INDAG RUBBER

The company did not do too well in Q3FY17. Net sales dropped 27% (YoY) at Rs.45 crore and net profit came in at Rs.4 crore, down 50%. QoQ, it was down 36%. Though raw material costs were down 37%, interest cost dropped 59% and tax outgo was halved, the poor topline is what dented the bottomline. EBITDA was down 45% at Rs.6 crore and margins slipped from 18% to 13%.

The company’s equity is small at rs.5.25 crore and reserve is at Rs.152 crore. Annualised EPS is at Rs.8.5 (FV of Rs.2). Its 9MFY17 net profit is at Rs.16 crore and with just one more quarter to go, it seems unlikely, purely on fundamental efficiencies to surpass FY16 net profit of Rs.32 crore.

Indag Rubber is the largest retreading company in India, retreading used tires and given the run-up in rubber and new tyre costs, demand has been good for this company, mainly from commercial vehicles. And going ahead, with the debottlenecking completed and expansion to 20,000 MTPA, the company could do well in Fy18. Implementation of GST will work in its favor as it will remove different taxes and result into level playing, especially with the unorganized sector, which is its biggest competitor.