Monday, January 23, 2012

Indag Rubber - reaffirm among my Top 10 investment buys

Indag rubber .Cmp 160. Lifetime high 167. Posts great results again. 
Revenues up +55% YoY. EBITDA up +74% YoY. Net PAT up +84%.
Slowdown ? What slowdown ? 
Bear market ? What bear market ? Just 4% below lifetime all time highs.
1 Year Performance +70% vs Sensex -15%
YTD performance +16% vs Sensex +6%. A 2x multibagger potential in my view.Details below
Had initiated among my top 10 investment buys / multibaggers on Oct`11 when it was ~119. Post here. But after posting great Q2 Sep`11 results (+130% YoY growth in PAT), it closed up next day +20% at 143.
So here is the quarterly Q3 Dec`11 results
  • +55% YoY growth in Net revenues to 55 crores
  • +74% YoY growth in EBITDA.
  • EBITDA Margin at 13.4% vs 11.9% last year
  • Net Profit up +84% to 5.3 crores.
9 months Results i.e 9m Dec`11 vs 9m Dec`10 YoY
  • +47% YoY growth in Net revenues to 160 crores
  • +89% YoY growth in EBITDA.
  • EBITDA Margin at 13.4% vs 10.4%
  • Net Profit up +103% to 14.4 crores. 
  • EPS of 27 or FY12 PE of 4.4x , EV/EBITDA of
And the usual Saanpaurseedi fundamental quality metrics ( Technical check already covered initially as just 4% below lifetime / all time high)
  • All set to post lifetime record high Revenues and profits. Stock price should also justifiably make new all time highs.
  • Debt free. As compared to 3 months ago, interest cost down 40% to just 0.24 crores in Q3.
  • ROE /ROCE set to cross 35% this year
  • Promoter Holding 77%
  • Secret of this unreal performance is the company`s business of Re-treading and recent 100% capacity expansion of retread rubber. Retread tyres cost 25-30% of a new tyre and gives almost equal life of a new tyre.Street is obsessed with Apollo Tyres,CEAT,MRF,Good Year.Due to rising raw rubber prices and hit on tyre makers,some brokers have put out a sell rating but dont realize that Indag Rubber is the hidden dragon. 
  • Valuation -at cmp / LTP of 160, market cap of 83 crores, annualized 9mDec`11 FY12 results.
    • FY12 PE of 4.4x
    • Price to Sales of 0.4x
    • EV / EBITDA of 3x with FY12 earnings growth of over +100%
    • Almost debt free (<5 crores)
    • To post ROCE / ROE of over 35% in FY12.
    • Definitely strong case for 2x re-rating in such valuation ratios. i.e target of 2x or 320 from here ,over a period of 1 year.
  • For latest and past results. See here
  • Results snapshot below. ( click to zoom)
 
Disclosure : I hold Indag Rubber.Intend to buy more.
Already a 10x bagger from Mar`09 low ( ~ 3 years ago) of 16.6.Chart below

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