Commodity and Cyclical Plays

(aarshkshah1992) #204

Is there any way for an Indian resident investor to invest in Ardea Resources ?

(Amit) #205

Looks at ICICI and Kotak securities. They may allow you to invest in ASX. Ardea is listed at 400 mil mcap and rival CLQ is at 1 bill Macap. Ardea has far better resources. It has done 10 times since IPO early this year. It is on absolute tear and should continue to catch up with mcap of clq.

Imho expect another 3-4 bagger from here in Ardea. I reserve the right to be wrong.

Disc: invested in Ardea and hindcopper. Looking at another lithium major producer in Asx

(shreys) #206

@aarshkshah1992 I get it. A significant upside revision is expected in copper prices. Just a couple more questions: Would you mind sharing with me some information on the buyers of Hind copper products. And why can’t customers buy the refined metal from Vedanta or any other competitor?

(Jiten Parmar) #207

Appreciate all the responses. Especially good digging on Copper. Collabarative work really helps every one.

([email protected]) #208

Since Vedanta is expanding his capacity that should also be a good investment bet alongside Hindcopper to play out the copper theme, any thoughts?
The idea is to look out for listed players and invest on the best ones.

(suhagpatel) #209

@aammiitt2 Would you help to do a relative valuation of Hind copper at current price and what are the possible triggers for the company in future other than rally in copper prices? I have gone through the thread and aware about EV theme so you can exclude that.


(Jose) #210

As far as Vedanta is concerned they are very much diversified and into a lot of metals and oil,so it is more of a commodity play than a play on copper .but Vedanta may have gains easier pure copper play would be hind copper.

Disc: Inv in hind copper ,tracking vedanta

(Jiten Parmar) #211

To a question on what made me invest in Rain Ind in 2015. Reproducing here as some might not be following Rain Ind thread.

A lot of that thought process is there in my Cyclical/Commodity presentation.
Anyways, coming back to Rain, I have been tracking this company for long time. Just see the financials for CY 11, 12, 13, 14. OPMs consistently falling from 23%+ to 7% over these 4 years. And company was still eking a net profit, despite big leverage. Somehow, I had a sense that things can only improve from here. So, basically it was buying it at almost peak pessimism.

In cyclical investing, u buy when ratios are bad. And u have reasonable confidence that company will survive these bad times. Hope this helps.

-Jiten Parmar

(suhagpatel) #212

@jitenp Can you answer on Hindustan copper investment rationale at current price? looking at the numbers i feel the same story as you posted above for Rain. Not saying that Hind Copper can give similar return but your views will definitely help to understand.


(pla7yer) #213

If you have invested in hind copper what triggers did you bank on and is the story still on ??

(Jiten Parmar) #214

I would suggest you read the annual report and the plans the company has for increasing capacity and move up the value chain. One can also go through the filings. Of course, these had been said before too, but this time I am a bit hopeful as new MD has good background and my checks suggest he is a guy who possibly can do it. Of course, execution risk remains as it is a PSU.

(Jose) #215

And what’s your view on Vedanta? Read that you have exited at some point of time.and brokerages seems to be quite bullish on it.

(Jiten Parmar) #216

Maybe I exited too early. But stock had given a quick 4x and I was uncomfortable with Cairn merger, so exited. But no regrets, as the stocks which I have switched too, have also performed well.

(Amit) #217

Only monopoly in India in copper concentrate, full integrated copper company. There are copper refineries in India run by private corporates but they either procure copper concentrate from overseas or hind copper. The PBT suggest that copper prices are on absolute tear. I think next quarter will also be good but may not be as good as this result.

June 2017 EPS of #Hindcopper was 0.111 and price was in 60-65 range. EPS has increased 1.8 times in September qoq. Minimum target I see is 110. At 98, We should see a UC on Monday. 110 is conservative target. The run has just begun. Please conduct your due diligence before investing. I reserve the right to be wrong. Shri Santosh Sharma reviewing the performance of marketing team. In my view, the new CMD is focussed and good bring value to shareholders.

Private corporates in India look for higher import duties on copper. Imho this could be another trigger.

One the negative side,

On the base metals side, LME copper fell to its lowest level since October 11 on Thursday, coming in at $6,761.50 per tonne. Friday morning it was holding above that level on the back of a weaker dollar, sitting at $6,840. prices will continue to trade sideways over the coming weeks due to a stronger U.S. dollar outlook and weakening Chinese import of refined copper.

As UD dollar depreciates, it will be positive for metals.

(aarshkshah1992) #218

Great write-up. Why do you think next quarter result won’t be as good as this quarter ? Is it because of decreasing copper prices?

(Sanjeevani1) #219

Sir although the result of MMTC is tepid can we expect the same cyclical opportunity in MMTC

(suhagpatel) #220

Thanks for the details. Yes i agree that copper prices have retracted a little from top but they are still trading near the top seen in September. October saw it peaking up before cooling down to the current level.


(Arpit Jain) #221

Hi Jiten,
As a novice I wanted to understand when you look at changes in OPMs over the course of 3-4 years, how does one interpret increase/decrease in Top line vs increase/decrease in Expenses?
Like for the case of Rain industries, when their margins fell from 23 to 7%, their sales numbers kept growing as I see in the statements, but obviously the expenses grew at faster rate. Now with Hindustan copper, when I look the PNL statements from March’12 onwards, I see falling margins but decreasing/flat sales (different from the Rain industries case).

Similarly I looked at MOIL. From 2012 onwards, sales grew initially but then went down, while margins have also been decreasing.

Just wondering how to interpret this. Thanks

Discl: not invested in any of the above companies.

(Amit) #222

Interesting read on where China is heading in years to come.

(malayruparel) #223