Rain Industries - An oversold de-leveraging play


([email protected]) #238

Hi Board members,
Have a question related to Account receivable from the presentation

AR:

CY17 CY16
16873 10392

This is close to 62% Y-OY increase in the AR.
During the same period the sales has increased as follows

CY17 CY16
113919 94378

This is close to 20% Y-O-Y
How should we interpret this, as I read in some of the fundamental analysis book that the increase in the AR should be proportionate to the sales.

Can someone throw some light on this.

Thanks,
Pandi


(duranvskp) #239

Thank you so much for taking your valuable time and posting your understanding of results and summary of con call. This is my reading from your replies: All in all the growth of Rain is well poised into 2018 with the tailwinds that are helping it to catapult into accelerated growth.


(mukeshbhatt77) #240

good point, in the carbon business or for that matter in B2B it is normal, though, I must admit it is on slightly higher side. Also, biggest client is Alcoa and I dont think they will not pay…


(mukeshbhatt77) #241

This is a margin expansion and still lot of scope to increase it further. I would be concerned if the volume does not improve especially when they are at the peak of demand cycle


(pla7yer) #242

Even with a conservative net profit of 1100 crores, EPS comes around 32 Rs


([email protected]) #243

Thanks @mukeshbhatt77 for your insights on this.


(Raj A A) #244

DEC 17 results: My Intrepretation… OPM contracted by 84 basis points during Q-O -Q 2016, and current OPM contracted by 184 basis points during Q-O-Q 2017.
Again PBT increased from 166 to 171 Cr (Q-O-Q 2016) .But PBT decreased from 419 to 322 Cr (Q-O-Q 2017)
IMHO this implies there is decelaration in the growth comparing 2016 and 2017 . There is pressure on margin. Experts may comment on this.


(jeet1990) #245

This is because of an exceptional item of Rs. 113 crores which corresponds to an early repayment premium and deferred finance cost. If not for that payment the PBT would have been Rs. 434 crores in Q4FY17 vs Rs. 419 crores in Q4FY16.

I think this might be because of some/all of the following:

  1. Decreased CPC volumes due to delayed shipments. Since the margins on CPC have increased, if not for the delayed shipments, the company might have been able to post higher revenue numbers.
  2. Decline in Chemicals Trading due to the Company’s decision to reduce low margin trading operations.

Source: rain pres.pdf (1.3 MB)

Considering the reopening of several Aluminium producers and reduction in interest cost going forward, I think the company is in a strong position for 2018.

Disclosure: invested at lower levels


(PE_Ratio) #246

Very good Q4 EPS 9.13 despite the exceptional item of -113.3cr. But that exceptional item was slightly nullified by one-time impact of US and Belgium tax reforms (83cr). So, that was like, exceptional net loss of 30cr. If we added that 30cr to the bottomline, Q4 EPS would be 10. That’s pretty good EPS growth QOQ (against 7.3rs in Q3).

Management has guided that from this quarter, company will save around 40cr in the interest they pay. That’s additional EPS 1.2rs per quarter. Also, company will save a lot in tax because of the tax cuts in the US and Belgium. That will add additional 0.5 to 1rs EPS per quarter. Just by these two factors, company will generate additional EPS 2rs from this quarter onwards.

So my guess is that from this quarter, EPS should be at least 11. And in four quarters, TTM EPS should be 40 to 45. And with debt reduction and additional CPC capacity coming online in India from 2019, rerating should be on the cards. Future growth prospects intact.


(Raj A A) #247

Thank you for highlighting the points I missed to take note.


(phreak) #248

Interesting thing to note is that HSCL’s margins are still way ahead of Rain Industries. For Dec quarter, HSCL’s OPM is 24% vs 18% of Rain Inds (as per Screener)


(KiranP) #249

That can be explained by the better product mix that Himadri has. CTP is more profitable than CPC, and they’re the largest CTP player in India. They have also higher carbon black and specialty carbon (including anodes for Li-Ion batteries) share than Rain.

In previous concall, Rain management has indicated they want to get into advanced carbon in a bigger way, but there’s no concrete plans afaik.


(Man) #250

Revised target for Rain Post result.

IDBI Capital Target Price 522


(yudiagg) #251

Thanks a lot for sharing the IDBI report. I have three issues

1 I am not clear if the target of Rs 522 is for CY 18 or 19.
2 In Spite of all the good things being talked, why the mutual funds have
been constantly reducing their stake in this stock - Source BSE
3 In spite of great Q4 result and optimistic future, why the selling is so
heavy that it is dragging the stock price down.

Yes. I am being devil’s advocate - and therefore looking for these answers.

Disc : Invested and have a serious interest in the stock.


(nitin goyal) #252

One more thing which I noticed in the report. The tax percentage has come down 26.9% in CY17 due to US & Belgium tax reforms, However the report still considers 33% in CY18&19. I feel the EPS will further go up due to these tax reforms.


(AbhijitMani) #253

In view of the hike in tariffs for steel and aluminum by the trump government,what kind of impacts does one foresee for rain industries?


(Akshay Kumar) #254

https://aluminiuminsider.com/yunnan-aluminium-teams-israeli-firm-phinergy-produce-aluminium-batteries-electric-vehicles/?utm_content=buffera72ee&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

May be the next of growth for Aluminium which in term should drive the growth for Rain products


(Akshay Kumar) #255

My View:
Since Rain have multiple facilities in the US, this hike in tariffs IF Implemented can be big tailwind and will help rain in optimizing the cost which will lead to better cashflows. Also as this is coming at the time when all major US Aluminum manufactures have done the capex and ready for realization. which means more demand for Rain products.

Disc: I am invested and my views may be biased


(yudiagg) #256

While there are multiple drivers to growth, what would be a fair PE multiple- considering that it is a commodity stock.


(SS64) #257

Just a generic question: I see that stock price went from 200+ to 400+ just based on recommendations of brokerage reports. Now, when the sentiment is down after the results, I see again the reports are giving good coverage. My question is why can’t these brokerages identify these stocks when price was 50-200?