Thanks @manoopatil for sharing the presentation
It seems we’re on the spot with share price also cooled off. Copper consumption bound to go up in coming years. There is a huge demand and limited supply. Capitalism work this way like or not.
Some indian Telcos have announced their intention to develop e buses,
Disc. invested
http://www.bseindia.com/xml-data/corpfiling/AttachLive/e87684cd-edb3-4af3-8a11-6af18a11b561.pdf
After seeing various managements trying to talk their company up and make flashy presentations, its in fact an amusing comic relief that they have dispatched an ugly photocopy to the exchanges. What’s curious though is that they seem to have made proper slides in PP with decent graphics and have printed it and then made a photocopy for dispatching to the exchange. That’s just hilarious!
Real hilarious part is that they have been doing it for quite sometime. Unfortunately some of the vital info on charts/ graphs etc becomes incomprehensible after all this creativity.
Here is the link for original PP, it is same old presenatation only mile stones are postponed. Poor execution like government projects. I shared it in same thread sometime back.
some random observations on cyclicals/commodities.
What I have always observed is that whenever a commodity price rises sharply in a short time, the cycle tends to be much shorter. eg BOPET price in 9-10. Prices rose very quickly and cycle lasted for 6-9 months.
When there is a gradual rise, with intermittent dips, the cycle tends to last a bit longer. eg current steel upcycle.
We also have to look at RM. If that has not risen much, or is available in abundant supply. Another big alert.
Do you think the same night hold true for graphite electrodes as well ?
History tells me this. I would be extra alert, if I had any of the GE plays.
Shares of sugar manufacturers were trading higher in an otherwise weak market after government imposed a limit on the amount of sugar that mills can sell in the market during February and March. On the BSE Dwarikesh Sugar Industries, Dalmia Bharat Sugar, Avadh Sugar Mills, Uttam Sugar Mills, Dhampur Sugar, Mawana Sugars, Shree Renuka Sugar are trading higher.
Elon Musk letter to shareholders. “2018 will be a transformative year for Tesla. This is the year when we believe we can achieve true cost parity” with internal combustion engine vehicle production, “something that many believe is not yet possible.”
Hi Guys, any views on cement sector. With govt focus on Infra we can get few good companies at decent price. Many cement companies reported good results for last few quarters.
If someone has done some research or came across any research report pls share.
I am yet to start my research in this sector.
Can somebody who is expert throw some light on the possible valuation of minority shares in bhushan steel after tatasteel takeover of same (NCLT resolution) ?
Peaking aluminium prices—is it an opportunity to enter or the time to get out of aluminium stocks?
LME aluminium chart shows peaking of aluminium prices. Particularly is it an opportunity to enter NALCO, which is available ex-dividend at about 68. Face value is 5. Book value is above 50. Debt free company. Big Capex plans over a decade. Good dividend yields. Probably capex will be largely through internal accruals, in view of good earnings.
Graphite India/HEG
Dear @VP_Amit, Following are a few good reference materials:
These reports seem to provide a hint that, the shortage of the graphite electrodes and raw material needle coke is likely to stay there for some more time (possibly, a few more years). Key factors that impact the earnings of Graphite India and HEG have been prices of graphite electrodes and needle coke. During the calendar year 2017, the spot prices for the Graphite Electrodes in China increased from around USD 3,000 to around even USD 30,000 per MT. Similarly, the needle coke prices also have varied between USD 300 to USD 3,000.
Graphite India and HEG are still running on a few older contracts with low Graphite prices (say USD 3,000). They are expected to fully come out of these old contracts by end of Mar-18. As per the Q3’18 results of Graphite India, their average price realization for Graphite during Q3 seems to be around USD 6,600 per MT and needle coke around USD 1,270 per MT.
As the spot prices have recently increased to even USD 30,000 per MT for graphite and USD 3,000 for needle coke, I am not sure about the future contract prices. Hence, I have done some estimates on the FY19 EPS for Graphite India, keeping those two as the variables. I have assumed a fixed cost (employee cost, power cost etc.) of INR 1,200 crores per year and a capacity utilization of 90%. Please note that, the current TTM EPS of Graphite India is Rs. 26.71:
Graphite India
Disc: Invested in Graphite India
Thanks for the great explanation Madhavik. I am also considering taking a small position in Graphite/HEG, but after the phenomenal run last year for HEG and Graphite India, was wondering how much is already priced in. From your analysis and the reports you shared, seems like there is good headroom still.
Couple of questions:
a) why you invested in Graphite but not HEG? Goldman Sachs also seems to have a position in Graphite India and not HEG. Any specific reasons for the choosing Graphite India over HEG?
b) Going forward, what is the biggest risk you see to the Carbon story and under any circumstance do you foresee Graphite India/HEG falling badly? (say like falling 50%-70% from current levels)?
Hi @VP_amit, I have been an investor in both Graphite and HEG in the past and even rotated my allocations between these two at times. I believe that, if Graphite story continues to be great, both these companies should do extremely well. However, currently I am invested only in Graphite India for the following reasons:
Historically, Graphite India used to have healthier balance sheets and also come up with better and more consistent results. That way, I have always been more comfortable in investing in Graphite India.
HEG had given much higher returns over the past one year, as compared to graphite India. However, the above happened for some valid reasons. It had a lot of valuation gap with Graphite India which it had to catch up with. Sudden unexpected huge surge in the Graphite electrode prices helped it to almost completely pay off its high debt over the past year, thereby saving a lot on interest costs over the past couple of quarters, which increased its profitability significantly. HEG also had some advantages over Graphite India in terms of reduced operation costs (power, employees etc.), hence their operational margins have been higher over the past year.
However, I believe that, HEG has already caught up with Graphite India on the valuation front and possibly has become even more expensive now, if you take the balance sheet strength and past performance aspects of Graphite India also into consideration. Also, I think that, going forward, the operating margin difference between these two companies will get narrowed down a lot.
If you refer to the earnings estimate table which I had attached with my earlier post, I have assumed a fixed cost of USD 1,200 for Graphite india for FY19. For HEG also, the fixed cost may be more or less comparable (in proportion with its capacity), as it will no longer be able to save anything on interest costs from now onwards (already paid off the debt) and savings on other costs like power and employee would be very small compared to the overall revenue from now onwards. For instance, even if we assume the average Graphite electrode price to be as less as USD 8,000 per MT in FY19, the revenue would be INR 4,579. On that sort of revenue figure, the impact of an operational advantage of INR 50-100 crores due to power/employee costs will not be that significant.
The profitability of these two companies would really depend on what prices they could get into contracts with the customers for the electrodes and how much they could sell on the spot market and for what price. Also, the needle coke price would be the other variable, as I mentioned in my earlier post.
Hi @madhavikkutti , do you think the pollution control which is currently prevailing in China happen in India as well, if this happens than Graphite India and HEG would have an impact on that front, your thoughts or any information on those lines would be helpful.
One more question - You had mentioned in the earlier post about ‘‘balance sheet strength’’, with limited knowledge or rather no knowledge can you enlighten on what parameters would you normally keep an eye on while looking at the BS. Your inputs would help me.
Many thanks,
Pandi
Hi @pandi.rao, I am not a balance sheet expert either. I usually have quick look at the trends like steady improvement in company’s total reserves year-on-year, debt reductions year-on-year etc.
Chinese crackdown on the pollution was on the heavily polluting vehicles, factories and construction sites. As a result, several non-compliant and illegal steel mills, coal mines, aluminum smelters, and other manufacturing units were shut down.
There are two methods for steel making: 1)The Blast Furnace 2)The Electric Arc Furnace (EAF) method. Revenues for the Graphite electrodes producing companies depend only on the EAF method of steel making, as Graphite electrodes are used as one of the raw materials for the Electric Arc Furnaces.
The Blast Furnace method is highly polluting, as you burn coke, which delivers smoke and gases and all sorts of things that ruin the atmosphere. The EAF method is less polluting, as electricity is used to generate heat, instead of burning coke.
Chinese crackdown mainly happened on the steel making companies that followed the Blast Furnace method. China infact, furher increased its EAF capacity, ever since the pollution crackdown started. EAF usage world over is expected to increase replacing the Blast furnaces. In India, primarily EAF method is being followed for steel making.
Having said the above, there is always a risk of any highly polluting manufacturing facility without adequate air pollution control systems to be asked to be closed down by the Pollution Control Board at any time in India also.
