Key message: Afrimat is exposed to the construction, industrial and commodity markets. With iron ore contributing approx. half of operating profit, earnings sensitivity is now weighted towards iron ore and exchange rate levels. An entrepreneurial management team promises growth by acquisition.

  • We initiate on Afrimat with a Target Price of R30.75. Our valuation increases to R35.00 if we use spot iron ore prices in our models.
  • Afrimat has consistently applied a simple business philosophy:
    • Strategic geographic location;
    • unique metallurgy;
    • and a structural cost advantage
  • Whilst starting out as an aggregates company, Afrimat has diversified into industrial minerals (dolomite, lime), concrete based products (bricks and blocks, readymix) and bulk commodity mining (iron ore). This has provided necessary diversification and moved Afrimat from relying on the construction sector only – products now feed into the manufacturing, industrial and mining sectors as well.
  • An entrepreneurial spirit is one of the defining features of Afrimat, with a management team that is willing to exploit opportunities in the market adjacent to their core strengths. A strong technical team also keeps expertise in-house.
  • Management, however, is circumspect in growth and recently walked away from a potential coal acquisition due to uncertainty over the expected returns.
  • Acquisition opportunities in other bulk commodities are being evaluated. Afrimat’s sweet spot is limited life deposits that the majors are not interested in and access to transport infrastructure.

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