In this blog, we will be discussing our second ev stock in the series of Electric Vehicle Value Chain. Here also we will pick stock from Mining Sector i.e. Hindustan Copper Ltd. The Mining Sector will be greatly focused as many commodities will be used in EV Value Chain like Lithium, Nickel, Cobalt, Aluminium, Copper, and many more. So, In this blog, we will be discussing the stock concerning Copper. So, let’s start.
India is having Copper Reserves of a mere 2% only. The major copper deposits in the world are in Australia and China.
Electric Vehicles Technologies and its supporting infrastructure employ 4 times more copper than the usage of copper in IC-engine vehicles.
The speedy development of EVs in the automobile sector will create a massive demand for copper in the coming years.
Hindustan Copper Ltd. is a Mini-Ratna PSU company. It is a Central Public Sector Enterprise engaged in mining and other operational activities of copper.
Hindustan Copper is one of the Top-12 Mini-Ratna companies in India.
This PSU holds 40% copper reserves out of the total reserves of India.
Due to such significant holding of copper reserves, any favorable change in demand for copper will directly and positively impact Hindustan Copper.
It is obvious that India is having a lesser amount of copper reserves, but any demands concerning these commodities will be fulfilled domestically and then only other supply resources will be evaluated and hence, Hindustan Copper can be one of the beneficiaries.
To participate in the upcoming demands of Coppers in the EVs segment, Company is forming strategic joint ventures named Khanij Bidesh India Ltd. with other 2 PSU companies like NALCO and Mineral Exploration Corporation Limited (MECL).
This joint venture is trying to explore things concerning mining in foreign countries especially ABC Triangle.
In the last 1 year, Copper Prices have been increased by 100%, which is already implying a positive sign for this commodity.
Copper has witnessed the positive impact of the commodity cycle and uptrend and the same has been reported by Hindustan Copper.
In the last 1 year, the stock of Hindustan Copper has gone through a significant rally, and its price has skyrocketed 7-8 times.
Hind Copper Stock has surged a lot and even touched its 52-week High Levels of Rs. 165 in respect of aggressive discounting. From this level, Stock has fallen to the range of Rs. 125.
If we look at the stock price of time-period between 2008-2011 where this stock has faced market correction as well as an upward movement, the stock price has All-Time High Levels of above Rs. 600.
Considering its All-Time High levels, the company presents its potential to generate heavy returns to the shareholders. But this will be an interesting thing to watch whether the company reaches its older levels.
As of now, from a longer time perspective, there is a possibility of the creation of secular demand in this industry on account of the developing EVs market.
Hindustan Copper has faced a significant amount of losses and also a hefty fall in its sales due to the Covid-19 Pandemic and imposition of lockdowns nationwide.
With the increasing normalcy in the economic operation, Hindustan Copper has shown signs of recovery and posted a bumper quarterly result of Q3FY21.
In Q3FY21, the company has reported a profit of Rs. 108 Cr.
Apart from the profit, another important thing to notice in the quarterly result of the company was its Operating Profit Margin. The company has reported an OPM of 40% in Q3FY21, which is noteworthy.
Overall, the company has posted its Q3FY21 result which proves to be somewhat near to the level of its glorious period of 2008-2011. And if the development of EVs continues at such a faster rate company can surely work well.
Promoters of the company i.e. The Government of India is having a significant 76.05% stake in Hindustan Copper Ltd.
From a divestment angle also, this stock can perform well. As in the future, the Government as a part of the divestment process of PSUs can sell some of its stakes in this business also.
Foreign Institutional Investors (FIIs) are having a very minimal stake of 0.41% in this stock.
While Domestic Institutional Investors (DIIs) are holding a 13.31% stake in Hindustan Copper. But the important thing to look at here is that LIC is the major stakeholder in DIIs with an 11.42% stake.
10.24% stake of the company is held by General Public.
Looking at the shareholdings of Hindustan Copper, it seems that Institutional Investors are not very much attracted towards this stock and thereby have not made any impressive allocation.
The possible reason behind less institutional holding in this company can be the availability of better-performing companies in the copper sector namely Hindalco and Vedanta Ltd.
Looking at the current market share of Hindustan Copper and the expected increase in demand for copper in the future, this stock can be positively affected.
The company is not having any kind of red-flags and the only visible issue is the low participation of institutional investors in the company shareholdings. Like the case of NALCO, Hindustan Copper is also looking forward to success in its projects and exploration in foreign countries, which will be a crucial stage for the business which will be directly reflected in its stock prices.
From an investment point of view, this stock can be a good pick and should be on an individual’s radar looking at prospects. Do your due diligence before investing.
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