Below R100: Sasol Shares Nosedive as Analysts Turn Sour on Oil, Rand Risks

In a stark reversal of fortune, Sasol’s share price shattered through the R100 psychological barrier on Monday, marking a dramatic 16% plunge from the R121 peak it celebrated just a week ago. The catalyst was a sobering downgrade from global investment bank JPMorgan, which shifted its rating on the petrochemical giant from ‘neutral’ to ‘underweight’ and slashed its price target to R94.

This move punctuates a brutal period for Sasol, with its shares down more than 70% since 2022, and layers fresh pessimism on top of recent negative outlooks from credit agencies Moody’s and S&P Global Ratings.

A Perfect Storm of External Pressures

JPMorgan’s downgrade hinges on a dual threat that is squeezing Sasol’s earnings model. First, the anticipation of weaker oil prices as geopolitical tensions ease. Second, and critically for Sasol, a stronger South African rand.

The company earns a significant portion of its revenue in US dollars, but reports costs in rands. A stronger local currency, therefore, directly dilutes its rand-based earnings. JPMorgan warned that Sasol’s free cash flow could turn negative if oil hits $50 per barrel and the rand strengthens to R16/$.

“The move reflects growing concern around currency sensitivity, softer oil and chemicals pricing, and a less compelling risk-reward profile,” said Kea Nonyana, market analyst at PrimeXBT.

From Bullish to Bearish: A Year of Reversed Fortunes

The current gloom stands in stark contrast to the bullish sentiment of early 2025, when banks like HSBC and Morgan Stanley issued price targets above R180. Back then, the rand traded above R18.60/$ and Brent crude was at $75/barrel.

The landscape has deteriorated sharply. S&P Global, which revised its outlook to negative in October 2025, expects “weak core earnings through 2026 and 2027,” citing “structurally challenged” global oil and chemical markets plagued by oversupply and muted demand. It forecasts Brent crude to average just $66/bbl in 2026.

Sasol’s Defense: Cost-Cutting and Self-Reliance

In response to these headwinds, Sasol is banking on an aggressive internal strategy to fortify its balance sheet. Key to this is a plan to boost output at its Secunda Synfuels operations and increase the use of its own-mine coal. The company is targeting a long-term oil breakeven price of $50/bbl by 2028, down from $59/bbl in 2025.

However, market sentiment remains deeply skeptical. Analysts point to ongoing mistrust of management’s execution track record and note that Sasol remains acutely vulnerable to the very external factors now turning against it: oil price swings and currency movements.

With oil prices softening to around $62/bbl and the rand having gained 13% against the dollar in the past year, the shine has well and truly come off the earnings forecasts. For investors, the plunge below R100 is a potent symbol of a company caught in a storm not of its making, but one it must now navigate with extreme skilland perhaps a little luck.

{Source: MoneyWeb}

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