Thread by @niveshaay

A long thread on the analysis of Rain Industries

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Rain Industries Limited is a play on the global aluminum demand. The aluminium LME prices are near-decade high
#aluminium #Rainindustries

Rain Industries Limited (RAIN) is a leading vertically integrated producer of carbon, cement, and advanced materials products. The company owns and operates a total of 18 manufacturing facilities. These facilities are established across North America, Europe, and Asia.

The sale of its products depends on the overall aluminium production. Aluminium, Construction, Carbon black & Graphite are the major contributors to the overall revenue of the company.

Near decade-high aluminium prices - The aluminium LME prices are at high levels since late 2018 implying higher capacity utilisation for aluminium smelters. The management also guided that ~4 million tonnes of new aluminium capacity are expected to come globally in 2021.

Out of this, 3 million tonnes would come in China in the form of new capacities or a re-start of idled capacities. This will increase the market opportunity for Rain Industries Ltd. as there would be less exports of CPC from China and CTP to the Middle East and South Africa.

Aluminium Capacity Expansion in India -
Coal India will set up SPVs for about Rs 38,000crore the green-field aluminium project, and an about Rs 23,400crore aluminium smelting unit with state-run NALCO
NALCO to invest Rs. 30,000 cr for expansion, diversification in next 6-7 years

With the proposed expansion plans of both coal India and Nalco, the probability of receiving a favorable outcome from the government to Rain for the commencement of a new vertical shaft calciner plant becomes higher.

The Company is witnessing a good demand in CPC and CTP segments. But, one needs to watch the GPC prices too. It wouldn’t be difficult to pass on the increase in price because of the higher LME aluminium prices due to shortage of scrap and primary aluminium in the global market.

Completion of Capex - Total Capex of $153( INR 1150 cr) million for Hydrogenated Hydro Carbon (HHCR) Resin, Vertical shaft & Anhydrous Carbon Pellets( ACP) Plant
The EBIDTA contribution of these plants can reach $50 million on ramping up by end of 2022

Cost-cutting measures by the company
The Company has closed operations of plant situated at Uithoorn, Netherlands. The division mainly catered to printing ink adhesives, which witnessed slower demand and exhibited eroding profitability.

On 31st Dec 2020, the company sold two of its subsidiary for Rs. 637 crores. The funds would be utilised for repayment of debt resulting in Rs 32 crores of interest savings p.a.

They also guided on the reduction of the overall interest rate from 5.5% to 4% in the next 1-2 year

The company has high debt on its book.
The management has also guided that no new capex in line for some time, the focus would be on reducing debt.

Cash profit upside in the next 2-3 years from all efforts

Expected free cash flow in next 2 years

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