This is my first attempt at a stock story so forgive me if I miss any key points
Easter Treads Ltd.
CMP: 194 MCap: 100 cr. BV: 20
Background:
Eastern Treads Limited is an Indian conglomerate holding company, headquartered in Kerala. Eastern group was founded by late Mr. M E Meeran and it’s a part of 8000 million company – Eastern Group.
The Company was incorporated on July 2, 1993.
In recognition of the excellent performance on productivity in the field of manufacturing tyre-retreading materials, the Company had received FACT MKK Memorial Award for the year 2002-03. Besides, the Company also received quality certifications and accreditations including ISO 9001-2008.
Present and Future
Eastern Treads has developed new Diamond Quality tyre re-treads which offers better mileage on roads. The Company is optimistic about the new offering and believes that it will give them a competitive edge in the coming years.
Re-treaded tyres have a great future since the price of new tyres is going over the roof. Also, today’s re-treading technology ensures that these tyres have the strength and durability of a new tyre, at a lesser cost. Besides, the improved road conditions also now make it possible to go in for multiple re-treads.
Also being an eco-friendly product, re-treading as an alternative to buying new tyres is bound to get wider acceptance in the days to come with more countries following the ‘Go-Green’ Policy pursued by the European Union. So, Eastern Treads is open to embracing new ideas in tune with the changing trends and market realities on its way to becoming a leading global player.
The company has other products namely: Precured Tread Rubber, Hot rubber slab & camel back treads etc. The complete list is here: http://www.easterntreads.com/en/products/2
Points to note:
84 dealers with presence in 17 states
Positives:
- The beginning of re-treading industry in India. With environmental concerns being one of the top priorities in the minds of Auto manufacturers, this will definitely be a growing industry. Greater focus on safety and precautions is leading customers to move to the organized sector.
- High Promoter holding with no pledging.
- EBIDTA increased by 99% last year, PAT by 116%. ROE44% ROCE 27% and fastly growing.
- Margin expansion will further push the profits
Negatives:
- Company might be slightly be overvalued at current price but looking at the recent growth in Profits/Operating profit margins, I think the current ratios will change.
- Competition from branded tyre companies entering the retreading industry. First mover advantage?
- Acceptability of a new product in the market. I am not from the Auto Industry so will be great if someone can help figure out if there is a requirement of such a product.
- Debt to equity on the higher side but the company is continuously bringing down the debt in the last 3 years. DE has come down from 1.4 to 0.79 in this period.
disc: initiated tracking position
This is not a recommendation and anyone contemplating investment should do due diligence and make an informed decision.