Tronox Holdings plc

TROX Details

Tronox Holdings plc (NYSE: TROX) is a vertically integrated manufacturer of TiO₂ pigment. The company operates titanium-bearing mineral sand mines and beneficiation and smelting operations in Australia, South Africa, and Brazil to produce feedstock materials that can be processed into TiO₂ for pigment.

Result Performance – For the First Quarter Ended 31 March 2021

• Increased Revenue: Recorded revenue of $891 million, up 14% sequentially, primarily led by a double-digit rise in both TiO₂ and zircon volumes and 3% higher TiO₂ average selling prices
• Recorded income from operations at $125 million and Net income at $26 million for the quarter.
• GAAP diluted income per share of $0.12 and adjusted diluted EPS of $0.43 (Non-GAAP): the difference was mainly due to costs associated with the Q1 debt refinancing transactions and the break fee associated with the TiZir Titanium and Iron (TTI) transaction
• Improved adjusted EBITDA of $225 million: Recorded higher adjusted EBITDA margin of 25% (Non-GAAP), sequential improvement led by TiO₂ and zircon sales volumes, and TiO₂ selling prices, which was offset by unfavourable exchange rates and increased pigment costs
• TiO₂ sales volumes grew 15% sequentially on stronger than expected market growth, particularly, in China while selling prices remained level.

Key Data (Source: Company Reports) 

Recent Updates

As per the release dated 12 July 2021, the company  announced  dates for the earnings release and webcast conference.

• Earnings Release: Wednesday, July 28, 2021, after the market close
• Webcast Conference Call: Thursday, July 29, 2021, at 8:00 a.m. ET (New York)

Risks

A slowdown in  global demand and economic downturns  could adversely impact the demand for end-use products, thereby,  impacting the operational results.  The price of products, primarily TiO₂, zircon, and pig iron are volatile, which could impact the financial position and results of operations.

Outlook:

For Q2FY21, the company expects TiO₂ sales volumes to rise in the low-to-mid-single digit percent range over Q1FY21. Further, the Zircon sales volumes are expected to remain higher than 2019 and 2020 quarterly volume levels. Also, TiO₂ and zircon prices are forecasted to rise due to regional price initiatives' progress. Meanwhile, adjusted EBITDA could be in the range of $225-$240 million in Q2FY21.

Valuation Methodology: EV/EBITDA Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation:

We have valued the stock using an EV/EBITDA multiple-based illustrative relative valuation and have arrived at a target price that reflects a rise of low double-digit (in % terms). We have applied a slight premium to EV/EBITDA Multiple (NTM) (Peer Average) considering fall in the debt to equity ratio as well as decent long-term outlook.

Considering the aforesaid facts, we give a “Buy” recommendation on the stock at the current market price of US$18.83 per share, up by 0.11% on 26^th July 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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