Author Topic: EAF - GrafTech  (Read 22086 times)

peterHK

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Re: EAF - GrafTech
« Reply #20 on: December 07, 2018, 11:35:30 AM »
1) Less than 5% of EAF steelmaking costs are electrodes. It is highly unlikely that the costs of these things will force a customer out of business.

2) Keeping plants open is often more profitable than closing them.

3) EAF has said that there are no reopeners on contracts, so there is no renegotiation available until the contracts roll over.


valueinvestor

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Re: EAF - GrafTech
« Reply #21 on: December 07, 2018, 12:38:25 PM »
1) Less than 5% of EAF steelmaking costs are electrodes. It is highly unlikely that the costs of these things will force a customer out of business.

2) Keeping plants open is often more profitable than closing them.

3) EAF has said that there are no reopeners on contracts, so there is no renegotiation available until the contracts roll over.

Any chance you looked at how their Accounts Receivable works? I'm not really concerned about steelmakers ability to stay open, but rather their ability to pay on time during a downturn, which can have a domino effect, especially when it comes time to pay bills, and payroll. 


valueinvestor

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Re: EAF - GrafTech
« Reply #22 on: December 08, 2018, 12:02:08 PM »
1) Less than 5% of EAF steelmaking costs are electrodes. It is highly unlikely that the costs of these things will force a customer out of business.

2) Keeping plants open is often more profitable than closing them.

3) EAF has said that there are no reopeners on contracts, so there is no renegotiation available until the contracts roll over.

Any chance you looked at how their Accounts Receivable works? I'm not really concerned about steelmakers ability to stay open, but rather their ability to pay on time during a downturn, which can have a domino effect, especially when it comes time to pay bills, and payroll.

Seems AR is net 30 to 120, but what's interesting is that their AR only increased by 76%, when revenues went up 280%.

On a completely different note, not sure why the stock got killed because of the Vertical Group Report last month. Even if 91,000 MT in additional capacity comes in, which increases supply by 14%, I fail to see how it will reduce the value of Graftech by almost half.


valueinvestor

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Re: EAF - GrafTech
« Reply #23 on: December 11, 2018, 10:54:22 AM »
The stock is in free-fall, sold out my position when it hit a 10% loss, but have plans to buy back. Not sure what is happening, especially when there's nothing changed to the fundamentals of the stock, maybe it's something outside? Does anyone know what it is?

Cardboard

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Re: EAF - GrafTech
« Reply #24 on: December 11, 2018, 11:14:03 AM »
Bear market. People sell everything out of fear. Fundamentals no longer part of the equation.

Listening to many managers on TV, they all try to hide somewhere and almost all expect a bad economy in 2019. It now pays to be negative as they all have had a bad 2018 and their clients are not or will not be happy.

I don't own this stock but, I will be doing some research on it as it looks interesting.

Cardboard

Gregmal

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Re: EAF - GrafTech
« Reply #25 on: December 11, 2018, 11:25:20 AM »
Bear market. People sell everything out of fear. Fundamentals no longer part of the equation.

Listening to many managers on TV, they all try to hide somewhere and almost all expect a bad economy in 2019. It now pays to be negative as they all have had a bad 2018 and their clients are not or will not be happy.

I don't own this stock but, I will be doing some research on it as it looks interesting.

Cardboard

Basically this.

All those turds who have been wrong for years, if not longer now get to gloat about being in the consensus but at the end of the day, you can't talk the economy into a recession, and barring one, there's a lot of companies out there that are very enticing right now. Sometimes the market goes stupid. Everyone thinks 2019 will be a lost year. If those predictions bear the same accuracy as one's we've heard from underperformers and analysts for the past decade, 2019 will turn out to be decent...Think with your brain, not your ears.

I'd also add that the Wall St crowd's obsession with the boogey man called "recession" is kinda stupid as well. Maybe companies that are operating at record profitability this year, earn 5% less next year... SO WHAT? What does Wall St say? Give em a 7x multiple.... Sheer stupidity.
« Last Edit: December 11, 2018, 11:29:19 AM by Gregmal »

peterHK

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Re: EAF - GrafTech
« Reply #26 on: December 11, 2018, 12:27:43 PM »
Bear market. People sell everything out of fear. Fundamentals no longer part of the equation.

Listening to many managers on TV, they all try to hide somewhere and almost all expect a bad economy in 2019. It now pays to be negative as they all have had a bad 2018 and their clients are not or will not be happy.

I don't own this stock but, I will be doing some research on it as it looks interesting.

Cardboard

Bringing it back to EAF, 2/3 of their revenue is contracted, and while some roll off this year there will be renewals.

The market thinks this business is WAY more cyclical than it actually is going to be over the next 4 years, and because of the small float, it can get pushed wildly around.

Basically this.

All those turds who have been wrong for years, if not longer now get to gloat about being in the consensus but at the end of the day, you can't talk the economy into a recession, and barring one, there's a lot of companies out there that are very enticing right now. Sometimes the market goes stupid. Everyone thinks 2019 will be a lost year. If those predictions bear the same accuracy as one's we've heard from underperformers and analysts for the past decade, 2019 will turn out to be decent...Think with your brain, not your ears.

I'd also add that the Wall St crowd's obsession with the boogey man called "recession" is kinda stupid as well. Maybe companies that are operating at record profitability this year, earn 5% less next year... SO WHAT? What does Wall St say? Give em a 7x multiple.... Sheer stupidity.

valueinvestor

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Re: EAF - GrafTech
« Reply #27 on: December 11, 2018, 12:28:38 PM »
 ???
Bear market. People sell everything out of fear. Fundamentals no longer part of the equation.

Listening to many managers on TV, they all try to hide somewhere and almost all expect a bad economy in 2019. It now pays to be negative as they all have had a bad 2018 and their clients are not or will not be happy.

I don't own this stock but, I will be doing some research on it as it looks interesting.

Cardboard

Basically this.

All those turds who have been wrong for years, if not longer now get to gloat about being in the consensus but at the end of the day, you can't talk the economy into a recession, and barring one, there's a lot of companies out there that are very enticing right now. Sometimes the market goes stupid. Everyone thinks 2019 will be a lost year. If those predictions bear the same accuracy as one's we've heard from underperformers and analysts for the past decade, 2019 will turn out to be decent...Think with your brain, not your ears.

I'd also add that the Wall St crowd's obsession with the boogey man called "recession" is kinda stupid as well. Maybe companies that are operating at record profitability this year, earn 5% less next year... SO WHAT? What does Wall St say? Give em a 7x multiple.... Sheer stupidity.

It's an incredible and lucrative phenomenon. I'm going to slowly rebuild my position, because although I have been in situations where it took two-to-three years of being underwater, before the market became optimistic, I'm not comfortable with the fact that it is a commodity company and the debt.

I still do not understand why it is hard to bring in additional needle coke and graphite electrodes supply, as I am just basing this on the words of Graftech and other reports, and not the source material.

However even with my ignorance, it looks stupid cheap, because even if there was enough demand or supply cuts that brought prices to down by 50%, they still make a 60% FCF margin. I wish Graftech includes in their presentation sometime in the future, how their company will look during a trough cycle, like how Fiat did.

It's trading at 6x net earnings after taxes, and even adding the debt to the market cap, it still trades at 9x net earnings after taxes without factoring growth or price increases as more than 2/3 of their contracts are based on prices that is 50% below the spot price. 


peterHK

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Re: EAF - GrafTech
« Reply #28 on: December 11, 2018, 01:59:31 PM »
As per Showa Denko's most recent call:

Q. It is said that spot prices of graphite electrodes
in Chinese market are going down. How are the
prices of graphite electrodes manufactured and
sold by your Sichuan subsidiary?

A. Prices of high power (HP) graphite electrodes for
ladle furnaces in China are stagnant. However, as
for ultra high power graphite electrodes which our
group company in China produces with high quality,
the situation is quite different. Prices of UHP
graphite electrodes with diameter of 24 inch or larger
in Chinese market remain high

From their Q2 call, they said that they think competitors are debottlenecking, but no new supply and IF there were it would take 3 years to build it (even in China).

bjakes00

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Re: EAF - GrafTech
« Reply #29 on: December 11, 2018, 02:37:39 PM »
How do you bring new petroleum needle coke onto the market (the key ingredient for the UHP-GE)? This is a small market with 4 players and Philips 66 has something like half (if not more) of the production. P66 and Graftech have 75% of production.

This stuff is produced in a complex refinery and a project to bring on more supply would be a significant cost and time outlay. I don't see how P66 would be incentivised to bring on more capacity given how profitable their current capacity is without significant off take agreements and a floor price. Otherwise they risk bringing on supply at a time when demand dries up.

There is also a route to produce UHP-GE via coal but I understand its only Showa Denko and maybe Tokai that can process this stuff:
https://www.m-chemical.co.jp/en/products/departments/mcc/coke/product/1201080_7940.html

EAF have an extremely advantaged position in the UHF-GE market.