Some facts about Rain Industries as per my analysis –
Rain Industries Limited (RAIN) is one of the world's leading producers of calcined petroleum coke (CPC), coal tar pitch (CTP) and other high-quality basic and specialty chemicals. CPC is produced from GPC.
(1/n)
Rain Industries Limited (RAIN) is one of the world's leading producers of calcined petroleum coke (CPC), coal tar pitch (CTP) and other high-quality basic and specialty chemicals. CPC is produced from GPC.
(1/n)
Positive triggers over 2016-2017
1. Announcement of new capital projects for CPC production and HHRC plant.
2. China who is the market leader in aluminum sector puts restriction on production due to pollution issue which led to increase in demand of CPC.
(2/n)
1. Announcement of new capital projects for CPC production and HHRC plant.
2. China who is the market leader in aluminum sector puts restriction on production due to pollution issue which led to increase in demand of CPC.
(2/n)
3. Company did the debt re-financing at lower interest which helped in saving interest expense.
4. Due to strong demand of aluminum sector, smelters which were shut in US and Europe started opening up.
5. CPC demand increased which led to increase in its price.
(3/n)
4. Due to strong demand of aluminum sector, smelters which were shut in US and Europe started opening up.
5. CPC demand increased which led to increase in its price.
(3/n)
GPC price also followed but very marginally. The margin expanded significantly due to this gap.
6. Both volume and margin expansion helped the company and its posted strong results.
7. Stock got re-rated from Rs. 50 to Rs. 475.
(4/n)
6. Both volume and margin expansion helped the company and its posted strong results.
7. Stock got re-rated from Rs. 50 to Rs. 475.
(4/n)
Negative triggers over 2018-2020
1. Supreme Court initially imposed a ban on import of GPC & CPC in India but later on allocated some quantity to each calciners which was a major blow for the companies operating with these products.
(5/n)
1. Supreme Court initially imposed a ban on import of GPC & CPC in India but later on allocated some quantity to each calciners which was a major blow for the companies operating with these products.
(5/n)
2. GPC prices kept on increasing which earlier did not rise much in 2017 which impacted margins significantly.
3. Due to the ban, additional cost for the company increased like logistics cost, storage cost, legal cost, etc.
(6/n)
3. Due to the ban, additional cost for the company increased like logistics cost, storage cost, legal cost, etc.
(6/n)
4. High cost GPC got accumulated with the company in inventory and due to import ban it had to face many issues in clearing these inventories.
5. Aluminum sector faced a down cycle due to various reasons leading to low demand of CPC in last few years.
(7/n)
5. Aluminum sector faced a down cycle due to various reasons leading to low demand of CPC in last few years.
(7/n)
6. Company as part of strategy has shut down less profitable plants as part of cost savings measure.
7. Due to huge capex announced in 2017 and down cycle in the industry management planned to deferred debt repayment as part of strategy.
(8/n)
7. Due to huge capex announced in 2017 and down cycle in the industry management planned to deferred debt repayment as part of strategy.
(8/n)
8.On top of these, due to Covid and environmental clearance commercialization of CPC plant in Vizag and HHCR plant got delayed by 1 year.
(9/n)
(9/n)
Potential positive trigger for Rain in FY 2021 & 2022 as per my analysis -
1. All capex which were there in the pipeline are done except few small ones. All projects will start contributing from FY 2021.
(10/n)
1. All capex which were there in the pipeline are done except few small ones. All projects will start contributing from FY 2021.
(10/n)
2. Management has re-structured it's business during its down cycle by shutting down & selling less profitable companies.
3. Company focused intensively on its R&D and has developed a new product - ACP from its in house R&D, which can be a game changer for the company.
(11/n)
3. Company focused intensively on its R&D and has developed a new product - ACP from its in house R&D, which can be a game changer for the company.
(11/n)
With the help of ACP, company will be able to use inferior and low cost GPC available in India. Already the product is tested extensively and shown good performance as expected. Company has asked clearance from Supreme Court for this.
(12/n)
(12/n)
Company will set up one plant in India and one in US to start with in 2021. With this impact of Pet coke ban will be fully minimized.
4.Margins are likely to expand a bit once ACP is commercialized across all its plant in India and US.
(13/n)
4.Margins are likely to expand a bit once ACP is commercialized across all its plant in India and US.
(13/n)
5. Since there is no more capex in pipeline, management is now focusing on debt repayment as mentioned in recent concalls.
6. Seeing positive trend in Auto & Steel sector, aluminum industry can have a uptick in coming times.
7. Management can plan to list its US subsi.
(14/n)
6. Seeing positive trend in Auto & Steel sector, aluminum industry can have a uptick in coming times.
7. Management can plan to list its US subsi.
(14/n)
as part of unlocking value for its shareholder. Management has deferred the plans considering the down cycle it had in last few years due to which it might not have got good valuations. Now they might do it next 1-2 years once cycle resumes.
(15/n)
(15/n)
Management has shown resilience & posted decent results in Covid times. Also management has shown its innovating character during these years by spending on R&D & developing another product internally after the import ban of pet coke which is proving to be more effective.
(16/n)
(16/n)
With so much done & dusted in last 3 years, now hoping for value creation for the shareholders over next 2-3 years.
I know this is bit long but your views will help me shaping with these kind of analysis in future. @Atulsingh_asan @nishkumar1977 @Rishikesh_ADX
#Rainindustries
I know this is bit long but your views will help me shaping with these kind of analysis in future. @Atulsingh_asan @nishkumar1977 @Rishikesh_ADX
#Rainindustries
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