Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (CAD) | Target 1 (CAD) | Target 2 (CAD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 18 Feb, 25 | ERO | Buy | CAD 20.5 | CAD 21.6 | CAD 22.5 | 10 days | 9.8% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Ero Copper Corp. engages in the exploration, development, and production of mining projects in Brazil. The company is involved in the production and sale of copper concentrate from the Caraíba operations located in the Curaçá Valley, northeastern Bahia state, Brazil, as well as gold and silver by-products. It also holds 100% interests in the Tucumã project, a copper development project located within southeastern Pará state; and the Xavantina Operations located in Mato Grosso state. Ero Copper Corp. was incorporated in 2016 and is headquartered in Vancouver, Canada.
Increase in Net Margin: 33.1% in Q3FY24 vs 2.7% in Q3FY23
Increase in Gross Margin: 43.0% in Q3FY24 vs 33.7% in Q3FY23
Lower Current Assets Ratio: 0.68x in Q3FY24 vs 1.23x in Q3FY23
Higher Debt-Equity: 0.79x in Q3FY24 vs 0.68x in Q3FY23
Commodity Price Volatility, Operational Risks, Geopolitical and Regulatory Risks, Environmental and Safety Risks, Currency and Inflation Risk, Climate Change and Environmental Impact, etc.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 20.5 | 18.0 | 21.6 | 22.5 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Production- In Q3 FY24, Ero Copper Corp. made significant progress across its operations. At the Caraíba Operations, the company processed 900,289 tonnes of ore, up from 806,096 tonnes in Q3 FY23, reflecting improved production capacity and efficiency. At the Tucumã Operation, 110,778 tonnes of ore were processed, indicating steady progress in the ramp-up phase. Additionally, Xavantina Operations processed 41,761 tonnes of ore, highlighting the company’s diversified production base with both copper and gold. These results underscore Ero Copper's commitment to operational growth and a balanced resource portfolio.
Revenue Growth- Ero Copper Corp. reported an 18.63% increase in revenue, reaching USD 124.8 million in Q3 FY24, compared to USD 105.2 million in Q3 FY23. This growth was largely driven by higher copper and gold production volumes. Revenues from copper sales totaled USD 90.4 million, up from USD 76.1 million in Q3 FY23, primarily due to a higher average realized price of USD 3.88 per pound (compared to USD 3.65 in Q3 FY23), although there was a slight decrease in quantity sold (22.0 million lbs vs. 22.2 million lbs). Gold sales generated USD 34.4 million, an increase from USD 29.0 million in the same period last year, attributed to a higher realized price of USD 2,382 per ounce (compared to USD 1,902 in Q3 FY23), despite a decrease in sales volume to 14,615 ounces from 15,457 ounces.
Profitability- Ero Copper Corp. reported a significant improvement in profitability for Q3 FY24. Gross profit increased to USD 53.7 million, compared to USD 35.5 million in Q3 FY23. EBITDA also saw substantial growth, reaching USD 74.5 million in Q3 FY24, up from USD 28.3 million in the same period last year. Additionally, net income rose to USD 41.4 million in Q3 FY24, compared to USD 2.8 million in Q3 FY23, reflecting strong operational performance and improved cost efficiencies.
Liquidity-As of September 30, 2024, the company reported cash and cash equivalents of USD 20.2 million, with total available liquidity amounting to USD 125.2 million. The cash and cash equivalents primarily consist of funds held in reputable financial institutions, invested in highly liquid, short-term instruments with maturities of three months or less. These funds are not subject to liquidity risk, and there are no restrictions on their use, allowing the company to fully access them to meet its financial obligations.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on Ero Copper Corp (TSE: ERO) at the closing price of CAD 20.50, as on February 18, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Basic Materials Industry: Copper
| Company | Change (CAD) | Price (CAD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| ERO Ero Copper Corp |
0.29 1.66% | 17.72 | 85.48 | 4.85 | 5.14 | 2.41 | 4.85 | 18.94 |
| FM First Quantum Minerals Ltd |
0.54 2.76% | 19.89 | - | 47.39 | 3.34 | 1.02 | 3.58 | 92.79 |
| LUN Lundin Mining Corporation |
0.07 0.60% | 11.73 | 28.94 | 14.20 | 2.60 | 1.55 | 2.29 | 5.80 |
| CS Capstone Mining Corp |
0.09 1.21% | 7.50 | - | 12.41 | 5.01 | 2.03 | 4.79 | 36.74 |
| HBM HudBay Minerals Inc |
0.10 0.92% | 11.01 | 31.92 | 10.63 | 2.51 | 1.49 | 2.17 | 5.82 |
Data Powered by EOD Historical Data (“EODHD”).
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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