Business Overview
Rane (Madras) is in the auto ancillary industry and manufactures Steering and Suspension linkages. The company also setup a Die Casting division in 2006 and acquired US-based Precision Die Casting Inc in 2016. As a result, the company has organized operations as three divisions - Steering & Linkage Division, Die Cast Division and Rane Precision Die Casting.
Overall, the standalone revenue of the company over the last ten years is as follows
| 09 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Sales | 349.19 | 415.50 | 578.89 | 663.15 | 633.06 | 718.80 | 770.02 | 847.05 | 989.27 | 1,211.89 |
| SalesGrowth | 18.99% | 39.32% | 14.56% | -4.54% | 13.54% | 7.13% | 10.00% | 16.79% | 22.50% | |
| ProfitGrowth | 78.87% | 33.88% | 36.04% | -6.75% | 4.38% | 11.08% | 15.43% | 27.33% | 39.38% |
Rane Precision Die Cast was acquired and turnaround plan is in progress.
Financial Overview
| Trends | 10 years | 7 Years | 5 Years | 3 Years | Recent |
|---|---|---|---|---|---|
| Sales Growth | 14.83% | 11.13% | 13.87% | 16.32% | 22.50% |
| OPM | 8.95% | 9.36% | 9.47% | 10.02% | 10.89% |
| P/E | 22.21 | 17.41 | 21.48 | 21.31 | 9.38 |
Sales growth dipped in between and is now accelerating. OPM has been steady and improving. P/E of Sona Koyo is 45.17 and Z F Steering is 14.29.
Valuation compared to peers
Comparing to Sona Koyo and Z F Steering
| Rane | Sona Koyo | Z F | |
|---|---|---|---|
| ROE | 19.03% | 10.49% | 13.13% |
| ROCE | 17.81% | 12.83% | 15.33% |
| ROA | 8.13% | 5.86% | 11.10% |
| Debt to Equity | 1.02 | 0.72 | 0.17 |
Positives
- After a dip in revenue growth between 2012~2015, the company is now growing faster than it’s peers.
- As the Passenger and Commercial vehicle segments grow, the management expects the growth to continue/accelerate.
- Profit growth is slightly more than sales growth, indicating improved efficiency. This is also validated by the improvement in ROCE.
Concerns
- Turnaround of Rane Precision Die Cast is going on.
- I think Rane Holdings has increased it’s ownership by using Warrants. This has happened for the first time in recent years.
- P/E has reduced drastically from >25 at beginning of the year to ~10
- The volumes are low.
New to investing and looking for inputs from experts
Disc: Tracking, not invested.