Fan Milk PLC – Ratings Update & Earnings Analysis
Sustainable Earnings Growth Strengthens Investment Case
Fan Milk PLC (FML) maintains a positive earnings trajectory, with strong first-half 2026 performance supported by revenue growth, volume recovery, stronger distribution and significant gross-margin expansion.
We maintain our “BUY” rating on Fan Milk PLC (“FML”) and raise our 12-month target price to GHS21.10 per share, implying 51% upside potential.
FML’s 1HY-2026 performance reinforces our conviction in its recovery, with revenue rising 25.5% year-on-year and operating profit increasing 258.4% year-on-year. The performance was supported by stronger distribution, volume recovery and significant gross-margin expansion. We also see growing vendor activity as a key driver of sustained earnings growth.
Fan Milk Investment Rationale
Our investment case for Fan Milk is based on four key factors:
- Elevated revenue growth tailwinds supported by improved company-specific fundamentals and steady disinflation.
- Stable margins, influenced by revenue growth and calmer cost pressures amid reduced macroeconomic volatility.
- Improved asset quality, aided by efficient utilization, is expected to generate sufficient cash flow to fund operations and support organic growth.
- Lower debt burden is expected to unlock higher cash flows to equity investors.
Fan Milk Q2 2026 Earnings Analysis
Fan Milk reported Q2 2026 revenue of GHS313.8 million, up 19% year-on-year from GHS264.4 million in Q2 2025, although revenue declined 2% quarter-on-quarter from GHS321.6 million in Q1 2026.
Revenue was also 1% above our Q2 2026 estimate of GHS309.3 million.
| GHS’000 | Q2-2025A | Q1-2026A | Q2-2026A | Y/Y | Q/Q | Q2-2026E | Variance |
|---|---|---|---|---|---|---|---|
| Revenue | 264,373 | 321,641 | 313,814 | 19% | -2% | 309,316 | 1% |
| COGS | 187,506 | 171,370 | 148,088 | -21% | -14% | 207,242 | -29% |
| Gross profit | 76,867 | 150,271 | 165,726 | 116% | 10% | 102,074 | 62% |
| Operating expense | 71,526 | 90,762 | 95,119 | 33% | 5% | 75,010 | 27% |
| Operating profit | 5,341 | 59,635 | 70,946 | 1228% | 19% | 27,837 | 155% |
| Pre-tax profit | 8,490 | 61,157 | 74,812 | 781% | 22% | 28,302 | 164% |
| Tax expense | 6,546 | 33,538 | 20,571 | 214% | -39% | 8,491 | 142% |
| Net profit | 1,944 | 27,619 | 54,241 | 2690% | 96% | 19,812 | 174% |
| EPS (GHS/share) | 0.02 | 0.24 | 0.47 | 2690% | 96% | 0.17 | 174% |
Strong Gross Profit Growth
The strongest improvement in Q2 2026 was at the gross-profit level. Gross profit increased to GHS165.7 million, compared with GHS76.9 million in Q2 2025, representing 116% year-on-year growth.
Gross profit also increased 10% quarter-on-quarter from GHS150.3 million in Q1 2026.
Against our Q2 2026 estimate of GHS102.1 million, reported gross profit was 62% higher than expected.
The improvement was supported by a 21% year-on-year decline in cost of goods sold, from GHS187.5 million in Q2 2025 to GHS148.1 million in Q2 2026. COGS also declined 14% quarter-on-quarter and was 29% below our Q2 2026 estimate.
Operating Profit and Net Profit
Fan Milk’s operating profit increased to GHS70.9 million in Q2 2026, compared with GHS5.3 million in Q2 2025. This represents 1,228% year-on-year growth and a 19% quarter-on-quarter increase.
Operating profit was also 155% above our Q2 2026 estimate of GHS27.8 million.
Pre-tax profit rose from GHS8.5 million to GHS74.8 million, representing 781% year-on-year growth and 22% quarter-on-quarter growth. This was 164% above our Q2 2026 estimate.
Despite a 214% year-on-year increase in tax expense, tax expense declined 39% quarter-on-quarter to GHS20.6 million.
Consequently, net profit increased to GHS54.2 million, compared with GHS1.9 million in Q2 2025. Net profit rose 2,690% year-on-year and 96% quarter-on-quarter, while exceeding our Q2 2026 estimate by 174%.
Fan Milk EPS Performance
Fan Milk reported Q2 2026 EPS of GHS0.47 per share, compared with GHS0.02 per share in Q2 2025 and GHS0.24 per share in Q1 2026.
This represents 2,690% year-on-year growth and 96% quarter-on-quarter growth. Q2 2026 EPS was also 174% above our estimate of GHS0.17 per share.
Fan Milk Outlook and Target Price
The 1HY-2026 performance reinforces our conviction in Fan Milk’s recovery, with revenue growth, volume recovery, stronger distribution and significant gross-margin expansion supporting the improvement in earnings.
We maintain our BUY rating on FML and raise our 12-month target price to GHS21.10 per share, implying 51% upside potential.
Our investment case remains supported by elevated revenue growth tailwinds, stable margins, improved asset quality and a lower debt burden. We also see growing vendor activity as a key driver of sustained earnings growth.