Commodity and Cyclical Plays

(Ab09) #753

Sir is there any source for finding BOPET/BOPP prices ?

(Amit) #754

Lithium ion Batteries Outlook 2020
By the year 2020
BYD Battery Capacity - 60 GWH
LG Chem - 90 GWH
Tesla/Panasonic - 50GWh

Wood Mackenzie Forecast
2020 Capacity - 346 GWH

Year 2018
Current Capacity - 198 GWH

Most of the capacity will come from China. Lot of EV build up happening in China, Europe and US. No major player in key battery metals in India. Nickle, Cobalt, Lithium. Copper is the EV play in India. Selected Lithium, Cobalt, Vanadium, Nickle junior aussie miners have given over 1000% returns in
2017. Which private mining player do you all see would be key to India ev supply chain? I feel Mruti is the best ev bet for ev journey on 2022 and beyond. Ashok leyland wd be another good bet in commercial space. Ebuses and eRickshaw will be next BEV in India.

(Rohit91) #755

Good order win for L&T

Good holding for a long term:
As I had mentioned earlier once private capex starts picking up (in 12 to 18 months), L&T would be in limelight.

(Amit) #756

This ev jagguarnut wont stop.

The rapid growth in unit sales, subsidy changes are bullish for ev raw material demand as the subsidies promote NEVs with longer drive ranges that will require larger battery packs, as well as higher energy density batteries.

(Jay vaghasia) #757

Norsk hydro to shut down its plant in brazil. plant has capacity of 6.4mtpa (10% of global non-china alumina capacity). @jitenp sir, is this trigger strong enough for another alumina rally till $600/tonne?

(Raj A A) #759

JSPL posts Highest Ever Domestic Quarterly Steel Production and Sales in Q2 FY 2019


Be careful guys! China is slowing down materially and things might go out of hand if there is no settlement of the trade war with US. It is perfectly possible that they could start the supply tap again to temporarily protect domestic suppliers. It is perfectly possible that despite showing good results, commodity companies might not show improved stock performance. The way interest rates are going up in US it is matter of time that US demand also starts to slow down.

adding a data point … earlier JLR was massacred and now ford. Auto sales are generally great indicator of consumer sentiment.

(Jiten Parmar) #762

I believe textile sector might be turning around.

(Akshay Kumar) #763

Hi Jiten, would be of great help if you share the rationality behind your belief.

(nil_71) #764

Yes, last quarter concall of Welspun was a good one. Only thing rupee depreciation will nullify the cotton price increase. Because of China, significant cotton will be exported there

(Manohar T. Patil) #765

(SOHAN) #767

Hello jiten sir please shre your views on amarjothi spinning sarla permomance zenith fibres

(shri) #768

I think textile as a basket will not be but some sectors in textile looking good
1)Home textiles - Mostly exporters to usa, European markets benificial due rupees weakness & Comparatively stable yarn prices

2)Naylon synthetic yarn manufacture - Government has imposed custom duty on imported yarn for next 5 years

(Jiten Parmar) #769

Yes. Looking at exporters should be first point to start. Would request more people from the industry to participate and give their views. Views from unorganized sector of Surat and Mumbai is not very good. Of course, we need organized segment views, as that is where we will invest.

(Jiten Parmar) #770

Sorry. I cannot comment on individual stocks.

(Savishesh) #771

INR depreciation from 64 to 74 is a big positive for the sector. Look for companies which can export as well as sell locally as situation changes. Companies that have recently expanded capacity and its underutilized or utilized at less than industry margins…these are the first ones to benefit as demand comes back.

home textile companies generally hedge and all of them are having forex losses (Trident, welspun, Indocount). It will take them some time to take benefit of INR depreciation.
Yarn manufacturers may benefit from INR depreciation which will be partially mitigated by increase in cotton prices. But its just just a time lag before high cotton prices get transferred in form of higher yarn prices.

Unorganised sector hit hard and due to working capital constraints some of the capacity is offline at least temporarily.

Concalls suggest worst is behind and things are changing for good.

(adityaagarwal) #772

Textile sector might present a very good opportunity. In fact I was just planning on asking your opinion on the same. The sector will benefit from :
1.Operating leverage coming into play (how will the demand for the textile sector increase? Can someone pls mention some triggers)
2. Rupee depreciation.
3. Decreasing price of cotton. (however I am unsure as to whether cotton will fall in the near term or remain stable for next few qtrs)

@jitenp in your interview you had suggested to invest in cyclicals at the inflection point. My question whether the inflection point for the textile sector has come or it is still a few qtrs away?


(Jiten Parmar) #773

I start taking small bets when things are at extreme pessimism. And then track it closely. You track harder, when there is skin in the game :slight_smile: And at inflection point, make the big bets. Just the way, I do it. People might have different approaches, which might be better. The above works for me most of the time.

(adityaagarwal) #774

Very valid point Sir. Even I have taken a tracking position in basket of textile stocks. However I am still weak in identifying inflection points so I am afraid that I might not be able to scale up as I don’t know when to scale up.
I know you can’t comment on individual stocks but Trident’s result has been very good. Is it the beginning of the upcycle or it is just a one off case? And how do we know the reason behind such good result?

(Savishesh) #775

Well you cannot invest at the bottom and exit at the highest peak ! But if you get the cycle fairly right : your risks are much less and gains can be 2x - 8x in cyclicals. Some points I personally follow:

  1. Go through all concalls of companies in the sector - first, most promoters know their business much better than the analysts but are not good at communicating or analysts don’t ask the right questions hence the need to go through different conference calls.
  2. Look out for signs of extreme pessimism on the ground…like in case of Real Estate 2 yrs back, people stopped applying for affordable housing too - no. of applications where less than no. of flats when the applicable rates were much less than the market ! So when veteran employees say this is the worst downturn they have seen in their life / capacities being closed / mass job losses or people shifting to different occupation…these are good signs that turnaround is near
  3. Risk perception is much higher than real risk - most of these sectors are capital intensive, non transparent (corporate governance issues) and have bad reputation so its easy to be totally neglected during downturn…this leads to situations where risk perception is much higher than actual risk.
  4. Textiles is little complex - you cannot compare a home textiles company with a yarn company or even a high compact yarn company with a normal yarn company or company that is across value chain but in most commodities like cement, real estate, etc. its fairly easy to compare them like EV/ton, etc. So better to understand past cycles and how companies have evolved to what they are today
  5. One should follow Risk management - this is something I am still struggling with so cannot give any advice on this.
  6. Public perception is like Lady luck it changes - for example, NBFC which was called a steady compounder for another 10-20 yrs suddenly appears most risky, so perception changes with price…try to ignore it. Even valuation metrics changes - in downturn cash flows become important and in up cycle capacities become important !

so small piece of knowledge from my little experience!!