Hello everyone! I've been reading through your "investment cases" on KGHM and am wondering whether we're talking about the same company here or whether there's a bit too much sniffing at the bare copper wire in the forum. 😬 Let's put your arguments through the shredder of hard numbers:
1. the fairy tale of the expected P/E ratio of 9-10
Dream on! The current, real trailing price/earnings ratio (P/E ratio) is a whopping 26. In order to achieve a P/E ratio of 9, net profits would have to almost triple at the current share price level (approx. PLN 335). Where would that come from? With a solid but unspectacular operating margin of around 16%, this is pure wishful thinking. Anyone talking about a P/E ratio of 9 here is making the world look good with wild fantasy estimates for 2027 or 2028.
2. the copper & silver fantasy (when the story is bigger than the numbers)
Ah, the classic rookie mistake: a great-sounding macro story (solar needs silver, the world needs copper) is blindly projected onto a share. But what's in the real cash register? KGHM's sales fell by 4% in the third quarter of 2025! Why? Because KGHM produces in expensive Polish złoty, but copper is traded in US dollars. The strong złoty almost completely eats up the attractive commodity prices on the stock exchange. A share whose turnover shrinks during an alleged "super cycle" is a macroeconomic gamble, not a qualitative growth investment. This is a crystal-clear red card: no top-line sales momentum, no buy.
3. "Efficiency" through SMR reactors and wind farms
Now it's getting really adventurous. KGHM wants to install small nuclear reactors (SMR) in its front garden with its US partner NuScale in order to reduce the enormous electricity costs. Do you know when this is due to go online at the earliest? By the end of 2030! Until then, these projects are a gigantic black hole for capital expenditure (CapEx). Although the operating cash flow is there, it is currently being completely eaten up by these investments and maintenance - KGHM is burning money at the bottom line and the free cash flow is deep red. A genuine "real cash machine" looks different. Until these reactors deliver the first "cheap" electricity, billions more will flow out.
Conclusion for you:
Anyone adding KGHM to their portfolio is currently not buying a cheap quality share, but an expensive currency bet (złoty vs. dollar) paired with a CapEx monster. Qualitative growth? Negative. Margin security? Not a chance. Reliable dividend? A joke that is not even covered by cash flow. Don't let yourselves be dazzled by beautiful stories about the future when the fundamental figures are already in the red today!
1. the fairy tale of the expected P/E ratio of 9-10
Dream on! The current, real trailing price/earnings ratio (P/E ratio) is a whopping 26. In order to achieve a P/E ratio of 9, net profits would have to almost triple at the current share price level (approx. PLN 335). Where would that come from? With a solid but unspectacular operating margin of around 16%, this is pure wishful thinking. Anyone talking about a P/E ratio of 9 here is making the world look good with wild fantasy estimates for 2027 or 2028.
2. the copper & silver fantasy (when the story is bigger than the numbers)
Ah, the classic rookie mistake: a great-sounding macro story (solar needs silver, the world needs copper) is blindly projected onto a share. But what's in the real cash register? KGHM's sales fell by 4% in the third quarter of 2025! Why? Because KGHM produces in expensive Polish złoty, but copper is traded in US dollars. The strong złoty almost completely eats up the attractive commodity prices on the stock exchange. A share whose turnover shrinks during an alleged "super cycle" is a macroeconomic gamble, not a qualitative growth investment. This is a crystal-clear red card: no top-line sales momentum, no buy.
3. "Efficiency" through SMR reactors and wind farms
Now it's getting really adventurous. KGHM wants to install small nuclear reactors (SMR) in its front garden with its US partner NuScale in order to reduce the enormous electricity costs. Do you know when this is due to go online at the earliest? By the end of 2030! Until then, these projects are a gigantic black hole for capital expenditure (CapEx). Although the operating cash flow is there, it is currently being completely eaten up by these investments and maintenance - KGHM is burning money at the bottom line and the free cash flow is deep red. A genuine "real cash machine" looks different. Until these reactors deliver the first "cheap" electricity, billions more will flow out.
Conclusion for you:
Anyone adding KGHM to their portfolio is currently not buying a cheap quality share, but an expensive currency bet (złoty vs. dollar) paired with a CapEx monster. Qualitative growth? Negative. Margin security? Not a chance. Reliable dividend? A joke that is not even covered by cash flow. Don't let yourselves be dazzled by beautiful stories about the future when the fundamental figures are already in the red today!
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@Raketentoni Hi there for now! Thank you for the feedback with the hard facts - that's exactly what I love the community here for.
I just wanted to introduce the share because I thought: "Wow, the second largest silver producer and I haven't read anything about it on GetQuin yet"
You're absolutely right: KGHM is no bargain. My idea was based more on the forward P/E ratio. Due to the recovery in production and rising copper prices, a massive jump in profits is expected for 2026/27, which can put a lot of pressure on the P/E ratio. But of course, this is a risky bet on the future.
Currency hedge: The złoty-dollar effect does not always have to be negative. It currently hurts, but can quickly turn into a turbo for margins if the dollar strengthens.
CapEx: The SMR issue can become a long-term billion-dollar grave, you're right. But without these investments, KGHM will be stuck with the expensive Polish electricity prices. The market seems to be celebrating the fact that management is tackling the problem at all, even if free cash flow suffers as a result.
In the end, KGHM is not a classic 'buy & hold' stock for eternity, but a highly cyclical commodity play. However, the +144% in one year shows that the story is a good one.
It will be interesting to see whether the annual figures in March confirm your skepticism or catapult the share further upwards.
I just wanted to introduce the share because I thought: "Wow, the second largest silver producer and I haven't read anything about it on GetQuin yet"
You're absolutely right: KGHM is no bargain. My idea was based more on the forward P/E ratio. Due to the recovery in production and rising copper prices, a massive jump in profits is expected for 2026/27, which can put a lot of pressure on the P/E ratio. But of course, this is a risky bet on the future.
Currency hedge: The złoty-dollar effect does not always have to be negative. It currently hurts, but can quickly turn into a turbo for margins if the dollar strengthens.
CapEx: The SMR issue can become a long-term billion-dollar grave, you're right. But without these investments, KGHM will be stuck with the expensive Polish electricity prices. The market seems to be celebrating the fact that management is tackling the problem at all, even if free cash flow suffers as a result.
In the end, KGHM is not a classic 'buy & hold' stock for eternity, but a highly cyclical commodity play. However, the +144% in one year shows that the story is a good one.
It will be interesting to see whether the annual figures in March confirm your skepticism or catapult the share further upwards.
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@JBatelli that's what it's all about, talking to each other and i just like the whole thing to be funny and not so opinionated 😬
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