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Renaissance Capital, an emerging markets-focused investment bank, has revised its forecast for Dangote Cement’s stock due mainly to the ongoing foreign exchange scarcity in Nigeria. The Russian investment bank said in a note to investors on Thursday that it has downgraded Dangote Cement’s stock to “Market perform” from “Outperform” in line with analysts’ views on the security.

“We think Dangote is a quality name in Nigeria, but at current prices and given the FX situation in the country, we see limited upside potential in the stock and believe that most is already priced in,” the investment bank said in the note written by its analysts, Temilade Aduroja and Adedayo Ayeni. “In addition, it is also seeing price and margin pressures in South Africa, Zambia and Tanzania.”

For the nine-month period ended September 30, 2016, Dangote Cement reported that its revenue rose 21 per cent to N442.09 billion driven by record sales in Nigeria and a ramp up of production in other countries. However, the company said after-tax profit fell 15 per cent to N133.52 billion due to the impact of lower cement prices in Nigeria and higher import costs caused by the devaluation of the naira.

Rencap said given that Dangote Cement remains the lowest-cost cement producer in Sub Saharan Africa, it still has scope to raise cement prices. The investment bank said it expects a 26 per cent return on equity (RoE) on Dangote Cement’s stock in 2016 – the forecasted RoE is at a premium compared with the company’s frontier market peer RoE of 15 per cent. Dangote Cement’s stock remained flat at N167.11 per share at the close of trading at the Nigerian Stock Exchange on Thursday.

As for Lafarge Africa, Dangote Cement’s main rival, Rencap said it has upgraded the company’s rating to “Outperform” from “Market perform.” The investment bank said its upgrade is based on Lafarge Africa’s more attractive valuation following share-price weakness and improved cement pricing.

Lafarge Africa reported that its revenue for the nine months ended September 30, 2016 fell by 25 per cent to N161.04 billion. The company reported a loss of N37.4 billion due mainly to the impact of the devaluation of the naira on its dollar-based borrowings estimated to be about $400 million.

“We believe 2016 was a tough year for Lafarge, due to gas shortages, significant dollar debt and flooding,” Rencap said. “However, following the introduction of its Unicem line II, its kiln conversion and the change of dollar debt to an equity-like instrument, in 2017 we think Lafarge will regain market share, reduce operating cost and eliminate the profit & loss volatility associated with FX fluctuations.”

Rencap, however, said Lafarge’s cement prices and margins remain highly dependent on Dangote Cement’s pricing strategy. Lafarge Africa’s stock remained flat N41.78 per share on Thursday at the close of trading at the NSE.