Buy rating for Padenga as gold fuels profit bonanza

Padenga Holdings Limited, once a modest player in Zimbabwe’s agro sector, has cemented its transformation into a gold mining powerhouse, reporting a historic financial performance for the year ended December 2024.

According to a Fincent Securities Research report released this week, the Padenga’s strategic pivot to mining has unlocked explosive growth, with revenue soaring 43.3 percent year-on-year to $223 million and net profit skyrocketing 392 percent to $40.2 million.

The star of Padenga’s success story is its wholly owned mining subsidiary, Dallaglio, which contributed 86 percent of group revenue ($195.5 million) in 2024.

Gold production surged 29.2 percent to a record 2,740 kilograms, capitalising on rising global gold prices, which averaged $3 133 per ounce in early 2025. This dual advantage of higher volumes and favourable pricing propelled earnings per share (EPS) to 3.53 US cents — a staggering 257 percent increase from 2023.

While mining stole the spotlight, Padenga’s crocodile farming division demonstrated resilience despite headwinds. Revenue from agribusiness inched up 2 percent to $30.4 million, even as sales volumes plummeted 40 percent.

This was offset by a 69 percent spike in average skin prices, underscoring the premium positioning of its products in the luxury goods market. However, the segment’s contribution to group revenue has dwindled to 14 percent, down from 31 percent in 2021, reflecting Padenga’s deliberate shift toward mining.

“These figures clearly underline Padenga’s strategic transformation from a diversified agro-mining operation into a mining-focused enterprise with supplementary interests in crocodile farming.

“The company’s earnings profile is now overwhelmingly skewed toward gold production, positioning it strongly for further growth in resource sector,” reads the Fincent report in part.

According to the Fincent, Padenga’s financial metrics reveal a story of efficiency and scale. Gross profit jumped 67.1 percent to $112 million, lifting the gross margin to 50 percent (up from 43 percent in 2023).

EBITDA surged 169.1 percent to $71.8 million, translating to a 32 percent EBITDA margin — nearly double the prior year’s 17 percent.

Even after accounting for rising depreciation costs, EBIT climbed 155.4 percent to $57.9 million, with margins expanding to 26 percent. Net profit margins followed suit, leaping from 5 percent to 18 percent, driven by disciplined cost control and operational leverage.

According to Fincent, the company’s financial health improved markedly, with operating cash flow rising 45 percent to $48.3 million. A strategic debt reduction initiative saw short-term borrowings drop 23.6 percent, while long-term debt fell to $10.1 million.

Liquidity ratios strengthened: the current ratio rose from 1.02 to 1.40, and cash reserves quadrupled to $5.06 million. Return on equity (ROE) catapulted from 9.32 percent to 33 percent, signaling robust capital efficiency. Fincent said the returns “reflects superior returns to shareholders and may be attributed to enhanced operational margins.”

Capital expenditures in 2024 focused on high-impact projects, including the Southwest Shaft expansion at the Pickstone Underground Mine and solar energy installations aimed at reducing operational costs.

These investments, slated for completion in late 2025, align with Padenga’s goal of sustaining gold output while cutting reliance on grid power, Fincent said. Mine development assets now account for 7.6 percent of total assets, up from 5.8 percent in 2023, reflecting a commitment to extending mine life.

With gold prices projected to reach $3 350 per ounce by end-2025, Fincent forecasts a 9.7 percent rise in EPS to 3.87 US cents and net profit of $44 million. The report reaffirms a “Buy” rating, citing Padenga’s attractive valuation — a forward P/E ratio of 4.56x — and its leverage to rising commodity prices.

Padenga shares closed at 25.50 US cents on April 11, 2025, with Fincent’s fair value target implying a 9.5 percent upside to 27.43 cents.-herald