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A E C I LIMITED

AFE JSE Listed
Market Cap
ZAR 9.77 billion

EQUITY RESEARCH NOTE Ticker: JSE:AFE | Company: AECI Limited | Date: 10 January 2026 Analyst: Gemini (Senior Equity Analyst)

Step 1: Data Gathering & Source Verification

Reporting Period Basis: This analysis utilizes the most recent audited annual figures for the year ended 31 December 2024 and the subsequent interim results for the six months ended 30 June 2025.

Primary Documents:

Step 2: Metric Extraction

  • Market Cap: ZAR 9.77 billion (Mid Cap).
  • Price: 9,260 cents (ZAR 92.60) at time of writing.
  • Dividend Yield (L12M): 3.44%
  • Calculation: Interim 2025 (100c) + Final 2024 (219c) = 319c total.

  • Note: The company resumed interim dividends in 2025 (up from 0c in H1 2024), signaling improved cash flow confidence.

  • Liquidity Check: ADEQUATE

  • Metric: Average daily value traded consistently exceeds ZAR 10 million.

  • Status: The stock is a constituent of the JSE Mid-Cap indices and offers sufficient liquidity for retail and most institutional position sizing.

  • P/E Ratio: 8.7x

  • Calculation: Price (9260c) / TTM HEPS (~1,060c).

  • Derivation: H1 2025 HEPS (604c) + [FY2024 HEPS (716c) - H1 2024 HEPS (approx. 260c)].

  • Net Asset Value (NAV): 11,850 cents per share (trading at a ~22% discount to NAV).

Step 3: Operational & Strategic Analysis

Business Overview AECI is a diversified chemicals and explosives group. Its core profit driver is AECI Mining (explosives and detonators), which services the global mining industry. It also operates AECI Chemicals (industrial water treatment, agri-health, and chemicals). The company is currently concluding a significant strategic pivot, divesting non-core assets (e.g., Much Asphalt, Animal Health) to become a pure-play mining and industrial chemistry group.

Performance Trend (H1 2025 vs H1 2024) The trend is Strongly Positive (Turnaround Phase).

  • Earnings: HEPS skyrocketed 132% to 604 cents, driven by the absence of prior year one-offs and improved operational efficiency.
  • Debt: A major risk factor has been neutralized. Net debt decreased from R5.1bn to R2.9bn (Gearing down to 25%), well within covenant levels.
  • Margins: EBITDA margins improved to 15% (up from 13%), validating the new management's cost-cutting and "value over volume" strategy.

Sector Context

  • Macro Factor: Global Mining Production vs. Input Costs. While commodity prices (PGMs/Gold) are volatile, mining activity (blasting volumes) remains robust, particularly in international markets where AECI is expanding (Australia/Indonesia). However, the South African chemical sector faces headwinds from logistics inefficiencies (Transnet), which inflate the cost of importing raw materials (ammonia) and exporting finished product.

Step 4: The Verdict

Bull Case: The "Leaner & Meaner" Restructuring Play Management has delivered on their promise to sell non-core assets (Much Asphalt sold, Animal Health sold). The balance sheet is now healthy (Net Debt/EBITDA < 1.0x), and the company is trading at a single-digit P/E (8.7x) despite doubling its interim earnings. The market has not yet fully priced in the "pure-play" premium AECI deserves as it exits lower-margin construction businesses.

Bear Case: The "SA Inc" Discount Despite international growth, AECI remains heavily exposed to the South African mining sector. If local mining output contracts due to power/logistics constraints, or if the Rand strengthens significantly (hurting the translation of their foreign earnings), growth will stall. The dividend yield (3.4%) is also relatively low compared to other JSE value stocks (often >6%).

Fair Value Estimate Range: 11,500c – 12,500c

  • Rationale: A re-rating to a 10x-11x P/E multiple is justified given the cleaned-up balance sheet and 20%+ earnings growth trajectory.

Final Rating: BUY

  • Justification: AECI offers a classic "recovery" setup. The heavy lifting of the turnaround is done, debt is down, and earnings are up. You are buying a high-quality industrial asset at a discount to its book value (0.8x P/B) with a clear catalyst for re-rating as they prove their new "Mining First" strategy.
AI Generated Analysis Last Updated: 2026-01-14