Recently Porinju tweeted about this company at rs 24, and his huge fan base is such that after his tweet it hits circuit with high pending orders.
Thanks a lot for all the above views guys… I came across this company and thought of posting some questions here… Found answers to most of them frm the above posts.
Hello friends,
I just stumbled upon Rubfila today in my quest to find some winners from the fall in rubber prices recently. Looks interesting to me:-
1- Good ROIC of 36% (according to screener website).
2- Debt free since march 2012.
3- Good way to play the fall in rubber prices as looks like this co has some pricing power unlike the Tyre guys.
4- Valuations look pretty decent around 12x PE. Based on annualized Q4 EPS, it becomes 10x.
5- Company has undergone expansion in 2014.
6- Looks like company has good cash flows.
7- Q1 could be bad as one of their plants was shut for over 40 days due to some labor unrest. Could be a steal if it sells off on bad Q1.
8- Co came out of BIFR in 2012 with new investors.
9- In an interview in 2013, they targeted revenues of 350cr by 2016…so far they have hit 164cr as on march 2015. (in 2013, revs were just 100cr. 2014 was 125cr).
10- Co is based out of kerala and hence Rubber sourcing should be easy.
11- Latest development is a tie up to make some special rubber threads with some company - http://www.business-standard.com/content/b2b-plastics-polymers/abhisar-buildwell-inks-rubber-threads-supply-pact-with-rubfila-114090300844_1.html
12- 2014 expansion was done entirely from internal accruals. (PRUDENT & benefit of good ROIC).
13- Rubfila is the largest manufacturer.
14- In 2014 AR, they have mentioned they hope to keep growing by expanding in India and overseas.
If they can manage to grow at past 3 years growth rates, this stock can potentially be a winner as the Q4 annualized PE is just 10x and its a debt free company.
Any thoughts?
Neil Bahal
Please see the above replies for owner integrity. A stock no matter how cheap will continue to fall under the hands of the wrong promoter.
From what I have gathered in this thread, SEBI has barred the promoter several times on the broking service he runs…
Hope that helps
Balaji
look interesting stock
I m new here
any thoughts?
As far as I understand…this guy is a crook turned sage.
He has become completely clean.
- Company management is talking of achieving a 350 cr turn over by 2016.
- Rubfila continued to maintain the leadership in market. Rubfila’s products command a good premium in the market for its good quality and brand image
- Promoters found buying the stock from open market in the last one year.
Hey buddy,
So I spoke to the company and they said that they are really getting squeezed by Malaysian imports but they continue to maintain their market position.
There is no clarity for FY16 as it all depends on rubber prices. Company has added capacity last year and there is no plan to add any more capacity at the moment.
Basically, I did not get conviction after talking to them.
Ive given this a pass…will definite relook if I get a price of 35-38/share.
Regards
Neil
@gauravgzp87 - Hey buddy…no clarity whatsoever. They were not willing to explain anything. Passed it as they themselves didnt sound convincing.
But the price did go from 42 to 63 within 14 days hehe.
Anyways, without the benefit of hindsight, I can never buy anything without understand.
Cheers
Neil
I invested into Rubfila because I thought it had a Malaysian company as parent, who I thought must have been a big player in the market in Malaysia. However, when I searched for the parent company, it turns out to be some kind of holding company rather than a proper corporate with revenues etc. This is just my opinion based on some basic research, so please convince yourself if it is true. But after this, I disposed of my holdings in Rubfila.
Discl. Was invested with about 5% of my portfolio but have recently sold off…
Rubfila International at current levels of Rs. 82-83 presents an exciting investment opportunity. The current EV / market cap is about 390 crores, with negligible debt. September quarter was expectedly subdued due to GST issues / strike by the textile units in Gujarat which lasted about 3 weeks. The mgt. had however forewarned about the subdued Q2 in their Annual report.
The Co. has in the recent past added two additional production lines. The fifth line went into commercial production in March 2017 & the sixth line in August 2017. The Co. manufactures rubber threads that go in the making of elastics for under garments. It is the biggest player in the industry, controlling more than 50% of the market, which itself is growing at about 10-12%, given the under penetration of the inner ware segment. With rising incomes & demographics, growth in the sector is a given. Being a dominant player in the industry, the Co. enjoys high operating margins of about 20%.
With GST issues getting gradually resolved, the Co. should see a robust second half & could end up with Sales & Profits of about 250 Crs & 30 Crs for the current year, making current price levels look quite attractive.
Attaching the latest AR which gives decent insights into the business.
Disc: Invested.
http://www.bseindia.com/bseplus/AnnualReport/500367/5003670317.pdf
5 Likes
@RajeevJ - Hope you doing great! I added Rubfila in my ‘to-dig-deeper’ list on Friday when it popped up in my screener filter. It definitely looks good at a very high level. I will be back with my findings.
Disc - not holding
@RajeevJ: Very interesting pick in the current market conditions indeed. For a company with this kind of market share and growing quite profitability, I agree with you that the valuation should be substantially higher here. However, just a couple of quick checks (if you could give your insights):
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The margins have been erratic over the years. Is the moat strong enough to pass on the raw material fluctuations consistently going forward?
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The operating margins hit 20% for the first time in 12 quarters in Q1 FY18. Off course, as you mentioned Q2 was an abberation. With the sixth line commencing from August 2017, can we look at 20% margins consistently from the next quarter onwards.
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Also, this looks like an industry which is highly unorganised. So, although Q2 was an abberation, with the teething issue is GST getting over, do you think there is scope for the company to increase its market share further.
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What are the key risks according to you over the next 2 quarters. The management has mentioned aggressive imports and pricing of latex as a couple of key data points to track. What would be your views on the same?
If the operating leverage comes into play here and the company is able to record 20% margins consistently, then the ROCE/ROE will look very attractive indeed going forward. In an attractive sector with secular growth trends, this can easily command valuation of Rs.800 Crores.
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Can u share ur screener filters so that it can help all newcomers…
promoters selling shares for last 1 year in open market!
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In spite of consistant promoter selling the stock, price trend looks firming up. Something is cooking which is still not in public domain
First of all management has done tremendous job in last 6+ years by growing the business to current levels using only internal accruals and not through debt or issuance of new shares. Very few sub 350cr market cap businesses would have the balance sheet like Rubfila.
The biggest challenges faced by the business has been 1) wide price difference in latex in domestic vs other south east Asian countries where prices have been lower than India 2) the inverted duty structure of higher duty on raw materials and lower duty on rubber products. Rubfila still managed to overcome these challenges and became the industry leader in India for Heat Resistant Latex Rubber Thread (HRLRT) market which shows that there is something special about the management and the way they do the business.
With the recent run-up in prices from 50 odd levels in May to current levels of 80 – market is pricing in some future growth. It is not a net-net bargain. So it becomes very critical to check if the recent rally will be short lived or there is something big in here. While I am pretty convinced that management is excellent with their skin-in-the-game, below are the few things where I struggle and would like to dive deeper for better understanding which shall help to get an idea for how big can it get in next 5+ years. Below items need some scuttlebutt work:
- Why would biggest garment industry domestic customers of Rubfila not buy rubber threads (RT) from Rubfila but import cheap from south east Asian countries? What is the current price difference between RT of Rubfila vs imported RT?
- Can Spandex be a substitute of RT and garment manufacturers move 100% to Spandex in future? In short – can Spandex or any other alternative substitute kill RT?
a. Note from FY2015 AR – The growth in the elastic market is shared between rubber threads and spandex with major growth going for spandex. Spandex being a product of the petroleum chain, the cooling of the crude oil prices has resulted in lower prices helping in spurring the consumption. - Does Rubfila produce Spandex today? I have not seen this in their last 5 annual reports.
- How big is the domestic market for RT in textile industry?
- How big is the domestic market for Spandex in textile industry?
Disc: currently not invested but exploring answers to above questions.
3 Likes
It’s simple at a very high level - high RoE and ROIC, low debt, high promoter’s skin in the game and then check 1) if its Good or Great business in Buffett’s language 2) available at reasonable valuation