Rating Summary:
We revise our rating on Fan Milk PLC from “HOLD” to “ACCUMULATE”, implying a 15.6% upgrade to our previous fair value of GHS 8.18 which translates into an 11.26% upside from the current price of GHS 8.50. Our rating reflects strategic CAPEX under Project Kilimanjaro, supportive VAT reforms, and short-term margin pressures. Revenue surged 46.3% y/y to GHS 1.0bn in FY2025, validating early benefits of expanded refrigerated trucks, cold rooms, and vendor freezers. We forecast FY2026 revenue of GHS 1.2bn (+24.8% y/y) and a five-year CAGR of 22.4%, above the historical 21.8%. CAPEX jumped 108.1% q/q in 4Q2025 to GHS 36.0mn in FY2025, which we expect to strengthen delivery efficiency and reduce reliance on external water, supporting a projected five-year average operating margin of 6.3% (historical 3.6%). We believe VAT reforms from 21.9% to 20.0% and removal of the 1.0% COVID levy will boost sales volumes. We expect operating margin to decline by 1.8pp to 9.4% in FY2026 as the cost intensity of the ongoing expansion phase persist. Our fair value combines DCF (40%), P/E (40%) and P/B (20%). relying on a risk-free rate of 15.01%, WACC of 18.6%, and 5.0% terminal growth.