Not financial advice. Full disclaimer available here.
If there was ever a time to buy a stock, it’s when it’s trading at a multiple of less than 1 time cash flows. JSW (Jastrzebska Spolka Weglowa) fits that description.
JSW is the largest producer of high quality metallurgical coal in the European Union. Met coal is an essential ingredient in the production of steel, one of the most widely used building materials on earth, see JSW video here. There are no economically-viable alternatives for smelting steel without using met coal. JSW also mines thermal coal, which is used for electricity generation.
Let’s consider a few reasons that could explain why JSW is so cheap:
it’s a state-owned enterprise
the ESG crowd does not like coal
Poland / emerging markets are out of favor
Europe is in an economic crisis
the market does not believe coal prices can stay elevated
several employees died on duty this year
Despite all the above, why isn’t the stock at least 2 times higher? I don’t know what the right share price is (40 PLN at the close on Oct. 27, 2022) but use book value and you end up above 100, take 1x sales for the last 12 months and you get closer to 160. By the way, net cash on the balance sheet is worth over half the current market cap…
I don’t think I need to add anything else except that there are always risks, with any investment, and you should do your own due diligence.