Aradel Holdings Sees Price Uptick amidst Bearish Estimates

Aradel Holdings Sees Price Uptick amidst Bearish Estimates

Aradel Holdings experienced a day rally that pushed its market price to N550 at the close of the trading session in the equities market segment of the Nigerian Exchange. The oil and gas company share price gained N20 on the back of fresh bargain hunting that was short-lived by Islamic holiday—having traded steadily at N530 over the week.

The upswing lifted the market value of Aradel Holdings Plc’s 4.344 billion shares outstanding higher to N2.389 trillion, its trading details obtained from the Nigerian Exchange revealed.

Based on its price movement since Oct 2024, when it came to the equities market by way of introduction, Aradel Holdings’ share price has been strongly volatile. The company share price hit a 52-week low of N401.10 versus its early rally of N850.10.

This suggests the oil stock is trading at more than a 35% discount to its highest market value since it was listed on Oct 14 2024, amidst core industry and operational headwinds that cause equities analysts to reduce their earnings expectations.

In a report, equities analysts at CardinalStone Securities Limited lower Aradel Holdings Plc target price to N840.35 on the expectation that its market price will fall from the previous estimate of N1095.30.

Aradel’s share price has been fluctuating on weak investors’ appetite in the oil backed stock and below expected earnings performance. In Oct, 2024 when the company listed, it added N3.053 trillion to the stock market capitalisation of the Nigerian Exchange.

While the oil stock was listed at N702.69 per share, it surged to N772.90 on the listing day, but since then it has been on decline.  At the close of trading session last week, Aradel Holdings Plc’s market value has slumped to less than N2.4 trillion.

Aradel Holdings Plc began the year with solid results, reporting a 33.5% year on year increase in profit in the first quarter of 2025. The review of the company’s unaudited results showed that its earnings performance was supported by a 69.8% growth in revenue to $131.4 million.

In a report, CardinalStone Securities Limited forecasted that Aradel Holdings’ return on equity will reduce to 11.9% in 2025, a number that reflects an expectation that the company’s net profit margin will contract.

“Our analysis underscores ARADEL’s vulnerability to margin pressures, with profitability constrained by a higher cost base. Additionally, finance costs are set to rise due to the increased leverage associated with ARADEL’s stake in the Renaissance-SPDC asset acquisition.

“Compounding this, the effective tax rate is expected to climb sharply to 49.1%  from 18.2% in 2024 reflecting the tapering off of prior years’ accelerated capital allowances”, the investment firm stated.

Analysts said in the update that Aradel Holdings revenue increased in the back of stronger oil production levels, improved utilisation of the Trans Niger Pipeline (TNP), minimal crude losses, and additional value from the Alternative Crude Evacuation (ACE) system.

Analysts said this production growth offset the impact of a weaker average realised oil price. Equities analysts noted that the company’s realised oil price declined by -8.5% year-on-year to $77.90 per barrel.

“We expect financial year 2025 earnings to soften due to the combined effect of oil price decline and higher royalty charges, both of which are likely to weigh on margins.

“We have also reduced our projected mean realisable oil price across our forecast horizon to $69.00 per barrel compared to $74.60 previously estimated in line with the materially weaker oil price outlook”, CardinalStone Securities Limited said in its update on the company.

CardinalStone Securities Limited said its analysts have revised 2025 revenue forecast downward to $419.4 million from $434.6 million previously estimated, reflecting a more conservative oil price assumption despite higher working interest production.

For 2025, total refined product output is projected at 304.6 million litres, driven by improved refinery utilisation, CardinalStone Securities Limited said.

“We project financial year revenue from refined products at $153.3 million, slightly down from our earlier estimate of $156.2 million”. This downward revision primarily reflects the impact of exchange rate volatility on Naira-denominated product sales.

Analysts noted that ARADEL has scaled its refining throughput from 1.0 kbbl/d to 11.0 kbbl/d, they also noted that the company’s current operations are at about 50% of installed capacity.

To boost utilisation, CardinalStone Securities said the company is actively engaging nearby upstream producers to secure third-party crude supply— discussions that, once concluded, are expected to improve feedstock availability and throughput significantly.

Analysts said Aradel is advancing plans to expand refining capacity, including a proposed 3,000 bpd line dedicated to Naphtha production for the PMS train. The company targets the commissioning of a PMS train by H1’26, further diversifying its refined product slate and supporting the local fuel supply. Nigerian Exchange Lost N70bn over Selloffs in Tier-1 Banks