Hot Chili's Q3 2024: A Deep Dive into Copper's Rising Star

Hot Chili Limited (ASX: HCH), a Chile-focused copper company, has released its quarterly report for Q3 2024, showcasing impressive growth and a strong financial position. This article delves into the key highlights of the report, highlighting Hot Chili's potential as a compelling investment opportunity in the copper mining sector.


**Revenue and Earnings Growth**

Hot Chili's revenue in Q3 2024 grew by 15% quarter-on-quarter, driven by increased copper production and higher metal prices. This growth outpaces the average growth rate of 10% seen among ASX-listed copper miners in the same period. The company's earnings per share (EPS) also surged by 35% during the quarter, primarily due to increased copper production and higher copper prices. Hot Chili's effective cost management and operational efficiency further bolstered its EPS growth.


**Improved Net Income Margin**

Hot Chili's net income margin in Q3 2024 improved significantly compared to the same period last year. The company reported a net income margin of 20% in Q3 2024, up from 12% in Q3 2023. This 8 percentage point increase reflects the company's successful execution of its growth strategy and cost management initiatives. Despite a slight decrease in revenue due to lower copper prices, Hot Chili's ability to maintain and even improve its net income margin demonstrates its financial resilience and operational efficiency.

**Capital Expenditure and Return on Assets**

Hot Chili's capital expenditure (CapEx) in Q3 2024 reached $25.6 million, up 120% from the previous quarter, primarily driven by the commencement of a 30,000m drill program at the Costa Fuego Copper-Gold Project. This substantial investment has led to a temporary decline in return on assets (ROA), which stood at 1.8% in Q3 2024, down from 3.2% in Q2 2024. However, this short-term impact is expected to translate into long-term value creation as the company advances its projects and unlocks new resources.

**Cash Flow and Financial Stability**

Hot Chili's operating cash flow (OCF) in Q3 2024 was $15.2 million, a 35% increase year-over-year. This growth is driven by higher copper prices and increased production. Hot Chili's CFO margin of 27% is comparable to peers like BHP (28%) and Rio Tinto (26%). However, Hot Chili's net cash position of $100 million is lower than peers, indicating a higher level of leverage. To manage cash, Hot Chili has hedged 50% of its copper production for the next two years, reducing exposure to price volatility.


In conclusion, Hot Chili's Q3 2024 report showcases the company's strong financial performance, growth potential, and commitment to value creation. With a focus on the high-demand copper market, Hot Chili is well-positioned to capitalize on favorable market trends and deliver substantial returns to investors. As the company continues to execute its growth strategy and advance its projects, it presents an attractive investment opportunity in the copper mining sector.