PPC Limited (JSE: PPC) has experienced a positive turnaround in recent months, rising over 30% in the previous month to reach a 70% year-to-date return. The impressive year-to-date performance has been heavily fuelled by improved financial performance and the strategic focus on core markets.
PPC has shown resilience in its HY 2023 results, boasting a revenue surge of 20.9% year-on-year, reaching R6,172 million. The company’s headline earnings per share (HEPS) stood at 26 cents. Despite the subdued cement demand in South Africa, PPC has exhibited robust earnings before interest, taxes, depreciation, and amortization (EBITDA), soaring by 46.8% to R1.06 billion. Strategic cost containment measures enabled an impressive increase in the group’s EBITDA margin to 17.3%.
The sale of its Rwandan investment underscores PPC’s strategic focus on its core Southern African markets, where it aims to leverage its strong position and operational efficiency. The company’s balanced approach to capital allocation and its focus on enhancing operational efficiency positions it well in the cement industry amidst market uncertainties.
Technical Analysis
On the daily chart, the stock is currently trading within a symmetrical triangle pattern. This suggests a period of consolidation, with the potential for a breakout in either direction. The price action is above the 50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line), indicating positive momentum. The RSI, currently at 60.48 with a flat trajectory, suggests the stock may be nearing overbought territory. This could indicate a potential pullback before the next leg higher.
Short-term bullish opportunities may arise if the stock breaks above the symmetrical triangle, targeting the R3.99 resistance level, with the R4.18 resistance level likely to act as the next level of significance. Conversely, a downside move could test the support level at R3.56. A break below the initial support and possibly the triangle could trigger a run lower and would likely bring the R3.39 and R3.22 support levels into play.
Summary
PPC Limited’s fundamentals are improving, and the company is strategically positioned. Technically, the stock is within a symmetrical triangle, with upside potential towards R3.99 and possible further gains towards R4.18 on a sustained breakout. However, a break below the triangle could trigger a bearish correction towards R3.56 and potentially lower levels.
Sources: TradingView, Trading Economics, Reuters, Engineering News, PPC, News24, Global Cement.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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