Analyst recommendation

                                                                                                           As at 9 April 2025

Executive Summary

Management’s shake-up with the, new group CEO, Matias Cardarelli, has strengthened the Executive Committee with several new roles which could potentially help to improve the profitability and sustainable return on capital in South Africa. However, we did not add this as part of our main analyst thesis as more evidence is needed.
• Successful disposal of the company’s 51% stake in CIMERWA (Rwanda) for $42.5 million as of 25 January 2024.
• PPC has implemented bi-annual price increases to mitigate rising input costs and restore EBITDA margins.
• PPC hosted its Capital Markets Day on 27 March 2025, highlighting its core priorities: enhancing competitiveness, strengthening cost management, improving operational efficiency, advancing sustainability and environmental initiatives, and pursuing growth opportunities.
• PPC’s board of directors has approved a construction of a new R3 billion cement plant in the Western Cape.
• The R200 million share repurchase program was completed on 13 March 2024.
• The 10-month operational update highlighted slight volume declines in SA & Botswana, however with improved margins.
Outlook:
a. PPC will focus its resources on Southern Africa.
b. Operational efficiencies and cost containment measures have been identified and was supported by the margins improving in the 10-month operational update.
c. They will continue to implement bi-annual price increases to achieve margin recovery.

Analyst thesis

PPC’s largest segment is South Africa and Botswana:
a. Price increases should continue to help improve margins.
b. Increased construction from lower interest rates, improvement in infrastructure and thematic themes such as urbanisation could potentially help with industry growth. Volumes could also further benefit from expansion
projects such as the R3 billion cement plan in the Western Cape. Thanks to its premium cement, the company
can safeguard its market share against competitors offering lower-quality products, especially where quality is a priority for customers.
c. However, volumes are going to remain under pressure as competition remains high and exacerbated by price increases.
d. The real opportunity lies in government intervention: government spend (infrastructure plan), import tariffs and SOE performance.
• International (Zimbabwe): The company switched to hard currency; the dollar cleans up reporting with no more hyper-inflation items.
• Our valuation has an upside of 6% which supports our hold view. We value the company on a discounted cash flow basis which takes into account dividends received in international business. A high discount rate was applied due to inflationary pressure in Zimbabwe and uncertainty relating to supply demand dynamics in the cement industry.

Results

Valuation

Table 3: Valuation

We have valued PPC Limited using a discounted cash flow (DCF) model. In our valuation we have flexed our bear, base, and bull scenarios, each assigned with an equal probability weighting.

Source: FactSet