Recyclable Packaging Trends Will Transform African Markets

Key Takeaways

• Rising demand for recyclable metal cans and sustainability trends position Nampak to gain market share and capture premium pricing as plastic alternatives decline.
  
• Operational restructuring, capacity expansion, and manufacturing modernization support margin growth, improved earnings, and a stronger balance sheet with potential for shareholder returns.
  
• Reliance on a few major customers, operational concentration, currency instability, and limited innovation expose Nampak to significant structural and long-term competitive risks.

Catalysts

Engages in the manufacture and sale of packaging products in South Africa and rest of Africa.

• The rapid growth in demand for large-format 500ml cans-driven by shifting consumer preferences and further adoption within major beverage categories across Africa-positions Nampak to gain volume share and drive revenue growth above underlying beverage category growth, especially as can formats increasingly substitute for glass and PET.
  
• An ongoing consumer and industry shift towards metal and recyclable packaging-fueled by sustainability consciousness, regulatory requirements, and the recyclability advantage of cans-provides Nampak with tailwinds to capture premium pricing and boost net margins as single-use plastic faces headwinds.
  
• Recent and continuing operational restructuring-including asset disposals, a tighter cost base, and improved manufacturing efficiencies-have already dramatically improved margins and are likely to unlock further earnings growth as operational performance aligns with international benchmarks and underutilized capacity is optimized.
  
• Expansion and capacity investments in high-growth African markets, particularly Angola and other emerging regions, enable Nampak to address accelerating packaged goods demand from urbanization and the rising middle class, supporting sustained revenue and earnings momentum in the years ahead.
  
• The technology modernization and focus on advanced, energy-efficient manufacturing-combined with a sound, de-risked balance sheet and reduced debt-sets the stage for structurally higher net margins and the potential for reinstatement of dividends or shareholder returns as EBIT grows and finance costs decline.

Nampak Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Nampak's revenue will grow by 10.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.9% today to 7.1% in 3 years time.
• Analysts expect earnings to reach ZAR 998.0 million (and earnings per share of ZAR 112.82) by about August 2028, up from ZAR 623.7 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.7x on those 2028 earnings, up from 6.5x today. This future PE is greater than the current PE for the ZA Packaging industry at 7.3x.
• Analysts expect the number of shares outstanding to grow by 0.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 19.38%, as per the Simply Wall St company report.

Nampak Future Earnings Per Share Growth

Risks

• Nampak's Angolan business, though currently highly profitable, is heavily reliant on just two major customers; a loss or scale-back from either could result in significant declines in revenue and trading profit, especially given the lack of broader customer diversification in Angola.
  
• Ongoing macroeconomic and currency instability in key African markets-particularly Zimbabwe (where Nampak awaits substantial overdue payments) and Angola-pose persistent risks to cash flows, debt recovery, and revenue consistency, potentially undermining net earnings.
  
• Despite the turnaround, margin improvement, and deleveraging, Nampak's long-term results are still exposed to the risk of insufficient product innovation and lagging manufacturing efficiencies relative to global peers, which could gradually erode market share and compress margins as competitors invest in more advanced technologies.
  
• The company faces increasing seasonality and customer concentration in segments such as the Diversified division, where a material portion of sales depend on large, recently transferred businesses like Langeberg Ashton; operational or financial disruptions at these key customers could have outsized negative impacts on segmental and group revenues.
  
• While management highlights positive secular trends favoring cans and recyclability, heightened regulatory pushback on metal and plastic packaging in favor of biodegradable alternatives and potential shifts in consumer preferences present a structural risk to top-line growth for Nampak's core packaging products over the long term.

Valuation

• The analysts have a consensus price target of ZAR710.0 for Nampak based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ZAR14.1 billion, earnings will come to ZAR998.0 million, and it would be trading on a PE ratio of 9.7x, assuming you use a discount rate of 19.4%.
• Given the current share price of ZAR491.28, the analyst price target of ZAR710.0 is 30.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.