In brief
- Lower Cost of Sales, OPEX and Finance Charges Drive Earnings Growth: GGB Plc’s earnings surged by 40.1% y/y to GHS 117.5mn. The earnings growth stemmed from a 17.4% y/y decline in cost of sales to GHS 1.1bn, a fall in finance charges by 18.2% y/y to GHS 14.3mn and a plunge in operating expense by 45.8% y/y to GHS 95.7mn
- Portfolio Premiumisation Drives Short-Term Volume Pressure: Guinness Ghana is intentionally advancing a premiumisation strategy across its spirits and Ready-To-Drink (RTD) portfolio, repositioning its mix towards higher-value products and reinforcing brand equity. We believe this strategic shift weighed on volumes, driving a 15.9% y/y decline in 1H2025/26 revenue to GHS 1.3bn as management deprioritised lower-priced, high-volume offerings in favour of premium lines. Premium spirits such as Johnnie Walker and Gordon’s Dry Gin exhibit lower price elasticity, while alcoholic RTDs like Smirnoff Ice remain less price-sensitive than mainstream soft drinks. In contrast, non-alcoholic RTDs such as Malta Guinness compete directly with alternatives like Beta Malt and therefore face greater price sensitivity, with volumes closely tied to affordability. Nonetheless, as the mix tilts further towards premium categories and consumption stabilises, we forecast revenue growth of 21.8% y/y to GHS 4.4bn in FY2025/26, moderating from the 51.7% y/y expansion recorded in FY2024/25.
- Bottling Line CAPEX to Support Production and FY2025/26 Revenue Growth: Guinness Ghana’s objective to improve production efficiency, particularly across its bottling lines through targeted CAPEX injection, represents a structurally positive operational upgrade. We expect the enhanced bottling efficiency to reduce production bottlenecks, improve throughput and minimise downtime, enabling the company to respond more effectively to demand fluctuations across its Alcoholic, Non-alcoholic and Spirit categories. We believe this is particularly important as the portfolio becomes more diversified and premium-led. We anticipate that this will support production and distribution efficiency and reduce operational constraints. This supports our revenue projection of 21.8% y/y to GHS 4.4bn in FY2025/26
- Valuation Discount Signals Scope for Upside: Guinness Ghana is currently valued at 7.6x P/E, materially below the 27.9x average multiple observed across listed consumer and beverage peers. We believe this wide dispersion underscores a disconnect between the company’s strengthening earnings profile and its prevailing market valuation. In our assessment, the current pricing fails to adequately reflect the underlying improvement in GGB Plc’s earnings outlook. As fundamentals continue to firm, we perceive room for expansion over the medium term, narrowing the gap towards peer benchmarks. Overall, we believe Guinness Ghana remains undervalued relative to peer-implied benchmarks.
- Key risks to valuation: Unexpected upward reversal in inflation, failure of premiumisation strategy, foreign exchange volatility, elevated interest rates, utility tariff hikes, rising energy prices, price surge in key raw materials, intensified competition, unfavorable tax policy shifts (especially excise duty on sweetened and alcoholic beverages) and underperformance of marketing and product innovation initiatives to generate sufficient sales uplift
Rating Summary:
We revise our rating on Guinness Ghana Breweries Plc (GGB Plc) from “ACCUMULATE” to “BUY”, following a 47.6% upgrade to our previous provisional fair value of GHS 7.56, implying a 20.92% upside from the current price of GHS 9.23. Our rating reflects the company’s ongoing premiumisation drive, targeted efficiency-enhancing CAPEX and a supportive tax environment, alongside compelling valuation metrics. Although revenue declined 15.9% y/y to GHS 1.3bn in 1H2025/26 as management deprioritised lower-priced, high-volume products, we expect earnings quality to strengthen as premium spirits and alcoholic RTDs gain share within the portfolio. We forecast revenue growth of 21.8% y/y to GHS 4.4bn in FY2025/26, moderating from the 51.7% y/y expansion recorded in FY2024/25, supported by improved product mix, bottling efficiency upgrades and the reduction in VAT from 21.9% to 20.0% alongside the removal of the 1.0% COVID levy. Cost of sales declined 17.4% y/y to GHS 1.1bn in 1H2025/26, aided by a 40.7% appreciation of the cedi, while the renewed ability to claim input tax credits on the embedded 5.0% levies should provide an additional cost buffer despite residual FX exposure. At 7.6x P/E versus a 27.9x peer average, the stock trades at a material discount, which we believe does not reflect its improving earnings trajectory and supports scope for multiple re-rating. Our fair value derives from a blended approach comprising DCF (40%), P/E (40%) and DDM (20%), anchored on a 15.01% risk-free rate, WACC of 16.6% and a 5.0% terminal growth rate.