Indag Rubber Ltd. share price target

Indag Rubber Limited (IRL) started in 1982 is engaged in providing retreading material ranging from pre-cured treaded rubber (PTR) strip to other retreading accessories like envelopes and rubber cement. IRL sells its products through its retreader and dealer network spread across India. It also routes its sales to State Transport Units. IRL has one manufacturing plant, which is located in Nalagarh in Himachal Pradesh with a total installed capacity of 20000 MT per annum for manufacturing PTR and allied accessories. IRL was initially operating as a joint-venture between the Khemka group and M/S Bandag Incorporated, USA - one of the largest players in the US retreading industry. However,...

Excise Duty Impacted Q2FY17 on YoY; Healthy Balance Sheet Maintained with Strong Cash Balances: The excise duty exemption which the company availing at its manufacturing location at Nalagarh, Himachal Pradesh has expired on Jan 15, 2016 and this affected thetotal realizations and the net profits of the company in Q2FY17 and in the first half of FY17. In Q2FY17, IDR reported a weak performance with negative growth of 43.0% in topline and negative growth of 24.9% on YoY basis in bottomline to Rs. 405 Mn andRs.65 mn respectively. Inspite of weak growth in topline, EBITDA margins improved by 229 bps to 21.1% on YoY basis mainly on the back of sginficant growth in other income.

About the company: Indag Rubber was founded by the Khemka Group in 1978 as a JV with Bandag group. The JV ended in 2006 with the promoters buying the stake. The company is in the business of retreading tyres (87%), mainly for Commercial Vehicles in the domestic market. Retreading is a technology where old tyres are made serviceable by removing worn out/damaged treads and replacing it with new treads. Indag has an ~9% market share (2nd largest) in an industry worth an estimated ~31bn p.a. 40-45% of the market is unorganized. Indag recently expanded its capacity (plant in Himachal Pradesh) from 13,800 MT to 20,000 tonnes, at a cost of Rs70mn. Rationale of Retreading: 1. 30-50% of the cost of a new tyre with nearly an equivalent life2.Tested...