Stock research on global mid-cap companies

Evaluate Research

Evaluate Research provides institutional quality stock research on small-cap and  mid-cap companies on a global basis, thus helping connect investors with the company.

At Evaluate Research, we provide free of cost to all investors a 20-25 page Initiation Report which evaluates in great detail all aspects of the company:  growth opportunities, catalysts, business description, competitive positioning, SWOT analysis, risks, etc.  In addition, we determine specific price targets for the company based on detailed 5-year complete forecasts of financial statements including IS, BS, CF, ratios, etc.  Finally, whereas many sell-side brokers offer sketchy and irregular ongoing maintenance research of companies, if not outright dropped or termination of coverage, at Evaluate Research we systematically monitor and regularly publish Update Notes covering quarterly earnings, major corporate events, etc.

All of the research reports are broadly and freely disseminated globally to leading Fund Managers and analysts who invest specifically in mid-size equities, and also on leading investment information platforms including: Bloomberg, Thomson Reuters, FactSet etc.

Stock research on global mid-cap companies, Evaluate Research

Equity Bottom-Up

<a target="_blank">IRC [1029_HK; HK$1,430 mn/US$186 mn market cap; HK$5.1 mn total average daily value traded] reported stellar revenue growth along with robust operating and financial performance for the FY2021, in-line with our expectations. The company’s revenues increased by 65% YoY for FY2021 to US$371.3 mn, in comparison to US$224.6 mn for FY2020 inclusive of the impact of hedging. The EBITDA excluding non-recurring items and foreign exchange rose by 114% to US$170.6 mn (2020: US$79.7 mn). The significant growth was mainly driven by higher achieved selling price of iron ore. The net profit increased by 33% to US$134 mn in FY2021 as compared to US$101 mn in FY2020.&nbsp; Even though the ore quality, mining contractors’ performance, and railway logistics issues were present during 2021 which led to bottlenecks, lower production and lower total volumes of iron ore shipped, the company was still able to sell 2,553,804 tons of iron ore concentrate which was in-line with that of the previous year (2020: 2,576,722 tons). As these are short-term issues, the company is confident that it’s performance will improve further as the issues subside eventually. </a>&nbsp;
Key highlights of 2021 were:
<ul type="disc">
<li>Revenue up 65% YoY to US$371.3 mn</li>
</ul>
<ul type="disc">
<li>Cash balance increased to US$52.1 mn (2020: US$20.4 mn)&nbsp;</li>
</ul>
<ul type="disc">
<li>EBITDA excluding non-recurring items and FX up 114% YoY to US$170.6 mn (2020: US$79.7 mn)</li>
</ul>
<ul type="disc">
<li>Underlying Profit Increased 5x to US$125.3 mn (2020: US$24.2 mn) driven by strong iron ore price. Net Profit was almost equal to 0.7x Market Capitalization.</li>
</ul>
<ul type="disc">
<li>Profit Attributable to shareholders Up 33% to US$134.1 mn (2020: US$100.6 mn)</li>
</ul>
<ul type="disc">
<li>Net Debt reduced to US$60.5 mn (2020: US$181.7 mn)</li>
</ul>
<ul type="disc">
<li>In 2021, the average selling price of iron ore concentrate achieved by IRC after hedging was US$159 per dry metric ton - an increase of 67.4%.</li>
</ul>
IRC has achieved excellent financial results in 2021, and the company is on track to maintain this strong momentum into 2022 and beyond. The financial performance of the company mainly depends on the iron ore price, production capacity, and the Russian Ruble exchange rate, which continues to be currently in its favor to help achieve further growth in revenue and profitability. In 2022, the company aims to achieve three main objectives - reduction in the gearing ratio, development of Sutara mine and, most importantly, rewarding the shareholders with dividends.&nbsp;
Maintain Target Price at HK$0.52; 147% Upside
The Net Asset Value per share of IRC has increased by 36% to HK$0.57 per share as on 31st December 2021 as compared to HK$0.42 per share on 31st December 2020. Thus, the current stock price of HK$0.21 represents a huge discount of 63% to this NAV. Also, in view of the ramp up in production from the K&amp;S mine to full capacity along with a potential reduction in cash costs due to the completion of the Amur River Bridge, followed by reduced cash outflows due to refinancing of the ICBC loan by Gazprombank facility and an increase in the price of iron ore due to increased demand and supply constraints across the globe, we maintain our one-year price target on IRC at HK$0.52 per share. The target price implies an upside of 147% over the current stock price of HK$0.21. Our price target implies a P/E multiple of 2.7x on our FY2022 underlying EPS estimate of US2.45 cents and an EV/ EBITDA multiple of 2.2x on our FY2022 EBITDA estimate of US$236 mn. At the current levels, the stock is trading at extremely attractive multiples of just 1.0x P/E and 1.0x EV/EBITDA based on our FY2022 EPS and EBITDA estimates, respectively.&nbsp;
Iron Ore Price Recovers Sharply Despite Correction in the last quarter of 2021
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/267/301/original/image_3655001221649236755845.png?1649236756" width="462" height="312" class="editor-image img-responsive" data-smartkarma-image-id="267301"></figure>
In 2021, despite the relatively significant volatility, the average price of Platt’s 65% Fe increased 52.5% to US$186 per ton year on year. Substantial surge in prices was noted in the first half of the year when the index reached new highs against the backdrop of global economic recovery and monetary easing. The Platt’s 65% Fe spot price jumped to a record of US$260 per ton in May. However, the iron ore prices collapsed into a bear market in the second half, particularly in the fourth quarter of the year. The index crashed to about US$102 per ton in November on China’s pledge to reduce steel output. The index returned to a bull market in the space of a month, recovering by 37% to US$140 per ton at the end of the year, owing to rising steel mill margins and the resumption of Chinese steel production in December.
As China intends to reduce carbon emissions by the steel industry, demand for high- grade iron ore is rising. Generally, the greater the effort to decarbonize and safeguard the environment, the higher the demand for high-grade iron ore from the Chinese steel mills. The price spread between high-grade and low-grade iron ore remained substantial in 2021, with the average premium between 65% iron ore and 62% iron ore extending to US$26 per ton, doubling from the previous year.
For further details and financial model, please see our attached Earnings Update Report.

IRC [1029_HK; HK$1,430 mn/US$186 mn market cap; HK$5.1 mn total average daily value traded] reported stellar revenue growth along with robust operating and financial performance for the FY2021, in-line with our expectations. The company’s revenues increased by 65% YoY for FY2021 to US$371.3 mn, in comparison to US$224.6 mn for FY2020 inclusive of the impact of hedging. The EBITDA excluding non-recurring items and foreign exchange rose by 114% to US$170.6 mn (2020: US$79.7 mn). The significant growth was mainly driven by higher achieved selling price of iron ore. The net profit increased by 33% to US$134 mn in FY2021 as compared to US$101 mn in FY2020.&nbsp; Even though the ore quality, mining contractors’ performance, and railway logistics issues were present during 2021 which led to bottlenecks, lower production and lower total volumes of iron ore shipped, the company was still able to sell 2,553,804 tons of iron ore concentrate which was in-line with that of the previous year (2020: 2,576,722 tons). As these are short-term issues, the company is confident that it’s performance will improve further as the issues subside eventually. &nbsp;
Key highlights of 2021 were:

Revenue up 65% YoY to US$371.3 mn


Cash balance increased to US$52.1 mn (2020: US$20.4 mn)&nbsp;


EBITDA excluding non-recurring items and FX up 114% YoY to US$170.6 mn (2020: US$79.7 mn)


Underlying Profit Increased 5x to US$125.3 mn (2020: US$24.2 mn) driven by strong iron ore price. Net Profit was almost equal to 0.7x Market Capitalization.


Profit Attributable to shareholders Up 33% to US$134.1 mn (2020: US$100.6 mn)


Net Debt reduced to US$60.5 mn (2020: US$181.7 mn)


In 2021, the average selling price of iron ore concentrate achieved by IRC after hedging was US$159 per dry metric ton - an increase of 67.4%.

IRC has achieved excellent financial results in 2021, and the company is on track to maintain this strong momentum into 2022 and beyond. The financial performance of the company mainly depends on the iron ore price, production capacity, and the Russian Ruble exchange rate, which continues to be currently in its favor to help achieve further growth in revenue and profitability. In 2022, the company aims to achieve three main objectives - reduction in the gearing ratio, development of Sutara mine and, most importantly, rewarding the shareholders with dividends.&nbsp;
Maintain Target Price at HK$0.52; 147% Upside
The Net Asset Value per share of IRC has increased by 36% to HK$0.57 per share as on 31st December 2021 as compared to HK$0.42 per share on 31st December 2020. Thus, the current stock price of HK$0.21 represents a huge discount of 63% to this NAV. Also, in view of the ramp up in production from the K&amp;S mine to full capacity along with a potential reduction in cash costs due to the completion of the Amur River Bridge, followed by reduced cash outflows due to refinancing of the ICBC loan by Gazprombank facility and an increase in the price of iron ore due to increased demand and supply constraints across the globe, we maintain our one-year price target on IRC at HK$0.52 per share. The target price implies an upside of 147% over the current stock price of HK$0.21. Our price target implies a P/E multiple of 2.7x on our FY2022 underlying EPS estimate of US2.45 cents and an EV/ EBITDA multiple of 2.2x on our FY2022 EBITDA estimate of US$236 mn. At the current levels, the stock is trading at extremely attractive multiples of just 1.0x P/E and 1.0x EV/EBITDA based on our FY2022 EPS and EBITDA estimates, respectively.&nbsp;
Iron Ore Price Recovers Sharply Despite Correction in the last quarter of 2021

In 2021, despite the relatively significant volatility, the average price of Platt’s 65% Fe increased 52.5% to US$186 per ton year on year. Substantial surge in prices was noted in the first half of the year when the index reached new highs against the backdrop of global economic recovery and monetary easing. The Platt’s 65% Fe spot price jumped to a record of US$260 per ton in May. However, the iron ore prices collapsed into a bear market in the second half, particularly in the fourth quarter of the year. The index crashed to about US$102 per ton in November on China’s pledge to reduce steel output. The index returned to a bull market in the space of a month, recovering by 37% to US$140 per ton at the end of the year, owing to rising steel mill margins and the resumption of Chinese steel production in December.
As China intends to reduce carbon emissions by the steel industry, demand for high- grade iron ore is rising. Generally, the greater the effort to decarbonize and safeguard the environment, the higher the demand for high-grade iron ore from the Chinese steel mills. The price spread between high-grade and low-grade iron ore remained substantial in 2021, with the average premium between 65% iron ore and 62% iron ore extending to US$26 per ton, doubling from the previous year.
For further details and financial model, please see our attached Earnings Update Report.

IRC [1029_HK]: Underlying Profit Up 5x, +65% Revenue Growth, Iron Ore Price Recovery, 2.7x P/E

Irc Ltd

IRC [1029_HK]: Underlying Profit Up 5x, +65% Revenue Growth, Iron Ore Price Recovery, 2.7x P/E