Key message: We value PPC at R10 as a deal price should Heidelberg make an eventual offer.
- Heidelberg Materials has been reported as considering a bid for PPC. Heidelberg has assets in West Africa and has long been a potential suitor for PPC.
- There is no offer on the table as Heidelberg is only at the stage of appointing advisors for a potential deal. To consider what price they may have to pay for PPC we look at a number of valuation metrics to determine a suitable price for PPC.
- On a traditional EV/tonne basis, PPC currently trades at US$87 (using an efficient capacity for PPC of 6.8mt including RK3). Cement companies around the world trade on very different EV/tonne values due to various factors – integrated or not, energy costs, limestone supply, closed/open market, regional supply/demand etc. Heidelberg trades at US$195.
- On an EBITDA per tonne basis, PPC trades at US$16/tonne (FY26) vs Heidelberg at US$24/tonne. On our FY28 EBITDA forecast for PPC when the benefits of RK3 become apparent the value increases to US$22/tonne.
- There is a correlation between EV/tonne and EBITDA/tonne (which is logical as more profitable companies trade at higher valuation multiples). Should this be applied to PPC an appropriate EV/tonne valuation is closer to US$130 (implying a share valuation of 989c).
- Greenfield replacement capacity in Africa is running at approx. US$180-220/tonne. PPC’s RK3 kiln will cost approx. US$123/tonne (the last major kiln SK9 cost US$109/tonne). In India new builds are being done at US$100/tonne for massive plants (3-4mt) benefitting from economies of scale. We believe the RK3 cost is the relevant benchmark currently and supports the EV/tonne valuation.
- Recent M&A prices in Africa range from US70-110/tonne, but these reflect ageing assets and distressed markets and are not relevant for PPC.
- We therefore believe that an EV/tonne valuation for PPC should be approx. US$130/tonne, implying an offer price of approx. R10/share.
- We maintain our fundamental valuation of R7.10 until further details of a potential deal are made clear.