-Flow Strain)

Executive Summary

The Nigerian Aviation Handling Company Plc (NAHCO) has delivered one of the strongest performances on the NGX in 2025, with a 115% YTD share price gain and a market capitalization of N193 billion. The company’s operational performance remains exceptional, backed by 47% growth in profit after tax, resilient cargo-handling dominance, and an established reputation as a generous dividend payer.

However, despite strong earnings, recent share price volatility (–21% in the last four weeks) and emerging working-capital pressure warrant closer monitoring. NAHCO remains a fundamentally strong story, but investors must watch the sustainability of its cash-generation cycle as growth accelerates.

1. Market Performance Review

• Market Cap: N193 billion
• YTD Price Gain: +115%
• 4-Week Performance: –21%
• Strong outperformance relative to the broader NGX, driven by earnings momentum and dividend expectations.
• Recent pullback reflects profit-taking and rising caution as investors assess forward sustainability.

2. Financial Performance Highlights (9M 2025)

2.1 Robust Revenue Momentum

• Total revenue: N47.76 billion
• Cargo handling retains dominance, contributing 64%+ of turnover.
• The company is firmly on track to surpass FY 2024 revenue.

5-Year Revenue CAGR: 49.68% — confirming structural growth, not a one-off spike.

2.2 Strong Profitability

• Profit After Tax: N13.46 billion (+47% YoY)
  • Already 5% higher than FY 2024 full-year profit.
• Operating Profit: N18 billion
• Operating Margin: 38%
• Overhead still high at ~37% of gross profit but remains well absorbed by revenue expansion.

2.3 Dividend Strength

• Dividend track record:
  • 2020: 13 kobo
  • 2024: N5.94
• Supported by strong earnings growth and 90% payout ratio in 2024.
• With 2025 profits already ahead of last year, expectations for a higher dividend are rising.

3. Cash Flow Analysis – Strong Headline, Tightening Underneath

3.1 Operating Cash Flow

• 9M 2025 OCF: N16.8 billion
• 9M 2024 OCF: N3.06 billion
• A major improvement that reflects a business performing strongly.

3.2 Working Capital Shifts

Key underlying movements reveal pressure points:

Receivables

• Sharp decline — customers paying faster.
• A positive sign for liquidity.

Payables

• Also declined meaningfully.
• Trade payables dropped from N13.9bn (FY 2024) → N13bn (Sept 2025).
• Cash-flow statement shows N1.18bn outflow from settling payables quickly.
• Suggests faster settlement cycles and increased cash commitments.

Tax Payments

• Nearly doubled YoY.
• Added additional cash strain.

Interpretation

• Strong OCF is partly aided by working-capital release, not underlying expansion in core cash-generation.
• Paying suppliers quicker may reflect balance sheet discipline or relationship management, but it also limits free cash breathing room.

4. Strategic & Investment Considerations

4.1 Why NAHCO Still Stands Out

• Market leadership in aviation cargo handling.
• Exceptional multi-year growth metrics.
• Strong dividend identity appealing to income-focused investors.
• Highly profitable business model with sector pricing power.

4.2 What Investors Must Watch

• Sustained pressure on working capital as growth accelerates.
• Whether cash-flow gains are repeatable once payables normalize.
• Potential need for increased capex to support expansion.
• Dividend sustainability if cash conversion weakens.

5. Analyst View

“NAHCO’s operating and earnings performance remains among the most impressive on the NGX, supported by multi-year structural growth in cargo volumes and solid financial discipline. However, the company’s cash-flow picture signals a subtle but important shift: although operating cash flow is strong, it is being supported by faster receivable collections rather than rising organic cash generation. This does not pose immediate risk, but it elevates the importance of disciplined working-capital management going forward.”

Investment Implications:

• Earnings outlook: positive
• Dividend outlook: very strong, but tied to sustained cash conversion
• Share price outlook: fundamentally supported, though short-term volatility expected
• Key risk: working-capital tightness if receivables/payables normalize unfavourably

6. Bottom Line

NAHCO remains a high-growth, high-dividend, high-performing equity story on the NGX. But as the company scales rapidly, the cash engine powering this growth must remain stable and repeatable. The fundamentals remain strong — yet the working-capital trend deserves ongoing investor attention.