Our target price for IMP is ZAR300. We derive our target price by using an average of our DCF, SoTP, and EV/EBITDA (c8.5x) multiple valuations. We view this as an appropriate methodology as it accounts for the PGM pricing profile over the near to medium term, while valuing the long reserve mine life of IMP at our normalized long-term price forecasts.
Our DCF analysis uses a weighted average cost of capital (WACC) of 5.0% for the PGM operations. Our NPV is calculated based on real long-term equilibrium price forecasts.

Our valuation of IMP is exposed to macroeconomic developments affecting PGM prices and exchange rates, operational risks that might affect volumes and input costs, political and regulatory risks that might affect costs and the company's reputation and risks associated with power outages.


Macroeconomic risks: Our valuation of IMP is highly dependent on input assumptions for platinum, palladium, and rhodium prices, as well as the rand/US dollar exchange rate. Downside risks to our view include lower-than-expected PGM prices and a stronger-than-expected rand.


Operational risks: We base our production and cost outlook for IMP's individual mines on management guidance and by applying our discretion to management's guidance and targets. The main downside risk to our view is that more capex is required to sustain current production levels than is assumed in our valuation model. Other operational risks include IMP failing to contain costs at lease, and a deterioration in political conditions in Zimbabwe, which could prevent further growth for IMP in that country. 


If the impact from any of these factors proves to be more negative than we anticipate, the stock will likely have difficulty achieving our financial and price targets. However, if any of these factors proves to have less of an effect than we anticipate, the stock could materially outperform our targets.