Rain Industries| CMP INR 366.90 | Target INR 800 | Double the Money Target

By | 10th March 2018

 

Top pick of 2018

:RATIONALE:

  • ·       Vertically integrated conglomerate with strategic presence across the Globe
  • ·       2nd Largest producer of Calcined Petroleum Coke in the World
  • ·       Largest Coal Tar distiller in the World
  • ·       One of the leading producers of Cement in South India
  • ·       Q4 2017 sales rose 32% YoY at Rs. 3145cr. vs Rs. 2383cr.
  • ·       Net Profit surged 150% to 336cr. vs 134cr. Q4 EPS is Rs. 9.60

 

 

SURGE IN REALIZATION:

CALCINED PET COKE (CPC)

·       AVG REALIZATION OF CPC IN Q4 WAS $390/TON. PRICE SETTLEMENTS IN
·       Q1CY2018 IS IN RANGE OF $440-460/TON. HIGHEST REALIZATION SINCE
·       H1 2012
·       IN EUROPE, PRICES REACHED HIGHEST LEVEL SINCE H2 2011. WEIGHTED
·       AVG AT WHICH CONTRACT IS SETTLED IN Q1 CY 2018 IS $497/TON. (IN Q4
·       IT WAS $335/TON)
·       IN SOUTH AMERICA CPC CONTRACT PRICE IN Q1 CY 2018 SETTLED AT
·       $440-460/TON. ($370-390/TON IN Q4)
·       IN INDIA Q1 DEALS DONE IN THE RANGE OF $510-515/TON FOR EXPORTS.
·       DOMESTIC PRICE SETTLEMENTS AROUND $555/TON.

COAL TAR PITCH (CTP)

IN EUROPE PRICE SETTLEMENT BETWEEN $881-906/TON. THERE ARE OFFERS WHICH MAY SETTLE AT $979. IN Q4 CTP PRICES WERE $653-821. CTP PRICE IN NORTH AMERICA ROSE SIGNIFICANTLY IN Q1 AT $800/TON. IN Q4 CTP WAS TRADING BETWEEN $500-640/TON China supply side reform (curtailment of CPC production) and improving global demand from aluminium producers is behind surge in CPC/CTP prices.
 

REFINANCING BENEFITS

Co has already done refinancing of senior secured notes which will save $25-30 million each year. (INR 170-190 cr.) Taking account of big rise in carbon products profitability, interest rate savings and lower effective rates, RAIN MAY EVEN SURPASS ESTIMATES OF MOTILAL OSWAL.

VALUATION:

Even if Rain gets modest PE ratio of 20 (Industry PE 39.75), TARGET PRICE Rs. 800.
 
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My descriptions, videos, presentations are only for educational and information purposes and under no circumstances should be used for making investment decisions. I cannot guarantee the accuracy of any information provided.
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