Southern Copper Corporation
SCCO Details
Southern Copper Corporation (NYSE: SCCO) is primarily engaged in producing and selling copper. Its primary operations are in Peru and Mexico, and it is one of the world's major copper mining firms in terms of production and sales. It has exploration programs in Chile, Argentina, and Ecuador, among other places. SCCO produces substantial amounts of other metals (like molybdenum, zinc, silver) and copper, either as a by-product of the copper process or through several specific mines in Mexico.
Latest News:
- Dividend Declaration: The firm declared a dividend of USD 1.00 per common share on October 21, 2021, which was distributed on November 23, 2021, to shareholders of record on November 10, 2021.
9MFY21 Results:
- Rise in Revenues: The company reported YoY growth of 43.95% in net sales to USD 8.11 billion during 9MFY21 (ended September 30, 2021) compared to USD 5.63 billion during 9MFY20, which was primarily attributable to higher metal prices for copper, molybdenum, and zinc.
- Progress in Profitability: SCCO reported an increase in net income to USD 2.56 billion during 9MFY21 vs. USD 0.98 billion during 9M3FY20.
- Leveraged Balance Sheet: As of September 30, 2021, the company had cash & cash equivalents (including short-term investments) of USD 3.21 billion and total debt of USD 6.55 billion.
Key Risks:
- Supply Chain Risk: The company is at risk of potential supply chain interruptions as a result of current issues in the global shipping industry, which could harm its operations and development projects. However, if these problems persist for an extended period, the company's supply chain and sales flow may suffer.
- Input Price Risk: SCCO's activities necessitate significant fuel oil, electricity, water, and other resources, with fuel, gas, and power expenses accounting for nearly 28% of total production costs in FY20 and FY19. As a result, any cost hikes or supply bottlenecks may harm the company's bottom line.
Outlook:
- Production Guidance: SCCO indicated in its Q3FY21 announcement that it intends to produce 957,000 and 29,400 tons of copper and molybdenum, respectively, in FY21. In addition, in FY21, the company plans to produce 19.3 million ounces of silver and 67,500 tons of zinc.
Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation
(Analysis by Kalkine Group)
- % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
SCCO Daily Technical Chart (Source: REFINITIV)
Stock Recommendation:
SCCO's share price has fallen 23.17% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 54.92 to USD 83.29. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 51.69. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 70.60.
Considering the correction in the stock price in the past nine months, strong top and bottom-line performance, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 60.09, down 0.36% as of December 09, 2021, 10:09 AM ET.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
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