After a 4,700% rally from its Covid lows in 2020 and an 81% gain over the past year, has the easy money already been made in construction specialist Stefanutti Stocks?
A few years ago, Stefanutti looked like another casualty of South Africa’s battered construction sector, weighed down by debt and legacy project disputes. Today, it has settled its most important outstanding claim, exited its formal restructuring plan and rebuilt an order book that offers far better revenue visibility than it has had in years.
The scale of the turnaround is remarkable. Stefanutti’s financial distress in 2020 was largely rooted in the troubled Kusile power project, where delays, cost overruns and a long-running contractual dispute with Eskom placed severe pressure on the group. The contract had been expected to be completed years earlier, but site access problems, construction delays and other complications led to substantial prolongation costs.
At the same time, Covid lockdowns dealt a heavy blow to the construction industry. For a group already carrying a heavy debt burden, that combination was enough to send investors running.
What is remarkable is that Stefanutti managed to navigate this without a deeply dilutive rights issue. Instead, the group relied on asset disposals, cost control, operational restructuring, lender support and, eventually, the Kusile settlement.
In other words, the underlying business is now stable and profitable, but the 2026 earnings surge was largely a function of the settlement
The results for the year to February 2026 suggest that the crisis chapter has largely closed. Stefanutti secured a new five-year R850m term facility with Standard Bank, bringing the historic restructuring plan to an end after the previous loan was fully settled. Proceeds from the Kusile settlement and the disposal of SS Mozambique were used to make substantial capital prepayments, reducing the outstanding balance on the Standard Bank facility to R223m by year-end.
The Kusile settlement was the obvious swing factor in the 2026 numbers. Stefanutti and Eskom agreed to a full and final settlement of R580m excluding VAT. The settlement lifted revenue by R448m, operating profit by R388m and profit after tax by R492m. Reported profit for the year rose to R620m, with earnings per share of 370.44c, making the company look cheap against a market value of about R1.3bn.
Stripping out the Kusile award and adjusting for the impairment of land and buildings, normalised operating profit was R328m on revenue of R7.4bn, for an operating margin of 4.4%. That was almost unchanged from the previous year, when Stefanutti generated normalised operating profit of R333m on revenue of R7.7bn, also at a 4.4% margin. In other words, the underlying business is now stable and profitable, but the 2026 earnings surge was largely a function of the settlement.
Stefanutti’s diversification is one of its strengths. The group is involved in everything from civil engineering and renewable energy to water, mining and marine infrastructure. South Africa remains its core market, though it also does work in neighbouring countries.
The order book is the more encouraging part of the story — it has doubled to R17.2bn from R8.6bn. Of that, R8.7bn is secured for financial 2027. If that work is converted at the same 4.4% operating margin achieved on a normalised basis in 2026, operating profit could rise from R328m to roughly R383m.
Looking further ahead, management is positioning for public-private partnership opportunities in South Africa, including border posts and Transnet-related work. The group’s electrical discipline has already moved beyond its traditional petrochemical and mining base into data centres and renewables, giving Stefanutti exposure to areas where private capital is still being deployed.
At a market cap of R1.3bn, however, the valuation is no longer obviously cheap. The share trades at more than twice book value, while the normalised p:e is about eight. It is no longer the distressed bargain it once was.
Stefanutti stands out for its resilience and execution. In an unloved sector where several peers were badly burnt by offshore expansion and weak contract discipline, Stefanutti has emerged as a higher-quality counter than its history might suggest.
Apex Partners Holdings — the majority shareholder in The Financial Mail Group — holds a 5.82% stake in Stefanutti Stocks
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