Commodity and Cyclical Plays


(Jiten Parmar) #581

I disagree a bit here. Cyclical doesn’t mean low quality. And lot more stocks are cyclical than people think.

Cyclical investing is nothing but value investing.


(vihang) #582

Hi Jiten,

Thanks for sharing your knowledge and experience. it is really helpful.
I just have a question regarding ur position in Ferroalloys
1.) You normally invest during peak pessimism…so would you say the Ferroalloy sector is undergoing that now ? Because from what i read and researched, peak pessimism was somewhere around June 2016 (OPM was negative for IMFA then). right after that price shot up 7x to 780 levels in tandem with ferrochrome prices (which went from $0.60/lb to $1.70/lb). Cycle peaked in April 2017 and since then FC prices have come down from $1.60/lb to $1/lb. A couple of links i have shared below indicates Chinese prices have dropped to $0.85-0.86 levels. Do you think there is still further price decreases on the cards and we should wait for max pessimism to enter or now is a good time ?

https://www.metalbulletin.com/Article/3805276/GLOBAL-CHROME-WRAP-Alloy-prices-drop-in-line-with-Chinese-tenders-ore-prices-follow.html

https://www.metalbulletin.com/Article/3805236/Afarak-issues-Q1-profit-warning-amid-lower-ferro-chrome-prices-higher-costs.html

Your inputs would be highly appreciated. Thanks.


#583

Congrats Jiten. Very articulate and crisp. Thanks for educating all of us on cyclicals.


(Manohar T. Patil) #584

Nalco aiming for higher revenue this year.

Additionally firm alumina prices going to help…

Disc - Invested in Nalco


(sarangg) #585

Really liked your segment on cyclical value investing.

Have you looked at Selan Oil Exploration? It looks like a good asymmetric bet to me. I think the leverage will really shine through as Brent Crude has risen more in percentage terms than the stock, while the stocks’s PAT will rise more. Additionally, management has been talking about increased production since quite sometime - might finally come through in this year, could be an additional bonus. As for future oil production, they have a decent amount of reserves which they plan on monetizing. Also, they have a cash balance of 110 cr compared to 400cr market cap. Company pays a decent amount as a dividend (trailing 2.5%) - probably higher payout on higher EPS.


(Akshay Kumar) #586


(Manohar T. Patil) #587

Slightly old(10th may) article about captive coal mine for Nalco. Talks about potential reduction in the energy cost probably starting from FY20. Also, plans for reducing raw material cost via initiative on caustic soda and bauxite. Plan appears promising to provide a jump up to bottom line from FY20 and FY21. However execution needs to be seen…

Some additional numbers on mutual fund holdings in past 6 quarters(source-moneycontrol)

Quarter Ending Mutual Fund holding
Dec’16 19.12 mn
Mar’17 20.36 mn
Jun’17 35.33 mn
Sep’17 56.84 mn
Dec’17 119.30 mn
Mar’18 126.760 mn

Disc - Invested


(vihang) #588

Guys, does anyone know where i can track historical ferroalloy prices ? Trying to work on prices of different grades of Ferroalloy and match them with IMFA’s realized price and grade…


(Rajarshi) #589

(Bhavesh) #590

Steelmint.com would give you chart of the prices but not absolute prices. Bloomberg will give you international benchmark prices


(Gaurav Agarwal) #591

National aluminum q3fy18 results show exception item of 801 crore, this is rather very big amount. I could not find any explanation as to the source of this exceptional item. Anyone in know of this can help.

Thanks


(roomy) #592

check pt2 below mentioned in the results pdf
(2) Dispute with the Department of Water Resources, Govt. of Odisha over interest claim on water charges dues have been settled during the year. In terms of the settlement,
the Company has paid Rs.58.18 crore discharging the liability accrued till 31.10.2017. Consequent to the settlement excess liability of Rs. 785.71 crore provided for in the
books till that date has been written back and considered as an exceptional item.


(Shan) #593

Yes, it’s pertaining to the settlement of a case. @roomyd


(Raghu) #594

Can some experts throw light on the recent developments for Vedanta (Tuticorin plant shutdown) and impact on Copper supply/shortage in India and potential impact to Hind Copper. thank you.
Disc : invested in Hind Copper


(sivaprakasamp) #595

I recently went through Vedanta numbers in detail for the impact of Sterlite shut down. Copper contributes 25% to top line but at the bottom line the contribution trickles to just 1000Cr comparing to the net bottom line of 13kCr. Hence impact to EPS is less. Even if we discount this, PE works out less than 10x hence attractive. And the company has faced same issue in the past too and has restarted capacity after resolving the pollution issues. Which is additional upside to EPS.

Discl invested in family account, from Tamil Nadu


(vinayohara) #596

To my knowledge sterlite copper used to supply 36% of india Needs and rest was exported.
India Needs to import now. At global level India makes 5% of the copper. After this shutdown it decreases to 4%.
When i searched for global demand and supply of copper, i could see article that in 2020 world may see demand going above supply due to the higher copper usage in EV’s and other uses.
Not sure how this demand supply scenario plays out now.
@jitenp , if can you give your view on copper supply demand scenario in world and India.


(Manohar T. Patil) #597

News on Hindustan copper -

Disc - Invested in Hind. Copper at higher level


(manivannan.g) #598

Hi Jiten, Most of the textile stocks are beaten down severely, good names like ICIL are down by 70% from recent highs. Is it good time to consider and start looking at textile sector ? Also in the last budget we saw good subsidies and allocation for the sector. Various headwinds (US pricing pressure, GST dampness) seems to be easing. Pls share your view.


(Manohar T. Patil) #599

Summary of current situation with regards to copper prices from Wall Street Journal


(Raghu) #600