ASTRAL FOODS LIMITED

Investment Analysis: Astral Foods Limited (JSE: ARL)

Date: 12 January 2026 Analyst: Gemini (Senior Equity Analyst)

Step 1: Data Gathering & Source Verification

Reporting Periods Used:

• Annual Financial Statements (Year Ended 30 September 2025):

• Source: Audited Summarised Consolidated Results 2025

• Interim Results (Six Months Ended 31 March 2025):

• Source: Unaudited Interim Results March 2025

• SENS Announcements (Last 12 Months):

• Key Logs: ShareData Online - Astral Foods SENS

Recent Key SENS Activity:

• 11 Dec 2025: Allocation of Shares (Forfeitable Share Plan).
• 11 Dec 2025: Appointment of New CFO.
• 17 Nov 2025: Short-form Announcement of Financial Results (Dividend Declaration: 880 cents).
• 30 Oct 2025: Voluntary Trading Statement (signaling the earnings recovery).

Step 2: Metric Extraction

• Market Cap: ~R11.6 Billion (Based on share price ~R270.00).
• Dividend Yield (L12M): 4.07%.
• Calculation: (Interim 220c + Final 880c) = 1,100c total dividend.

• Context: 1,100c / 27,000c (share price) ≈ 4.07%. This marks a massive 112% increase in payout vs. the prior year, signaling a return to cash generation.

• Liquidity Check: High Liquidity / Low Risk.

• Data: Average daily traded volume over the last 3 months is ~170,000 shares.

• Value: ~R45.9 Million traded daily. This stock is highly liquid and easy to enter/exit for retail and institutional investors.

• P/E Ratio: 12.3x.

• Calculation: Price (R269.88) / HEPS (2,193 cents).

• Net Asset Value (NAV): N/A (Metric is less relevant for an operating industrial company than P/E and EV/EBITDA, but NAV per share is R139.50).

Step 3: Operational & Strategic Analysis

Business Overview: Astral Foods is South Africa’s leading integrated poultry producer. Its model is vertically integrated:

1. Feed Division (Meadow Feeds): Produces animal feed (approx. 17.5% of external revenue but a massive profit driver).
2. Poultry Division: Includes broiler genetics, hatcheries, and processing (Goldi, County Fair, Festive brands). This division contributes ~82.5% of revenue.

Performance Trend:

• "A Tale of Two Halves": The 2025 financial year showed a distinct split. The first half (H1) was battered by legacy costs and market pressure, while H2 saw a robust recovery.
• Revenue: Up 10.4% to R22.6 billion.
• Profitability: Operating profit increased by 11% to R1.25 billion. Crucially, the operating margin in the Feed division expanded from 5.5% to 6.6%, buffering the thin margins in Poultry (which recovered from a loss in H1 to a +3.9% margin in H2).
• Cash Flow: A significant strategic victory was "rebuilding the balance sheet," ending the year with over R1.0 billion in cash, allowing for the reinstated dividend.

Sector Context (Macro Factor): Feed Input Costs (Yellow Maize & Soya): The single biggest determinant of Astral's profitability is the price of feed (approx. 66% of the live cost of a broiler). The 2025 bumper maize crop in South Africa has softened input costs significantly in H2 2025. However, volatile weather patterns (La Niña/El Niño cycles) remain a persistent threat to this stability. Lower feed costs generally translate directly to margin expansion for Astral unless they are forced to pass savings on to consumers to protect market share.

Step 4: The Verdict

Bull Case (Buy Rationale): Dividend Restoration & Cash Generation: The company has successfully navigated the "perfect storm" of 2023/24 (Load shedding + Bird Flu). With R1bn cash on hand and a reinstated, high-yield dividend (1100cps), management is signaling confidence. The permission to vaccinate breeder stock against Bird Flu significantly de-risks future catastrophic biological asset write-offs.

Bear Case (Sell Rationale): Pricing Power Limitation: Despite the recovery, the consumer environment in South Africa is extremely weak. Astral cannot easily pass on cost shocks to consumers who are switching to cheaper protein sources (like tinned pilchards or pork). If a new strain of Bird Flu hits or maize prices spike, Astral’s thin poultry margins (1.5% for the full year) offer very little safety buffer.

Fair Value Estimate: R290.00 – R310.00.

• Rationale: Trading at a P/E of ~12.3x, it is fairly valued compared to its historic average of 10x-14x. The restored dividend supports a re-rating closer to R300.00.

Final Rating: HOLD

• Justification: Astral has done the hard work of turning the ship around, and the current price reflects this success (up ~46% over the last year). While it is a quality company, the "easy money" from the recovery trade has likely already been made. Investors should hold for the dividend income but wait for a pullback (closer to R250) before adding new capital, given the cyclical risks inherent in agriculture.