Daily Brief Energy/Materials: Sanil Electric, Copper, Diamondback Energy, Medco Energi, Ovintiv , Pembina Pipeline , Teck Resources , Cheniere Energy, Williams Cos and more

• Our base case valuation of Sanil Electric is market cap of 1.8 trillion won or target price of 58,593 won (95% higher than the high end of the IPO price).
• Sanil Electric has higher sales growth, operating margins, and ROE than the comps. 
• We estimate Sanil Electric to generate sales of 283.4 billion won (up 32.1% YoY) and operating profit of 79 billion won (up 69.6% YoY) in 2024. 

• A slowdown in China’s property and manufacturing sectors along with high refining ouput has led to a significant increase in copper inventories, contributing to short-term demand concerns.
• Major copper miners face production challenges, risking future supply deficits amid growing demand from the photovoltaic and EV industries.
• Asset managers have reduced their long positions in copper due to near-term market conditions, reflecting a cautious outlook on immediate price movements.

• Semiconductors (SMH,SOXX,NVDA,AVGO) have been leadership since late-2022, but they’re extended and starting to see profit taking as market participants rotate into other laggard areas of the market (especially Energy).
• The question is whether this new trend lasts a few days, or if this is the start of longer-term trend.
• If there will be any lasting rotation away from Technology/semiconductors, SPX and QQQ would need to break strong short-term supports at 5370-5380 and $468-469, respectively. Until then, Tech/semis remain leadership

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Medco Energi

• Ovintiv’s first quarter of 2024 showcases a positive momentum, achieving net earnings of $338 million and generating substantial free cash flow of $444 million.
• The company’s performance exceeded its initial targets, with cash flow per share standing at $3.80, surpassing consensus estimates.
• Encouraged by strong productivity and an advantageous oil price environment, Ovintiv raised its production guidance for the full year to about 206,000 barrels per day for oil and condensate, maintaining its capital expenditure forecast at $2.3 billion.

• Pembina Pipeline Corporation commenced 2024 with robust financial and operational performances, showcasing a positive shift as evidenced in the latest quarterly outcomes.
• The company posted a record adjusted EBITDA of CAD 1.044 billion for the first quarter, marking a 10% year-over-year increase.
• This financial uplift was primarily fueled by heightened activities across Pembina’s pipelines and facilities, alongside improved market conditions contributing to favorable product spreads.

• Teck Resources Limited presented their first-quarter 2024 earnings with mixed results and robust strategic endeavors, reflecting a complex but promising operational environment.
• The company successfully completed all major construction at QB including the ship loader and molybdenum plant, marking a significant step in enhancing their production capacity.
• The completion of these facilities aligns with Teck’s strategic shift towards expanding its copper production capabilities, a pivotal move given the looming global demand associated with the transition to a low-carbon economy.

• Cheniere Energy, Inc. started the fiscal year 2024 strongly, boasting robust performance across several operational and financial metrics.
• The quarter witnessed solid financial output, consistent operational excellence, and significant progress in strategic growth projects.
• However, Cheniere also faced challenges due to external factors such as weather impacts, which exerted slight pressures on operational efficiency.

• The Williams Companies discussed its Q1 2024 results, underscoring a robust quarter with notable operational, financial, and strategic achievements.
• The company reported a noteworthy 8% year-over-year increase in EBITDA to $1.934 billion, despite challenges such as a 25% decline in natural gas prices and milder winter weather.
• This performance illustrates the strength and resilience of The Williams Companies’ core business, independent of the fluctuating commodity price environment.

• Investing in copper and copper miners represents a significant opportunity for investors over the next ten to fifteen years.
• But the market is more complicated than most believe, and success will require not only an understanding of the entire supply chain but also a willingness to be active.
• In this post, we look at the role smelters play in the copper value chain.