AECI | An explosive performance
While FY ‘18a AECI (AFE) operating profit increased c.27% YoY, Schirm's performance disappointed. The speciality chemicals sector in Germany has de-rated c.20% since the purchase of Schirm. In our view, the Schirm acquisition will provide the Group's Plant and Animal health segment with a double agricultural season in the Northern and Southern Hemispheres which will unlock value for the Group. We expect Schirm's FY ‘21f operating profit to expand to ZAR283m (FY ‘18a: -ZAR21m).Our DCF method delivers a one-year target price of ZAR132.76ps (ZAR117.7ps previously). Combined with our forecast 7.2% dividend yield, our analysis implies a total return of 38% which is 25.7% more than our estimated market return of 12.3%. Accordingly, we upgrade our rating to an OUTPERFORM.
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