Sasol

Sasol is a cheap oil and chemicals business with its main operations in South Africa, Europe and the US. The group has emerged from the Covid-induced oil crisis and its misadventures in the US (where they built the Lake Charles chemical complex for $13bn – 40% beyond their original budget and several years behind schedule), into a more stable financial situation. With recovering product prices, the outlook for the business is healthy from an earnings generation perspective. Management have also laid out a clear plan for reducing its greenhouse gas emissions by 2030. This plan will involve extra capex and will raise the cost of their South African operations. We have explicitly incorporated these risks into our earnings forecasts and valuation multiple. We remain constructive on the investment case, given that we think the risks are adequately reflected in the current share price and that resumption of dividends will provide support to investor returns from this counter.