Tharisa PLC (JSE: THA) is a dynamic mining company specializing in the extraction of platinum group metals (PGMs) and chrome. Despite facing a challenging two-year period with a significant drop in share price, the company is showing promising signs of recovery. Over the past year, Tharisa’s market value declined by 25%, but its shares have rebounded by 22% year-to-date, indicating a potential turnaround.
For the first half of 2024, the company reported a 10.1% increase in revenue to US$369.1 million. This growth is primarily driven by a 16% rise in the average chrome price, partially offsetting a 40% drop in PGM basket prices. While the top line is positive, profitability remains a concern as Tharisa’s net profit after tax dipped 29.1% to US$38.8 million. This decline in profitability was attributed to weaker margins, exacerbated by a 65% increase in chrome production cost of sales and higher costs for purchased ore.
Despite these challenges, Tharisa declared an interim dividend of US1.5 per share, showcasing their commitment to shareholder returns. Can Tharisa overcome these headwinds and deliver sustained profitability? Investors will be closely watching the impact of PGM prices and Tharisa’s ability to manage costs in the coming quarters.
Technical
Tharisa’s share price had been trading in a prolonged downtrend, characterized by a descending channel pattern and consistent trading below the 100-day moving average. This bearish phase was marked by a significant level of support at R11.51 per share, which emerged amid oversold RSI (Relative Strength Index) conditions. This critical support level prevented further downside potential and ignited a rebound in the share price.
The shift in market sentiment favoured the upside, leading to a breakout from the descending channel pattern and a surge above the 100-day moving average. This breakout validated the change in sentiment, with the share price climbing past its initial year-to-date high.
Currently, Tharisa’s share price is approaching a nine-month high at R19.91 per share, a key resistance level. Should the bullish momentum persist, a full retest of this resistance level is plausible. Conversely, if downside pressures resurface, the 100-day moving average will likely become a crucial point of interest for intermediate support.
Summary
Tharisa PLC is poised for recovery with a 22% year-to-date share price gain and approaching the key R19.91 per share resistance level. Despite a 29.1% profit decline, revenue grew by 10.1%, driven by higher chrome prices. Investors will likely watch Tharisa’s cost management and PGM price impacts for sustained profitability.
Sources: Tharisa PLC, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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