Scripscan:Nissan Copper Ltd
cmp:30
Code:532789
Story:Nissan Copper manufactures copper pipes and tubes for supply to users in construction, air-conditioning, engineering and gas application industries.The demand for copper products appears strong driven by rising requirements from user segments.The clientele of the company includes Siemens, Voltas and Electrotherm India is a positive.However, the risks for the company are likely to outweigh the opportunities, and this may have an adverse impact on profitability.While it sources copper scrap from the domestic market, for copper cathode (both raw materials for making copper pipes/tubes) it relies substantially on imports.It is not clear what proportion of imports are long-term contracts. Hence the risk of the company being exposed to cost pressures is fairly high.The size and scale of operations also places it at a disadvantage. Being a secondary player, its bargaining power is likely to be limited compared to primary players where the degree of concentration is far higher. The effect of this is likely to be severe, especially in the event of a cyclical downturn.The higher outgo in the form of interest and depreciation may affect its profitability over the next few years.Considering the challenges mentioned above, generating earnings to support the current valuations is likely to be difficult.The management quality is not great either.The small scale of operations, the greater vulnerability to price swings, the blotted equity and the rich valuations are factors that underpin my view on it.A sell for me.
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Wednesday, October 7, 2009
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