Energy
Short-term headwinds, cash flow concerns, and a premium valuation - Wium Malan expects further earnings downgrades, driven by overly optimistic profitability (margin) expectations from the sell-side. He has concerns around Xinyi’s aggressive capacity expansion programme over the next 18 months and believes ASP’s will remain under pressure. The company's current valuation leaves no margin-of-safety, especially considering its poor historical FCF generation track record and working capital issues (highlights a staggering increase in receivables days).
Edition: 124
- 26 November, 2021