10 Questions for Gujarat Reclaim Management -25th Aug, 2011
1). Product Segments & Contribution
Natural rubber reclaim and Synthetic rubber reclaims are GRRPLâs two main segments. In synthetic rubber reclaims you have Butyl, EPDM, Nitrile, Latex.
Kindly throw some light on the end-user industry for synthetic rubber reclaims and the demand-supply situation -both domestic and exports.Who are your customers? What kind of margins are prevalent in synthetic rubber reclaims?What kind of revenue contribution is coming from synthetic rubber reclaims today? Is Butyl reclaims contributing the most within synthetic rubber reclaims? Which is the most promising, and why?
How is the RM procurement situation in synthetic rubber reclaims? How have you secured your RM supplies on this front?
2). Exports - Geographies and Contribution
What is the exports sales contribution currently? Kindly provide the Geographical spread - how much from Europe, US and other markets. How much of export sales is booked in Euros and how much in US$? Do you have higher margins from Export sales?
3). Competition âDomestic and Export markets
In the domestic market you have Balaji Rubber (36000 MTPA) and Elgi Rubber as the main competitors. Elgi Rubber with acquisition of Netherlands based Rubber Resources (42000 MTPA). Both companies also seem to have competencies in Butyl rubber reclaims.
Who are your major competitors in the Export markets? How big is the overall Reclaim rubber market, and what is the Industry rate of growth? How is Gujarat Reclaim competitively placed today - Is GRRPL growing faster than the Industry growth and grabbing market share from Competitors. If yes, why? What are your competitive advantages?
How strong is Chinese competition? In terms of capacities, how much bigger are they compared to GRRPL? Does GRRPL have any advantages in terms of the Product mix today visâvis Chinese competition? What is the price differential, if any, between Chinese and GRRPL products to OEMs.
How is the demand supply situation generally? If you had the full 80,000 MTPA capacities today, would you be able to sell comfortably? Are you aware of competitors expanding capacities aggressively? Is it likely that the demand-supply situation will get skewed with volatility in European and US economy?
4). Growth - Outlook
You have recently expanded capacity to 60000 MTPA after 3 years of consolidation. There is also expansion work of 10000 MTPA ongoing for the Erode facility, which might take capacities to 70000 MTPA by FY12. 1QFY12 sales grew at a healthy 31% and PAT grew at 47% over the last year quarter. You had guided for a 30% growth CAGR for next few years.
**Kindly comment on the current outlook and plans. What is the sense that you have got from your customers, especially Exports? What is your order book size at the moment? Have you noticed any slowdown in orderbook in Q2? If Export demand sees a decline, what are the plans to counter this risk? Can domestic market absorb additional sales? How do you see margins playing out for the rest of the yearFY12? **
5). Erode âManufacturing Plant on 12.5 Acres
Mott MacDonald, the global engineering and development consultancy has been appointed as EPCM consultants for this plant.
**The stakes seem to be very high for this plant! Kindly tell us a little more on what is planned and what kind of sophistication/productivity efficiencies is this likely to bring? What kind of capacities are planned at this facility in total? **What is the timeline for the first phase of expansion? Is this facility going to be dedicated for Butyl reclaims as reported in the press, or this will be multi-product?
6). Thermoplastics foray
Reportedly, this is a very exciting space and has huge potential. Kindly share the developments in this space? Any major successes? How much does this contribute to revenues today?
**7). **Customer segments - GRRPL products are approved at 7of the top 12 tyre companies in theworld and 4 of the top 10 non-tyrerubber makers globally.
Kindly share recent customer successes and or deeper penetration into existing accounts. Have more marquee names been added to the list?
Given the focus on synthetic reclaim rubber are we seeing more penetration in that segment? Who are your top customers in this segment?
How much does your top 3 customers contribute to Sales? Does any one customer contribute more than 10% of Sales?
8). Investor Relations âCommunication
GRRPL needs to improve communication with the investor community at large. The website does not provide even the Annual Reports.
With the company growing in size and stature, are we going to see a more proactive IR at GRRPL. Can we expect regular Analyst Calls & Presentations form the company updating investors on its successes, opportunities and challenges ahead?
**9). **Small Equity base. Low liquidity
At 1.33 Cr the equity base is pretty low and average liquidity/volumes traded (1000) is also low.
Does the company plan to do something on this front to allow more investors to participate in GRRPLâs stock story â splits/bonuses, etc. Any plans on listing in NSE?
**10). **Major opportunities & Challenges
Where does Gujarat Reclaim see itself in the next 5 years? What is the size of the opportunity in its niche? Will it improve its position among the top 3 global suppliers of reclaim rubber? Can we see GRRPL reach 500 Cr Sales, by when? What are the major challenges before the company and where are the big opportunities?
