ABOUT:-
RAM RATNA company is engaged in manufacturing
of enameled copper winding wires.
Its products
include modified polyester copper wires, polyesterimide wires, etc.
BRIEF ABOUT COMPANY:-
The company was originally
incorporated as Ram Ratna Winding Wires Pvt. Limited on July 21, 1992.
Subsequently the company was converted from private limited to public limited
and changed its name to Ram Ratna Wires Ltd.
The company is engaged in
manufacturing of enamelled copper winding wires. Its products include modified
polyester copper wires, polyesterimide wires, polyurethane self solderable
wires and dual coated wires.
A leading conglomerate in the
electrical industry and a global manufacturer, they collectively engineer every
electrical need of a modern society through the four business lines they
operate in:
i.
Wires and Cables
ii.
Winding Wires
iii.
Electrical Consumer Durables and Accessories.
iv.
Electro-Mechanical Multilevel Car Park
Solutions
Their approach to ingenious simplicity
is built into all their products that are made available through distributors
and retailers across 73 countries, globally.
PRODUCTS
OFFERED BY THE COMPANY:-
RRWL’s products are utilized in
various electrical equipments such as transformers, cables, transmission lines,
switchgears, capacitors etc. Its product portfolio comprises sixteen products
that broadly fall into five categories:
i. Enameled copper winding wires(ECW)
ii. Enameled copper strips (ECS)
iii. Submersible winding wire (SWW)
iv. Bare copper strips (BCS)
v. Enameled aluminum wire (EAW)
Few other products (amongst 16)
are: Modified polyester copper wires; Polyesterimide wires; Polyurethane
self-solder-able wires; Dual coated wires; fibre glass covered strip; enameled
fibre glass covered and varnished strips, etc. Its end products meet Indian and
international standards including IS, IEC, JS and NEMA.
The Company operates in the
transmission and distribution (T&D) industry and is the first choice for
large original equipment manufacturers (OEMs) and top electrical companies in
India as well as MNCs. Through its dealer-market nationwide, it also caters to
thousands of small manufacturing and repairing units of electrical equipments
in the country. Thus, it has an equal share of the organized and unorganized
market spread across the country. RRWL continues to develop value added products
like corona resistant wires and triple insulated wires as per customer
requirements keeping pace with developments across the world.
SHAREHOLDING
PATTERN:-
Promoters as on Sept’16 are holding
73% of the company’s shares. The company is having no pledged shares! The main
promoter, RAM RATNA RESEARCH & HOLDINGS PRIVATE LTD. holds 15.45% of the company’s shares. Highest
holder among the public shareholders is the LATA SHYAM PARWANEY, holding 2.9%
of the company’s shares. DIIs holding
stand at 0.02% (2DII holders)as of sept16.
Another interesting info, Promoters
of Ram Ratna Wires own 73% of the company. Another 10% is owned by anchor
investors. So only 17% is owned by around 4000 shareholders.
Financials
and future prospects:-
FINANCIALS:-
The company this financial year
posted an EPS of 4.39 vs 4.47 in FY 2014-15, thus posting negative growth for
this year. The company is having a good financial trend reporting fab Q2, more
than 250% rise in EPS YoY
Company’s operating profit per
share is Rs15.69 against 15.67. The OPM, CPM & NPM stands at 4.73%, 2.36%, 1.32%
against 4.61%, 2.21% and 1.32%. The ROCE decreased to 15.04% against 17%
while RONW decreased to12.94% vs 14.83%.
Company though is debt-ridden, but
having enough cash flow to pay interest on the debt. Company has been maintaining
a healthy dividend payout.
ABOUT RAW MATERIALS (expectations):
RRWL will benefit from falling copper prices and weak USD as copper is the
Company’s main raw material of which 32.74% of the total consumption is
imported along with state-of-the-art machinery for quality production.
FUTURE PROSPECTS AND EXPECTATIONS:-
The
modernization and expansion plan as envisaged by the Company at its plants for increasing the
production capacity, widening the product range and improving production
processes, is a continuous one and is being taken from time to time as required.
SECTOR outlook:-
The overall performance of the
Industry has been far from satisfactory in the past two years. The demand has
been sluggish with the Electrical Equipment Manufacturing Sector not having
adequate business from Power and infrastructure projects. The world seems to be
now recovering from the turmoil of past two years. Amongst the developing economies,
India has emerged as among the most promising prospects for the future. The
icing on the cake has been the recent Union Budget which is hugely focused on
infrastructure development nationwide. Naturally, they look forward to being a
significant contributor in this segment.
The demand for winding wire is directly linked
with the growth in power sector. The Union budget for the financial year 2016-2017
focus on accelerated growth within power sector with increased outlay of the
tune of ` 79,884 crs, apart from 3,000 crs allocated to the nuclear power
generation. This combined with programs like “Make in India” and “Skill India” will
give a big boost to domestic production of Electrical & electronic
equipment and hence greater demand for winding wires is expected.
As per the projection by Union
Power Ministry, by the year 2020, every home in the country will be
electrified. This coupled with the success of UDAY (Ujwal DISCOM Assurance
Yojana) scheme of the Energy & Power ministry to strengthen the working of
State electricity boards to supply electricity to its consumers will increase
per capita consumption of electricity in India. The Union Budget 2016-2017,
have given prominence to Agriculture and Rural sector, apart from
infrastructural development. All these factors will boost the demand for
Electrical equipment for Industry and domestic consumption in the vast rural
sector which in turn will result in huge demand for winding wires.
On the export side, Indian
Electrical equipment Industry is quite matured and competent as per world
standards, having export markets in countries like, USA, Germany, UAE, Saudi
Arabia, France, UK, Nigeria, Kenya and Brazil etc. This sector is backed by
diversified, matured and strong manufacturing base either directly or through
foreign collaboration with proven performance in rugged design of equipment to
meet the stringent international Standards. All these factors will contribute to
the demand for best quality winding wires. The very fact that, Salasar Copper
(Unit-1) of this company is credited with maximum no. of International
certifications, such as ISO 9001: 2008; ISO 14001:2004; ISO 50001: 2011; OHSAS
18001:2007 speaks of its quality, reliability and competitiveness which will
definitely help demand for the company’s products.
Technical:-
RAM RATNA is technically bullish. It has
crossed its life-time resistance at 75-77 zones after creating near triple-top
in that zone. Right now Ram ratna is trading at its lifetime high. The company
is above all EMAs and SMAs thus showing its bullishness. The price is going
above Bollinger bands, so it might create a base at 86-92zones before another
up-move.
SWEET
SPOTS:-
1)
Company has been maintaining a healthy dividend
payout.
2)
The company’s operating cash flow is positive
all the time, thus maintaining its stability and the ability to pay interest on
its debt and also having huge cash reserves for further expansion.
3)
Increasing cash reserves on low equity; can
issue bonus anytime.
4)
Company has plans for future expansion.
5)
No doubt in promoters’ integrity. The founder
of the company himself has raised from the earth to sky, he will try his level
best to push its way further.
6)
Modi Govt. Has vast Interest in infrastructure
sector, where they have already focused their main attention on this sector in
their last budget; further focus on this sector will be a boon for this company.
This company already has a wide customer base.
7)
Since last 3 quarters the company has done a
net profit of 4+crs, that too on the back of a sluggish year. There is quite
good scope that annual EPS for the current FY could well double compare to last
FY.
8)
Expecting good Q3 results.
9)
Expecting this union budget to be positive
for the infrastructure sector thus increasing the company’s wire demand.
10) Though
the last year balance sheet indicates a debt of 100+ crores, long term debt
here stands at only 12 - 15% of that. Rest all could be working capital.
11) Mcap to sales ratio is 0.29 thus giving ample
of opportunity of appreciation.
Hot
spots:-
1) In the winding wire business, the global
demand and supply of copper and its prices plays a vital role and could
significantly affect the Company’s turnover.
2) Company has a low return on equity below 15%
for last 3 years.
3) Highly fluctuating price of copper, which is
the principle input to the winding wire Industry, is a serious concern.
4) Delay in infra spending by the government.
5) Currency fluctuations could affect the
results of operations.
6) Margins are low for the company.
7) The company couldn't capitalize on falling
copper prices as the EBITDA margins are stable in the level of 4%-4.7%
8) The receivables are very high approx. 55% of
the company’s total assets.
MY
TAKE:-
The company is expected to do well in coming
years. The writer of this blog reco it at 76, has TGT1:250, TGT2: 470-500 in next 30-40months.
UPDATE 25th July 2018 (CMP 144):-
RAMRATNAWIRES met our 1st tgt in less than 18months. HOLD is my call!
Disc:- All
the info are based on the writer's own research/gathered from public domains.
The writer of this Blog is neither any advisor nor related to any brokerage
houses!! The writer might be himself invested in the stock after his own
research so the views might be biased. One must do their own research before
investing. The writer of this blog won't be held responsible for any of your
profit/loss in your investment/trading career!
