MOSL: RAIN INDUSTRIES (Buy)-Strong results, but CPC volumes disappoint-CT Pitch remains strong
Rain Industries: Strong results, but CPC volumes disappoint; CT Pitch remains strong, while ACM is recovering; Maintain Buy
(RINDL IN, Mkt Cap USD1.4b, CMP INR275, TP INR480, 26% Upside, Buy)
- RAIN's 1QCY18 EBITDA increased 50% YoY (-4% QoQ) to INR6.6b, but missed our estimate of INR7.7b due to a QoQ decline in CPC shipments, as against our expectation of growth. There has been regrouping of segments - some of the value-added products from CT Pitch and other carbon segments have been moved to the chemical segment, which is now called as advanced carbon materials (ACM). Interest cost declined 29% QoQ (-23% YoY) due to refinancing of bonds. Adj. PAT rose 116% YoY to INR2.7b, led by lower tax rates in the US and Belgium.
- Carbon - CPC volumes disappoint, but CT Pitch getting stronger: CPC volumes declined 10% QoQ to 389kt (est. of 482kt) due to a delay in shipments to Indian smelters, led by prolonged negotiations over pass-through of import duty hike by 750bp. CT Pitch continues to look up, as volume increased 9% QoQ and 5% YoY to 133kt, while NSR increased 29% QoQ to USD864/t. Carbon segment volumes declined 3% QoQ to 662kt, while EBITDA/t was down 1% QoQ (+116% YoY ) to USD128/t. Segment EBITDA doubled YoY to INR5.5b.
- ACM EBITDA has started improving: EBITDA rose 3% QoQ to INR908m and EBITDA per ton grew 10% QoQ to USD127/t. RAIN announced USD66m capex to add a 30kt Dicyclopentadiene (DCPD/C9) resin plant in Germany to capitalize on the rapidly growing market for water-white resins for adhesive application.
Rain Industries Limited (RIL) is an India-based company, which is engaged in the business of manufacture and sale of carbon products, chemicals and cement. The Company operates through three segments: Carbon Products, Chemicals and Cement. The Carbon Products segment consists of Calcined Petroleum Coke (CPC), Green Petroleum Coke (GPC), Coal Tar Pitch (CTP), Co-generated Energy and other derivatives of Coal Tar distillation. The Chemicals segment includes the downstream operations of Coal Tar distillation and consists of Resins, Modifiers, Super Plasticizers and other specialty products. The Cement segment includes the manufacture and sale of Cement. The Company markets cement under the Priya Cement segment. The Company's Subsidiaries include Rain Coke Limited, Rain Cements Limited, Renuka Cement Limited, Rain Commodities (USA) Inc., Rain CII Carbon LLC, CII Carbon Corp, RUETGERS Canada Inc. and Handy Chemicals (USA) Ltd.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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