Commodity and Cyclical Plays


([email protected]) #490

Hi @madhavikkutti - Have a couple of questions

  1. Can you please let me know for Graphite how did you arrive at USD 6600 per MT as the realization. I did some calculation and doesnt match with the figure.
  2. From the Q3FY18 presentation the current utilization of Graphite India is 95%, which leaves very little room for volume growth, the play in my opinion would be the new contracts that gets negotiated with the market price which might boost the top line and bottom line, what is your thought on this

(Mridul) #491

Your thoughts on hospitality sector? Occupancy rising (up over 65% for the first time since 2008). Will gradually move over 70% in next few years. ARRs are expected to rise then. Have you followed the past cycle?


(madhavikkutti) #492

Hi @pandi.rao, Please see if I have made any mistakes in the following rough calculation:

Total Sales for Q3: Rs. 9,33,06,00,000, which is approximately USD 14,57,90,625, assuming 1 USD = INR 64, as it was the case when I originally calculated it.

Assuming a capacity utilization of 90%, for the Q3, we can approximate it to 88200/4 = 22,050 MT

Now, if we divide 14,57,90,625 by 22,050 we get USD 6612 per MT.

In fact, volume growth during FY19 is hardly of any concern. As per reports, even achieving utilization of the 90% of the existing capacity may become a challenge due to the needle coke shortage going forward.

I feel that, going forward, about 60% of the capacity will go into short-term quarterly contracts (for say, USD 10,000 -15,000) and the remaining 40% may be sold on the spot market at higher prices (which can be even for more than USD 20,000 per MT).

Please note that, all these are based on my best judgement, after going through various news articles and I may prove to be wrong.


(Gaurav Agarwal) #493

Why do you think there will be shortage of Needle coke going forward?


(madhavikkutti) #494

As per what I read, needle coke industry is oligopolistic with top 5 players accounting for more than 80% of world’s capacity. Going forward, any increase in the production of needle coke is expected to be offset by its increased use in lithium-ion batteries (due to the increased usage of electric vehicles and phones), creating more shortage for the GE industry


([email protected]) #495

Hi @madhavikkutti thanks for getting back.
Have a query on the calculation.

The Q3 FY18 is the standalone figure, since being a standalone number I assume the sales from the German plant which contributes around 18,000MT is not reported on a quarterly basis (correct me if I am wrong).

So the 90% should be on the 98000-18000 = 80000MT. which is 72000MT

Now assuming the Q3 result reported is for their entire capacity (98000MT) and 90% is 88200, I did not understand the 88200/4 = 22050MT figure.

Can you please highlight that.
Also as mentioned above the current utilization is 95% as reported in the Q3 FY18 investor presentation.
So based on that we may have to re-calculate the realization accordingly.


(starman) #496

Are there any needle coke companies listed in India? There are some Calcinated Petroleum Coke (CPC) companies like Rain Industries, Goa carbon etc… but are there any needle coke manufacturers?


(madhavikkutti) #497

Thanks for these points @pandi.rao. I have divided the overall capacity by 4, as we have to consider the quarterly capacity of Q3 for our calculations. Following link clearly mention that the total capacity of 98000 is yearly and not quarterly: http://www.graphiteindia.com. Anyone, please correct if my above interpretation is still wrong.

Regarding the standalone results, I think you are right. However, when will the Dec quarter numbers for the subsidiary be published and where to get the same?

I feel, if we consider the subsidiary numbers into account, price realization for GE will be even further high as the numerator in our earlier calculation will increase further keeping the denominator the same.


(madhavikkutti) #498

Hi @smant, As per my understanding, no India company produces needle coke. Cpc, which is a raw material for the Aluminium industry is different from needle coke


(Gaurav Agarwal) #499

Reported number are standalone therefore they are only for Indian capacity which 80,000 ton per annum, I do not think we should assume otherwise and calculate accordingly.


(madhavikkutti) #500

Here is the revised calculations, based on 95% capacity utilization (76,000 MT) for the standalone entity. Revised Q3’FY18 realization for GE is USD 7,673 and needle coke, USD 1,472.

Graphite India Estimates for the one year period of FY19 (Apr-18 to Mar-19):


Graphite Electrode : Graphite India/HEG
(Gaurav Agarwal) #501

Steel 360: Graphite Electrode crises set to worsen?


([email protected]) #502

The real question is how does one value such special situations. I am personally convinced that there is structural change we are observing in Graphite Electrode so comparing with past GE cycles may not provide much answers. Any views are welcome.

I have opened a new thread primarily on GE : Graphite India / HEG since the story deserves a separate thread altogether and would request contributions from all.


(maheshkumar) #505

Hi Jiten sir
R u positive on any commodity currently
Thanks
Mahesh


(phreak) #506

Something’s up in the commodity space (non-ferrous metals to be precise).

Hind Copper has broken out of trendline resistance with good price action. All charts are daily ones and EMA’s shown are 20/50/100/200.

Gravita (also Pondy Oxides & Nile in the lead space) has closed above crucial resistance and is out of downward trendline resistance earlier this week.

Graphite India broke out earlier this week as well

Nalco/Hindalco in the aluminium space yet to show similar strength though

Disc: Invested in all (except Hindalco)


(ishandutta2007) #507

@jitenp For sugar I was following Anil Kumar Goel. He kept adding sugar on every dips. What could have been his rationale that he missed the top of the cycle?


(Jiten Parmar) #508

Anilji is a celebrated investor. I cannot comment on his rationale. Maybe, I am missing something.


(Jiten Parmar) #509

Continue to be cautiously optimistic on metals, papers, chemical, cement, infra and capital goods. There could be different time horizons for each.


(kanvgarg123) #510

@jitenp Don’t you think that this recent push for infra by the government should help cement companies? Number of contracts awarded by NHAI has risen 2 folds and the work will also start in some time?
The current capacity utilisation at aggregate level I read was closer to 67% which can shot up with additional road projects. What is your view?
Disc. I am holding Birla Corporation and looking to add Orient Cement


(Jiten Parmar) #511

Cement is one sector, I have mentioned, earlier too, that I am positive from a medium term.