Sasol shares surge, but market remains wary

Sasol's share price has more than doubled since bottoming below R60 in April, but still remains at a deep discount to fair value - despite returning a net profit of R6.8 billion for the year to June, after a R44.3 billion loss the previous year.

- Ciaran Ryan

Earlier this year, HSBC and PSG upgraded their price targets to between R184 and R185, considerably higher than the current price of R127.

In January, Morgan Stanley raised its target price to R225, suggesting a further 78% upside.

The shares are trading at a price-earnings multiple of 3.6, in part because top-line revenue has declined 14% since 2023, and earnings are down 12% over the same period. It's a smaller company than it was back in 2022, but still trading at a substantial discount to fair value.

"Sasol remains cheap for a reason," says Kea Nonyana, market analyst at Scope Prime.

"The reason is the market's mistrust of the management's ability to execute on strategy. The chemicals business has seen a rapid decline, and so long as chemical prices remain vulnerable, the share price of Sasol will remain undervalued."