Investidea: I was, because the bullets fly

TutorialComparator

Инвестидея: Olin, потому что пули летят

Инвестидея: Olin, потому что пули летят

Инвестидея: Olin, потому что пули летят

Community

TutorialComparator

Инвестидея: Olin, потому что пули летят

Инвестидея: Olin, потому что пули летят

Инвестидея: Olin, потому что пули летят

Community

Инвестидея: Olin, потому что пули летят

Investments

Инвестидея: Olin, потому что пули летят

Business

Инвестидея: Olin, потому что пули летят

Analysis of laws

Инвестидея: Olin, потому что пули летят

Spending diaries

Инвестидея: Olin, потому что пули летят

Calculators

Инвестидея: Olin, потому что пули летят

Travels

Инвестидея: Olin, потому что пули летят

Medicine and health

Инвестидея: Olin, потому что пули летят

Tests

Инвестидея: Olin, потому что пули летят

PropertySee all

Investidei21.1272

Investidea: I was, because the bullets fly

Инвестидея: Olin, потому что пули летят

Today we have a moderately speculative idea: take shares of Olin chemical enterprise (NYSE: OLN), to capitalize on the growth in demand for its products.

Growth potential and duration: 15,5% for 14 months excluding dividends; 9% per annum, taking into account dividends during 10 years.

Why stocks can go up: there is a demand for the company's products, and she herself is inexpensive.

How do we act: we take shares now by 53,21 $.

When creating the material, sources were used, inaccessible to users from the Russian Federation. Hopefully, you know, what to do.

No guarantees

Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what are we writing, Are forecasts and hypotheses, not a call to action. It is up to you to rely on our thoughts or not..

And what about the author's predictions

Research, for example this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would perform better than people, but alas, they work worse.

Therefore, we do not try to build complex models.. The profit forecast in the article is the author's expectations. We indicate this forecast as a guideline. As with the investment in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.

We love, appreciate,
Investment editorial office

What the company makes money on

The company's 2020 annual report includes losses, incurred by the company due to one-time costs, and the information presented there is not entirely objective. Therefore, we will focus on the latest company report, including information about the latest 9 months of her work.

According to the latest quarterly report of the company, its revenue for the last 9 months is divided into the following segments.

  Investidea: Genpact, because the moment is right

Chlor-alkali compounds and vinyl — 44,7%. This is caustic soda, hydrogen and other important things, needed by industrial enterprises in a wide variety of industries. Segment pre-tax profit margin - 24,26% from his proceeds.

Epoxies — 36,88%. These are different coatings, like liquid, so hard, and filtration solutions. Segment pre-tax profit margin - 18,64% from his proceeds.

Winchester — 18,42%. This is ammunition for small bore firearms. This segment also includes the sale of gunpowder solutions for the construction industry.. The military and law enforcement agencies only give 30,99% segment revenue, 69,1% proceeds here come from the private sector. Segment pre-tax profit margin - 26% from his proceeds.

By region, the company's revenue is divided as follows: 58,47% - USA, 19,55% - Europe and 21,98% - other, unnamed regions.

Инвестидея: Olin, потому что пули летят

Arguments in favor of the company

Fell down. FROM 12 November this year, the shares fell sharply: from 64.42 to 52,72 $. So we can pick up stocks in anticipation of a rebound.

In general, everything is good. The "chemical" part of the Olin business, giving the company more 80% proceeds, will support the ongoing industrial upturn in the United States - as in the idea with Westlake.

And Olin's "ammunition" business will support the steady rise in tensions in the United States, which we already talked about in the idea by Smith & Wesson. So, in general, Olin gives us a good opportunity to capitalize on various trends in American economic and social development..

Inexpensive. P / E at the company - 8,99, P / S — 1,05, and capitalization of about $ 8.46 billion. In general, the listed advantages make it easier as an opportunity for investors to pump the company's shares, and her purchases by someone larger.

Diversification. According to the annual report, none of the company's clients give her more 5% proceeds, except one. In general, this strengthens Olin's negotiating position and minimizes the risks of damage to reporting in the event of a client leaving..

What can get in the way

Concentration. According to the annual report, 11% Olin's revenue comes from the Dow Chemical Company - that very only customer with more than 5% proceeds. I don't think, that the Dow will scandal, demanding discounts, - although there is always such a risk with large clients. Still, logistical problems at Dow plants could negatively impact Olin, and now all large industrial enterprises in the USA and the world suffer from this kind of difficulties.

  Investidea: 3D Systems, because 3D printing

And much more. Rising labor costs, logistics and raw materials can affect the company's reporting. Sure, she will maximize the growth of costs in the price of her products, but here her clients have a certain limit of patience. So Olin will not be able to raise prices indefinitely.

ESG. The company's production is highly toxic, and from time to time she has litigation and compensation. But the most problematic here is reputation.: Sustainalytics has a very low ESG rating for the company - Olin in its subgroup of chemical companies is in 409th place out of 480. This can lead to ignorance of its shares by some investors., as well as negatively affect the ability to obtain loans at affordable rates.

Accounting. The company has $ 6.264 billion in arrears, of which 1.587 billion needs to be repaid within a year. Olin doesn't have much money at his disposal: 306,1 mln in accounts plus 1.041 bln counterparties' debts. Olin also pays dividends: 80 cents per share per year - as much 1,51% annual, - what it takes about 129 million a year - about 13,43% from her profits over the past year. Considering the factors described above, payments can be cut in order, to pay off debts, - and the company's payments are still quite tangible - we may be afraid of the outcome of dividend investors.

What is the bottom line

We take shares now by 53,21 $. And then there are two options:

  1. we are waiting for the growth of shares to 61 $, who asked for them back in November. I think, we will reach this level in the next 14 months;
  2. we hold the following shares 10 years - most likely, during this time the company will be bought by some large conglomerate. Waiting bonus will be dividends.

But still check the news section on the company's website., to have time to sell shares before, how investors will react to the reduction or cancellation of dividends on the "SPb-Exchange".

Scroll up