Commodity and Cyclical Plays


(Manohar T. Patil) #731


(asarun) #732

Hi phreakv6, my two cents follows:

I have been following the paper industry recently, and my inferences were similar to yours. However, what I am less certain about is if this is a shift that will last long. Unlike the graphite story, the paper imports ban doesn’t seem to be a structural ‘pollution’ related action by China. My reading is - there is a bit of that, but not as much so. It is also a bit of a trade move, and could change. Secondly reduction in price of waste isn’t good for the leading paper companies (West Coast, JK etc.) I think. This I am less certain about as I don’t understand it fully, but I think they are benefiting from the export lift and they actually will lose share in domestic market due to lower price for waste imports. So any change in China’s ban in importing waste will quite quickly change things.

Disclosure: I had a holding in one of the companies, but have exited now. I might regret it as I usually do when it comes to my timing in the markets. :slight_smile:


(SOHAN) #733

Cubex tubings and balasore alloys looking good at current valuations please suggest sectoral trendsforthis companies


(Rohit91) #734

In cylical plays, I would definitely recommend looking at ‘Private Capex Recovery’
Looking at the likes of L&T, Thermax, Cummins, etc
As we all know, Government capex has been growing at a great pace last 3-4 years.

In private capex, unfortunately after 2012, there has been no visible growth.
FY04-FY12, we witnessed a great run in private capex focused companies.
Private capex formed a huge chunk of L&T order book then.

Now if we see, it has almost halved from its peak levels. The reason for this is utilization levels weren’t picking up.
Now they are inching up and has reached close to 75%!. Around these levels, companies start announcing capex and thats when these pvt sector capex focused companies stand to benefit.

So I believe its a cyclical play.
My best bet would be L&T is this. Actually too big to fail. It is a portfolio stock. One must hold it definitely. Public capex is doing well, if private picks up, it would be the best beneficiary.

The article below captures its key points and gives me more confidence to buy L&T at these levels


(nikhilbora) #736

Copra prices down over 30% from Jan highs of Rs 145 per kg.

Which biscuit companies will be gainer??


(Suneel) #737

marico will get best benefit?


(saumya) #738

Yes , marico and they had also taken price hike as per last con call to pass on copra price increases so they will benefit in margins from this qtr onwards.
Bajaj corp some product were benefitting as they had non copra based oil and some higher segment Bajaj corp oil had become more cheaper than copra based so they might suffer from this.


(Amit) #739

https://www.bloomberg.com/news/articles/2018-09-24/china-is-adding-more-coal-capacity?srnd=premium-asia


(Amit) #740

https://www.bloomberg.com/amp/news/articles/2018-09-21/goldman-backs-commodities-as-investors-shrug-off-trade-war-shots?__twitter_impression=true


(Raj A A) #741

Is it time to create /add position in Hind copper, the only pure copper play in India?


(Amit) #742

I think so…At the bottom. Copper is trending up and inventories are down in LME. HindCopper only serious Copper ore player (concentrate) in India.

Negatives: There have been allegations of financial irregularities in the past, also mine expansion plans are bullish but where will the money come for expansion. QIP will keep the price down…

This price could even go down further if price manipulation happens in the counter. For now, I can see it has bottomed out.

Why to get into HindCopper when quality names are available in the market now ?:thinking:


(Amit) #743

From mid-June to mid-Sept metal prices and equities were all off significantly: #copper -18%, #zinc -29%, #nickel -20%, key zinc equities down 30 – 45%, key copper equities down 25 – 35%. Last week base metal prices were up ~8% & equities were up 8–15%


([email protected]) #744

@aammiitt2 - In the absence of Hindcopper are there any other quality players in this space, the closest would be Hindalco, Vedanta but I dont think they are full fledged copper players, your thoughts?


(Amit) #745

Vedanta in my view is more of copper refiner who can either source concentrate form HindCopper or Import form overseas. but for now there are questions around the smelter plant in TN. I think there will be resolution in favour of Vedanta eventually, may not happen in near term as the NGT panel is of view to keep it remain close.

Longer term, I would feel Vedanta is a strong player in commodity mix with Petroleum, Gas, Aluminium, Copper, lead, Zinc in mix. I am bullish on Vedanta for long term. I do not cover Hindalco as much as Vedanta. Copper demand will ramp-up as India cannot sustain this huge import deficit due to crude. Overall, demand will be strong post 2020 in copper. Adding to better price realisation is the supply concerns as grades are falling globally and new mines are hard to take to operational phase. Minimum 5 years it takes a mine from exploration to Production. Only a big player like Vedanta, Hindalco and HindCopper with big pockets can develop copper mines. I believe Govt would wish to keep HindCopper in its kitty as it would be like “ONGC of the future”. So stake sale would be measured based on better copper demand and pricing.

Disc: Holding HindCopper, Vedanta and other base metals , alloy players in India. Holding key EV metal companies in Lithium, Copper, Graphite, Pure Alumina and Cobalt companies in overseas market. PF is biased towards commodities. Following EV megatrend unfolding in China, Europe and US. View may be biased. Do your own research.


(Amit) #746

Vedanta Chart - I follow Mark Minervini Trend Template to identify which stage a stock is at present. this is for medium to long term investing. Also use other technical indicators.

I believe Vedanta is in Stage 3 - Distribution phase. It has completed Stage 1 i.e. Neglect Phase, Stage 2 i.e Accumulation Phase. Stage 4 is Capitulation Phase. I cannot fully know if the stock has entered Stage 4 yet but I could be wrong as some indications are suggesting that we are in Stage 4 already.

Stage 2 started around 16/05/2016 and it ended around 11 March 2017 where price moved from 95 to 345 i.e Super performance as per Mark Minervini Accumulation Phase expectation.

Stage 3 Started around March 2017 and it is ongoing most likely. For now 52 wk is a good floor for Vedanta. If it keeps on re-testing the 52 wk and cutting it then it suggests this could likely take the price to 155 levels. For now, I can say that 52 wk low is a good buy for this counter.


([email protected]) #747

Thanks @aammiitt2 for the insights, I am quite curious to know (due to lack of knowledge) how can one invest in companies into Lithium, Cobalt plays etc from India, any pointers would be helpful, as I believe there is a long road ahead for EV and holding onto quality names would bring benefits in the future, appreciate your response.


(Amit) #748

I bought those companies in Australian exchange but not from India. You could find fellow boarders and check if such option is available from the International brokerage in India. You will have to pay a double tax on gains in India and Australia as they have double taxation regime. Better focus on what is available in India. India is sea of opportunities.


([email protected]) #749

Thanks @aammiitt2 for your quick response, makes sense. The play on EV in the Indian context would then be restricted to Hindcopper, Vedanta and to a extent HIndalco.


(Tolaha) #751

India and Australia have a Double Taxation Avoidance Agreement (DTAA) since 2011. So you need to pay taxes only in the country where you are the tax resident.

https://www.incometaxindia.gov.in/pages/international-taxation/dtaa.aspx

Heard of “Interactive Brokers” that permit trading overseas (www.interactivebrokers.co.in). Never used it myself.


(Amit) #752

Read Article 24.

METHODS OF ELIMINATION OF DOUBLE TAXATION

By default there is double taxation you need to pay but you may get credit under some conditions.

I am not a tax guru and so would not be a position to comment on tax implications. May be best to contact a good tax advisor in India or contact brokerage.