Hi Supratik,
As far as I know there retreading is a pretty generic business, and Indag doesn’t have any big time sustainable business moat here. So they quote at such poor valuation of 5-6 p/e. With increase in business and pan-india presence, they might get a p/e re-rating, but I am not much sure here.
Regards,
-Subash
Thanks subhash for the quick response, but retreading is mainly in the un-organized segment. Hence the scale of opportunity is huge. This business has also worked well in some western countries.
The interesting point is that, even if we have 1 vehicle sold, there are 6 tyres being sold for that vehicle and hence the probablity of retreading is much higher with 1 tyre having capapbility to be retreaded thrice in a lifetime. Well in a best case scenario, the retreading can be as high as 18 times that of vehicle growth (thats absurd but just in jest)
In a not so rich country like ours, ppl might want to trear the retreading way.
Supratik is right. In Europe, especially in countries like Sweden the percentage of re-treading tires being used for replacement is almost 60-70 %. But there are three fold reasons for this:
1). Lower Costs for replacement.
2). Negligible drop in Fuel consumption if right tire pressures are maintained.
2). Environment Friendly
Infact, in my view it is more time sustainable business than most as awareness about the environmental impact of not retreading spreads and value of running tires through
Indag is supplying retread products for Commercial Vehicles. Even if there is slow down in commercial road transport, the demand for retreading would be stable. Plus the Buses playing over intercity routes and state transport will have a continuously growing demand with increasing fleet sizes.
Experience tells me that Indag’s share price has reached its traditional consolidated level, with very small downside (at ROE 33, DE ~0, PE 5.6, and Dividend yield 2.3%). To me it is a very good buy both in term of technical (I mean layman’s technical observation) and fundamental perspective.
Another good thing is that it’s peak price is 27% up from CMP. Experience tells me that it usually breaks its previous peak.
I am thinking of loading Indag to 5% of my portfolio.
Hitesh/Donald/Hemant/Dhwanil/Rudra/Valuepickr seniors,
Please let me know your views on investing in Indag at CMP.
subash,
I think at cmp indag offers good risk reward.
technically stock is taking support at previous peak after having taken off and making all time high.
I have also covered back most of the qty sold at 300+
Indag Rubber is a stock to watch in the coming days. And why so?
As per candle stick charts this is what happened:
The one week moving average has cut the five week moving average from below. This shows that the stock has gained momentum and one can see a good upside.
Let us see what happened today:
One can see that the stock has been trading above the Bullish Support Line ( see line in blue). This shows the trend of the stock is up. The stock made a double bottom at 265 ( see two “O” s and then a triple top at 285 ( see three “X” s). Once the stock breaks 285 then the next resistance is at 320 where it will make another double top. Thereafter it will be in new territory for another new high.
Isn’t Point and Chart very simple to understand?
X represents buyers and hence demand
O represents sellers and hence supply.
Applying simple economics when demand exceeds supply the price rises and vice versa. If you do need any clarification please do write in to me.
Indag Rubber is a stock to watch in the coming days. And why so?
As per candle stick charts this is what happened:
The one week moving average has cut the five week moving average from below. This shows that the stock has gained momentum and one can see a good upside.
Let us see what happened today:
One can see that the stock has been trading above the Bullish Support Line ( see line in blue). This shows the trend of the stock is up. The stock made a double bottom at 265 ( see two “O” s and then a triple top at 285 ( see three “X” s). Once the stock breaks 285 then the next resistance is at 320 where it will make another double top. Thereafter it will be in new territory for another new high.
Isn’t Point and Chart very simple to understand?
X represents buyers and hence demand
O represents sellers and hence supply.
Applying simple economics when demand exceeds supply the price rises and vice versa. If you do need any clarification please do write in to me.
Indag Rubber is a stock to watch in the coming days. And why so?
As per candle stick charts this is what happened:
The one week moving average has cut the five week moving average from below. This shows that the stock has gained momentum and one can see a good upside.
Let us see what happened today:
One can see that the stock has been trading above the Bullish Support Line ( see line in blue). This shows the trend of the stock is up. The stock made a double bottom at 265 ( see two “O” s and then a triple top at 285 ( see three “X” s). Once the stock breaks 285 then the next resistance is at 320 where it will make another double top. Thereafter it will be in new territory for another new high.
Isn’t Point and Chart very simple to understand?
X represents buyers and hence demand
O represents sellers and hence supply.
Applying simple economics when demand exceeds supply the price rises and vice versa. If you do need any clarification please do write in to me.
dear all,
Any update or take on this name?
Has been under consolidation for last few months.
Hi,
I was having a look at Indag rubber. Would be great if Ayush and Donald could respond to the below.
1) There is a company by name Unipatch rubber under the same promoters. The products include retread material - http://www.unipatch.com/introduction.html The website of unipatch is better and has a foreign partner too. The related party transactions in the Indag AR with unipatch are negligible but similar products and plants at same place for both the cos?. What is your opinion on this?
2) Foreign promoter stake from 0% increased to 2% in 2012. Any idea who these promoters are?
3) There was concern raised over Indag's plans to diversify into unrelated bus and also the view that retreading may not have high potential in India with many players with high capacity. Any change in your views regarding these?
4) How did the sales jump suddenly in 2010? Such great timing with capacity expansion? The capacity, utilisation, rubber price data is absent in the 2012 AR. Do you have the same?
| 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |
| Capacity (MT for treads) | 3500 | 3500 | 6550 | 8950 | 8950 | 8950 | 13800 | 13800 |
| Utilisation | 3203 | 2953 | 3784 | 4455 | 5401 | 4636 | 7849 | 7500 |
| Utlisation % | 92% | 84% | 58% | 50% | 60% | 52% | 57% | 54% |
| Sales (MT) | 3176 | 3000 | 3682 | 4472 | 5174 | 4636 | 7592 | 7849 |
| Sales (Rs ,000) | 299800 | 307300 | 385227 | 551586 | 657876 | 670835 | 992819 | 1318219 |
| Realisation (Rs/kg) | 94 | 102 | 105 | 123 | 127 | 145 | 131 | 168 |
| Natural Rubber Price senstivity | ||||||||
| Realiastion growth | 9% | 2% | 18% | 3% | 14% | -10% | 28% | |
| Rubber price paid by com | 59 | 66 | 76 | 99 | 98 | 116 | 114 | 174 |
| Growth | 13% | 15% | 29% | -1% | 18% | -2% | 53% | |
| Natural rubber price | 57.00 | 55.00 | 89.00 | 104.00 | 105.00 | 75.00 | 145.00 | 264.00 |
| Growth | -4% | 62% | 17% | 1% | -29% | 93% | 82% | |
Hi Vinod,
Had a quick look at the webiste, it seems that co is more into tyre flaps etc and re-treading material i.e… gum and all (not re-treading)
Didn’t notice the change in holding…the foreign holders seem to be there from before.
No idea on that…need to take an update. Last time I inquired, they said its a general approval as they keep evaluating ideas.
Don’t have the data for FY12. But the interesting thing is that in FY12, the rubber prices fell and yet the co grew…that means there has been good volume growth. Earlier it used to be more of realisation growth.
Ayush
Q3/Fy-13 Results out…
Total Income Flat at 57.18 Cr v/s 57.6 Cr.
EBIDTA up 8.7% to 8.34 Cr from 7.67 Cr.
Net Profit up 11.5% to 5.92 Cr from 5.31 Cr.
EBIDTA margin is 14.6% v/s 12.7% (SQ-12) and 13.3% (DQ-11)
NET Profit margin is 10.4% v/s 9.3% (SQ-12) and 9.2% (DQ-11)
Total Raw material costs as a %ge to Income is 68.5% v/s 72.5% (SQ-12) and 73.4% (DQ-11)
Employee costs to Income is 5.9% v/s 5.6% (SQ-12) and 4.3% (DQ-11)
Other expenses to Income is 11% v/s 9.2% (SQ-12) and 9% (DQ-11)
Tax Rate 25.9% v/s 22.5% (SQ-12) and 23.1% (DQ-11)
9M/Fy-13 v/s 9M/Fy-12:
Total Income up 12.1% to 179.29 Cr from 159.93 Cr (Fy/11-12: 216.29 Cr)
EBIDTA up 20.7% to 25.48 Cr from 21.11 Cr (Fy/11-12: 30.22 Cr)
Net Profit up 28.2% to 18.42 Cr from 14.37 Cr (Fy/11-12: 20.87 Cr)
Reported 9-month EPS 35.09 v/s 27.37 (Fy/11-12: 39.75)
Recorded TTM diluted EPS: Rs. 47.48
On 08/02/2013, stock on BSE closed at Rs. 261.50/-
(Results updated on 09/02/2013, Saturday)
I think this qtr results have gone un-noticed due to flat topline. But looking at the fall in rubber prices, it means the co has done decent volume growth and maintained margins in this tough environment.
The co looks undervalued given its consistent performance. I have bot some more after the nos.
Ayush
Looks like there could some temporary sell off attributed to this reason.
Indag Rubber Ltd has informed BSE that with respect to the approval letter dated March 04, 2013 issued by SEBI allowing the promoter(s) / promoter group of the Company, Indag Rubber Limited, to sell equity shares of the Company held by them through Secondary Market Sale in order to meet the Minimum Public Shareholding requirement in terms of Rule 19A of Securities Contracts (Regulation) Rules, 1957.
In terms of Clause 3(b) of the aforesaid approval letter, to take note of the following:
)- Unipatch Rubber Limited, one of the promoter of the Company, would disinvest its shares
)- Total shares it would disinvest are 107467 i.e. 2.05% shares of the Company
)- Disinvestment would be completed within a period starting from March 14, 2013 to June 03, 2013.
Further, in terms of Clause 3 ©, the Company note that as on February 28, 2013, the promoter shareholding of the Company is 77.05% of the share capital.
Couldnt they offload it to some insitutions or a PE player in a off-market transaction?! . With the kind of volume and liquidity this stock attracts , off loading 107467 shares will probably hammer it out of shape:) But then it gives oppurtunity for interested investors to get in at lower levels
Indag is now available at 211. Does it make the stock even more attractive to enter? Any specific reason for the sharp correction from 260 to 210? My second question is does anybody have any forecast on rubber prices…how are they expected to behave going forward and the demand supply situation in rubber industry?
vijay
Hi attached is link to a recent interview of Ceat CFO. I had looked at it to gauge what likely impact it could have on GRP Ltd. in future. It provides some info on rubber prices and outlook, key point being as below: Q: Can you give us an indication on what this would do to domestic rubber prices itself. Currently rubber prices have fallen about 20 percent in the last five months and trading at somewhere around Rs 160 a kilo. What would this hike in import duty do to jack up prices? A: First, we need to understand that the fall of 20 percent is from a very high unsustainable level of rubber prices which was close to Rs 190-200 per kg, which had never been seen before. The drop is primarily because this was the highest production season when the tapping of rubber is maximum. We expect that price to go up. One because now it is the lean season for production of rubber and secondly, we also expect auto sales and the tyre sales in the market to go up, which was very low in the last few months given the whole state of economy. With the prices going up and on top of that the imports becoming costlier we believe that it will again push the rubber prices to unsustainable level. Hence as an industry we think it is not the right direction that we are moving in because tyre manufacturing outside the country will become much cheaper than doing it in the country. http://www.moneycontrol.com/news/business/hiking-import-dutyrubber-will-hit-industry-ceat_838985-0.html http://www.moneycontrol.com/news/business/tyre-prices-brakestable-rubber-exports-to-boom-ceat_829349.html
Indag total equity is 5.25 crores with 52.5 lac shares outstanding.
Now promoters need to sell off around 10500 shares to bring their stake down to the stipulated 75%.
They seem to have begun the sell off today as per announcement on bse. total sell quantity around 2000 at avg price of 210-13 per share. So 8000 more shares to go.
Looking at the chart of Indag, stock is taking support at 50% retracement level of the rally from 82 to 330. If it corrects further the 61.8% correction level should come to around 180 levels.
At levels of 180 I think I would prefer to buy Indag as valuations would be very compelling considering fy 13 EPS estimates of around 45-50 per share. That would provide a debt free company with high promoter holding without pledge at a PE of 4.
views invited. disc: no holding but under watchlist.
According to company announcementUnipatch Rubber Limited, one of the promoter of the Company, would disinvest its shares,total shares it would disinvest are 107467 i.e. 2.05% shares of the Company ,disinvestment would be completed within a period starting from March 14, 2013 to June 03, 2013.
There will be pressure on price until the total selling volume gets observed.I agree with you that at the price of 180 stock offers good value .
