Our opinion on the current state of HUDACO(HDC)Hudaco (HDC) is an importer and supplier of "...automotive, industrial and consumer products" mostly in Southern Africa.
Its business has two sides:
(1) Supplying automotive security, power tools, communications, and business supply products to the consumer market.
(2) Supplying mainly the mining and manufacturing industries with mechanical and electrical power transmissions, diesel engines, hydraulics and pneumatics, steel and thermoplastics, and fittings and bearings.
The company has a very well-established business with 26 warehouses, 800 international suppliers, and 140 branches. Through this network, they supply about 230,000 products. The company has been battling to export goods because of inefficiencies at South African ports, especially Durban.
The group constantly makes bolt-on acquisitions to build and enhance its business.
In its results for the year to 30th November 2024, the company reported revenue down 5.8% and headline earnings per share (HEPS) down 6.3%.
The company said, "For the five months from the formation of the GNU to the end of the financial year, through strong management of gross profit margin, tight control of expenses and the reduction of inventory, operating profit increased by 0.2%, and headline and comparable earnings per share were up by 3.5% on the equivalent period in the prior year."
Hudaco is an extremely well-managed company operating in a difficult economy. As the economy improves, Hudaco's results will benefit directly.
The share trades on a P:E of 9.99 and a dividend yield (DY) of 4.08%, which looks cheap to us. In our view, this share should be bought on weakness and offers solid, long-term investment potential as the South African economy improves.
