In today’s briefing:
- Sanil Electric IPO Industry Analysis
- Southern Copper: In a League of Its Own
- Rajshree Polypack (RPPL): All Set for a Strong FY25
- Jyoti Resins and Adhesives- Forensic Analysis
- Spin-Off Analysis – Jericho Energy Ventures Inc. (TSXV: JEV; OTC Pink: JROOF)
- Esseco/Ercros: Bidding War
- Boise Cascade Company: Will The Heightened Focus on Repair and Remodel (R&R) Market Pay Off? – Major Drivers
Sanil Electric IPO Industry Analysis
- With the development of new and renewable energy, transmission and distribution network bottlenecks are worsening in many countries, and there is a strong demand for new transmission and distribution networks.
- China is virtually excluded from competition for the US market. This situation has resulted in increased new orders for companies such as Sanil Electric.
- Our base case valuation of Sanil Electric is target price of 58,593 won, which is 95% higher than the high end of the IPO price range (30,000 won).
Southern Copper: In a League of Its Own
- Southern Copper (SCCO US) in the equity space is the best way to play bullish copper long-term with its long-term (10-year) ROCE of >22%
- With low-cost production assets in Peru and Mexico, the company has managed EBITDA margins of> 39% across the cycle (last 15 years) and averaging 50%.
- A 100% payout results in a dividend yield of 3.5%. We believe there is a price for everything, and in the event of a 20% correction, it would be attractive.
Rajshree Polypack (RPPL): All Set for a Strong FY25
- RPPL executed well in FY24 with sales volume growth at 18% YoY. However, sudden and significant contraction in raw material prices dampened FY24 sales value growth to just 9% YoY.
- Exports sustained its quarterly run-rate of INR 10cr+ in Q4FY24, resulting in FY24 aggregate exports sales at INR 42cr. Exports contributed 15% of revenues in FY24 vs 5% in FY23.
- RPPL is also making good progress with its new initiatives. Its Olive Ecopak venture began commercial production in Mar 2024. Its injection molding segment is also scaling up well.
Jyoti Resins and Adhesives- Forensic Analysis
- Jyoti Resins and Adhesives (JRA IN) engages in manufacturing of synthetic wood adhesives under ‘Euro’ brand and claims to be the second largest player in its respective market.
- While on ground, Euro has gained good traction and has received positive feedbacks, there are however several takeaways noticed on the forensic end.
- These include Lack of clarity on revenue figures, low FA base, lack of disclosures of important accounting policies such as leases and customer rewards, etc.
Spin-Off Analysis – Jericho Energy Ventures Inc. (TSXV: JEV; OTC Pink: JROOF)
- JEV announced plans to separate its Hydrogen Platform into a separate public company (SpinCo), potentially via a spin-off . The parent will retain the oil & gas business.
- The spin-off makes sense given the lack of synergy between the businesses. The transaction provides each business with access to equity and debt capital markets to fund their growth strategies.
- We anticipate the spin-off to be value accretive for shareholders. We expect re-rating as the green energy business will receive higher multiple compared to the hydrocarbon assets.
Esseco/Ercros: Bidding War
- Esseco, an Italian manufacturer of chlorine and sulfur-based chemicals, has made a competing all-cash offer at €3.84/share, cum dividend, valuing 100% of Ercros (ECR SM) at €351 million.
- Putting 25e EBITDA of €70 million (source: IBES consensus), on the median of comparables, the stand-alone fair-value per share of Ercros is €4.4. Neither bid accounts for synergies.
- The strategic fit of Ercros for both bidders and its intrinsic value suggest a likely bidding war, given the scarcity of listed companies similar to Ercros. Reiterate long.
Boise Cascade Company: Will The Heightened Focus on Repair and Remodel (R&R) Market Pay Off? – Major Drivers
- Boise Cascade’s first quarter of 2024 shows a balance of strengths and areas of concern reflecting the complex dynamics in the wood products and building materials markets.
- Starting with the positives, Boise Cascade reported a revenue increase of 7% reaching $1.6 billion, coupled with a rise in net income to $104.1 million, up from $96.7 million in the prior year.
- The firm’s earnings per share also increased, reaching $2.61 compared to $2.43 in the previous year, primarily driven by a notable upswing in single-family housing starts which grew by 27%.
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