Operating Margin - Kaap Agri Ltd (JSE:KAL)

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Price: 5 052 Zac 1.75%

Market Cap: 3.6B Zac

3.3%

Current

Average

3.1%

Industry

Operating Margin represents how efficiently a company is able to generate profit through its core operations.

Higher ratios are generally better, illustrating the company is efficient in its operations and is good at turning sales into profits.

Operating Margin

3.3%

Operating Profit

671.3m

Revenue

20.3B

Operating Margin Across Competitors

Country		Company	Market Cap	Operating Margin
ZA	K	Kaap Agri Ltd JSE:KAL	3.6B Zac	3%
ZA	S	Shoprite Holdings Ltd JSE:SHP	150B Zac	6%
CA		Loblaw Companies Ltd TSX:L	74.4B CAD	7%
CA		Alimentation Couche-Tard Inc TSX:ATD	69.7B CAD	5%
US		Kroger Co NYSE:KR	38.2B USD	1%
UK		Tesco PLC LSE:TSCO	28B GBP	4%
JP		Seven & i Holdings Co Ltd TSE:3382	5.6T JPY	4%
NL		Koninklijke Ahold Delhaize NV AEX:AD	30B EUR	4%
IN		Avenue Supermarts Ltd NSE:DMART	2.5T INR	6%
CA		George Weston Ltd TSX:WN	37.7B CAD	8%
ZA	P	Pick N Pay Stores Ltd JSE:PIK	25.9B Zac	2%

Kaap Agri Ltd
Glance View

Market Cap

3.6B Zac

Industry

Retail

Kaap Agri Ltd., a venerable participant in South Africa's agribusiness landscape, has its roots tracing back over a century, deeply entwined with the farming communities it serves. Born from a co-operative model, its foundation is marked by a commitment to meeting the evolving needs of its agricultural clientele. Over the years, Kaap Agri has expanded beyond mere agricultural supplies, reinventing itself as a diverse, multifaceted enterprise. This transformation is driven by strategically broadening its offerings to include retail, fuel stations, and convenient stores, all of which cater not only to farmers but to the everyday shopper as well. Through its network of Agrimark retail outlets, the company ensures a touchpoint in rural and semi-urban locales where it provides farming essentials, household goods, and construction supplies, binding itself to the heart of these communities. At its core, Kaap Agri capitalizes on its wide distribution footprint and its deep understanding of the South African agricultural market, channeling both to generate revenue. It thrives on a model of vertical integration, where its various divisions—including manufacturing and retail—interact symbiotically to create a streamlined operational structure that enhances customer experience and maximizes profitability. Fuel sales, a significant contributor to its revenue, leverage high-volume transactions enabled by strategically located forecourts. This robust service offering is complemented by financial services tailored to assist the agricultural sector, further weaving Kaap Agri into the fabric of local economies. By extracting value from these diversified channels, Kaap Agri not only anchors its traditional customer base but also attracts a broader demographic, building a resilient business model that stands firm against the cyclical nature of the agricultural industry.

View KAL Analysis

KAL Intrinsic Value

What is Intrinsic Value?

Economic Moat is a concept popularized by Warren Buffett to describe a company's durable competitive advantage. It represents the 'moat' that protects a company from competitors and helps it sustain profitability over the long term. Our analysis of the past 10 years showed that companies with a wide economic moat significantly outperformed the market, delivering +645% returns compared to +189% for the S&P 500.

Our research into Economic Moat performance spans the past 10 years and focuses on companies with a wide economic moat. For this analysis, we calculated the average stock price returns of these companies, comparing them to the performance of the S&P 500 index over the same period.

The results were compelling: wide moat stocks achieved a remarkable +645% average return, compared to +188% for the broader market. This difference highlights the long-term benefits of investing in businesses that can maintain their market position and pricing power over time.

Note: This research does not account for survivorship bias. Past performance is not indicative of future results.

Determining whether a company has an economic moat requires both a deep dive into financial metrics and a qualitative assessment of its competitive position. Our analysts conduct a rigorous evaluation that focuses on identifying structural advantages that enable a company to sustain profitability and defend its market share over the long term.

The process begins with an analysis of a company’s historical financial performance. We assess how consistently the company has generated returns above its cost of capital and whether those returns have been stable or improving. However, financial performance alone doesn’t reveal the full picture. To understand the sources of these advantages, we evaluate five key drivers of economic moats:

Network Effect: We analyze whether the value of a company’s product or service grows as its user base expands. Platforms like payment systems or marketplaces benefit from this self-reinforcing.

Switching Costs: We assess whether customers face significant costs or disruptions when switching to a competitor’s product or service. High switching costs create customer stickiness and provide pricing power.

Intangible Assets: Strong brands, patents, and regulatory licenses can protect a company’s market position by creating barriers for competitors or enabling premium pricing. For example, a well-recognized consumer brand may command higher customer loyalty and margins.

Efficient scale: Occurs when a market is optimally served by one or a few players, making it unprofitable for new entrants to compete. This typically happens in industries with high fixed costs or geographic constraints, such as utilities or pipelines.

Cost Advantage: Companies with structural cost advantages can produce goods or services at a lower cost than their competitors, enabling them to offer competitive pricing or maintain higher margins. These advantages often arise from economies of scale, superior supply chain management, or proprietary technology. Firms like Walmart leverage their massive scale to negotiate better terms with suppliers, allowing them to undercut competitors on price.

By examining these factors in combination with a company’s financial performance and market positioning, we classify each company into one of three categories:

This rigorous evaluation ensures that our moat ratings are both comprehensive and reliable, giving investors the tools they need to make well-informed, long-term decisions.

The AI Assistant may sometimes provide inaccurate information.

Make your own investment decisions or consult a licensed financial advisor.

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Kaap Agri Ltd
JSE:KAL