ZIMBABWE Stock Exchange-listed African Distillers Limited's (Afdis) top line was up 15% in the financial year 2025 on the back of sales volume growth across all products.
Wine sales volumes increased by 29% while the ready-to-drink products and spirits were up 21% and 7%, respectively, in sales volumes.
Overall, sales volumes were up 15% from prior year. Margins were weaker because of stronger growth in direct costs which was only softened by a decline in operating overheads.
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Accounting technicalities and capital expenditure underscored the jump in non-current assets and. by extension, total assets.
Cash balances remained negative, albeit less so, because of positive operating cashflows and increased debt financing. A final dividend of US0,70c per share was declared.
Forecasts
Firm local demand, tight borders to sustain top- and bottom-line growth.
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The crackdown on illegal imports will continue driving sales back to Afdis in 2025, with a positive impact on market share.
We also anticipate additional demand coming from the local mining and agriculture sectors given the elevated gold price and bumper harvest expectations.
This will be supported by ongoing cost containment efforts and improved electricity supply.
However, tight policy and increased fuel taxes will likely water down the impact of these positives.
Valuation
We revise Afdis' financial year 2026 price target upwards to US30,89c on account of strong sales expectations coupled with an ease in cost pressures.
Global peers were used to generate forward-looking multiples, and these were adjusted for differences in country risk.
In addition, a counter-specific liquidity risk discount of 40% was further applied as a reflection of the counter's low free float shares.
We maintain our BUY recommendation on Afdis regardless of high liquidity risk on the Zimbabwe Stock Exchange.
Investment thesis
The crackdown on illegal imports at the country's borders has resulted in constrained supply of illegally imported alcohol from neighbouring countries with local and compliant businesses such as Afdis filling up the vacuum and recovering lost market share.
We also anticipate additional demand coming from the local mining (especially gold) and agriculture sectors in the coming year given the elevated gold price and bumper harvest expectations throughout 2025.
This will be supported by ongoing cost containment efforts such as using returnable glass bottles in ready-to-drink products and improved power availability.
However, tight policy and increased fuel taxes will likely water down the impact of these many positives.
This article was written by Morgan & Co, a securities firm for a new era, whose local knowledge and expertise is twinned with international experience to grow the Zimbabwean capital markets.
