While fuels and chemicals producer Sasol and coal exporter Thungela have been the obvious JSE beneficiaries of the Strait of Hormuz closure, with their shares up 114% and 58% year to date respectively, diversified industrial counter KAP has quietly joined the rally.
The share has gained more than 40% this year, helped by a 20%-30% rise in polymer prices that is lifting Safripol, KAP’s polymer-resin subsidiary. Safripol is one of KAP’s three main divisions, alongside wood-based panel maker PG Bison and supply chain and logistics provider Unitrans.
The recovery follows earlier weakness in the share price after KAP’s interim 2026 results in February, when management guided for a softer second half because of a stronger rand and a planned maintenance shutdown at PG Bison.
Safripol operates three plants. Two are in Sasolburg, producing high-density polyethylene (HDPE) and polypropylene (PP). Their key feedstocks are ethylene and propylene, which are supplied by Sasol and piped directly into Safripol’s operations. The third plant, in Durban, produces polyethylene terephthalate (PET). Its main feedstocks are petrochemical inputs sourced through local and imported supply channels.
Safripol is South Africa’s only producer of PET and HDPE and one of only two local producers of PP. PET is the familiar plastic used in water bottles, carbonated soft-drink bottles and food containers. HDPE is a tougher plastic used in packaging, pipes, drums, industrial containers and agricultural applications. PP has a wider consumer and industrial footprint, including packaging, textiles, homeware and certain moulded products.
Though Safripol sells mainly into the local market, its pricing is linked to international polymer benchmarks and the rand exchange rate. That is why the Hormuz crisis matters. Any sustained disruption to Gulf crude, liquefied natural gas and petrochemical supply chains can lift polymer prices through higher oil-linked feedstock costs, freight and insurance charges, and inventory rebuilding by cautious buyers.
For Safripol, rising polymer prices are positive if selling prices move faster or further than input costs. The risk is that some raw materials also rise, particularly imported PET inputs such as PTA and MEG. But with a large fixed-cost base, higher selling prices and volumes can still produce a disproportionate uplift in earnings.
The Sasol relationship is central to that operating leverage. KAP says Safripol’s raw material supply arrangements give it some of the benefits of an integrated producer, even though it does not own the upstream feedstock assets.
The catch is that the same arrangement is also Safripol’s biggest risk. Sasol is the monopoly ethylene supplier in South Africa, and the ethylene agreement is now in dispute. KAP has won an important arbitration ruling on pricing, which is positive for HDPE margins. But a separate dispute over Sasol’s minimum ethylene volume commitment remains unresolved.
Unitrans is a recovery play. The logistics business has been restructured after years of underperformance, with early signs of improvement
To protect supply volumes, Safripol has lodged a complaint with the Competition Commission over Sasol’s dominant role and has applied to the Competition Tribunal for interim relief under section 49C of the Competition Act. That matter has been heard, with judgment still outstanding.
There is another Sasol-linked exposure in Durban, where Safripol’s PET plant is a user of natural gas supplied through the Sasol-linked gas system. KAP has indicated that alternatives can be considered, but these would require investment and could be more expensive to run. Sasol has interim measures that may extend the gas runway into the mid-2030s, but the longer-term risk remains.
The rest of KAP provides a solid underpin. PG Bison remains the group’s highest-quality industrial asset, producing wood-based panels used in furniture, kitchens, cabinetry and interiors. The ramp-up of the new MDF line at Mkhondo has expanded capacity, while the longer-term opportunity is to shift more volume from lower-margin exports into higher-margin domestic sales and value-added products. A planned maintenance shutdown may weigh on the second half, but it does not alter the longer-term margin story.
Unitrans, meanwhile, is a recovery play. The logistics business has been restructured after years of underperformance, with early signs of improvement. Management is targeting about R700m in operating profit over the medium term. Higher fuel prices from the Middle East crisis are a headwind, but in contract logistics these costs are usually recoverable from customers, albeit with a lag.
The smaller divisions offer useful earnings support. Feltex should benefit if local vehicle assembly volumes continue to recover, though competition from lower-cost imported vehicles remains a risk for the broader automotive supply chain. Sleep Group is a steadier consumer-facing business, with modest growth likely to depend on product launches, better sales mix and any improvement in household spending. Optix remains the outlier. Its fleet-technology platform has long-term appeal in safety, driver monitoring and data analytics, but it still needs scale to turn growing subscription revenue into sustainable profit.
KAP’s valuation remains undemanding at about nine times earnings, particularly as current profits do not yet reflect the full potential benefit of higher polymer prices. The group is also emerging from a heavy capital expenditure cycle, which should improve free cash generation and support debt reduction.
Canaccord Genuity Quest analyst Graham Simpson argues that value stocks could continue to lead the South African market, with KAP identified as the biggest potential beneficiary in the firm’s model, offering estimated upside of 58%.
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