Rajratan Global Wire Ltd

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About the company

Rajratan Global Wire Ltd was established in 1989, it manufactures bead wire, high-carbon steel wire with specialization in TBW, which is bronze-coated and used in tyres and drawn steel wire (known as black wire), used in automobile, construction and engineering industries.

Q4FY23 Updates

Financial Results & Highlights

Detailed Results:    

1. The company’s operating Revenue dropped by 11% YoY to Rs. 21943 Lakhs.
2. The company’s EBITDA was lower by 29% YoY to Rs. 3380 Lakhs and EBITDA margin

lower by 381 bps at 15.40%.

1. The company’s PBT lowered by 36% YoY at Rs. 2580 Lakhs.
2. The company’s PAT lowered by 45% YoY to Rs. 2027 lakhs.

Investor Conference Call Highlights 

1. The company did not have a great year in terms of business, particularly in Thailand business. It has achieved satisfactory results in India Business (55,000-60,000 Tons in sales)
2. Ukraine-Russia War and America’s recession have affected Thailand’s business, reducing sales by 5000 Tons (35,000 Tons, the previous year)
3. The company claims that this year was full of learning and in the upcoming financial year, the company will use these learnings to capture a bigger market share by using full capacity and moderating prices in Thailand.
4. The company is projecting a growth of around 15% in India.
5. The company states that it is optimistic about the upcoming year and when comparing this year’s performance with the global competitors, the chairman claims that he is satisfied with the company’s performance.
6. The company stated that to win the competition coming from the new Chinese company and other probable companies, the company will find a balance between decreasing the selling price and optimizing the cost of production to earn a decent margin.
7. The company was able to have an EBITDA margin of 14-15% in Thailand and above 18% in India in FY22.
8. The company is expecting an 18% EBITDA margin and 15-20% of overall business growth in FY24.
9. The company stated that it is the only supplier to Michelin Ltd.(Tyre production company) in India, but this opportunity will not bring a substantial increase in business for the company.
10. ATMA- Automotive Tyre Manufacturer Association has stated that the tyre market will increase to a minimum of 165,000 Crores in 2030 from 65,000 Crores in 2023 which is a bullish sign for the company.
11.  The company is also in business discussions with companies like Bridgestone, Continental and Goodyear. 
12.  The company has started a marketing office in Europe for the last three months.
13. The company is building a production plant in Chennai too.
14. The company states that even though it’s a highly competitive business, it has certain advantages like profitability because of the low cost of production.
15. The company has invested its resources in adapting digitalisation and has converted Rajaratan Pitampur Mother Factory into a digital factory.
16. Ceat Ltd. has again chosen Rajaratan to become the partner in their Grand Deming Journey.
17. The company states that the only major challenge it sees is a delay because of the consequences of geopolitical problems.
18. The company aims to fulfil 15% of global demand in future and is doing 8% in present.
19. The company states that the price of raw materials increased this quarter which decreased the margins even though the volume increased by 20% in India.
20. The company stated that it will not claim any kind of Production Linked incentive for the Chennai plant in FY24.
21. The company stated that the majority of capex will be dedicated to the Chennai plant and minimal will be dedicated to the Thailand plant.
22. The company justified the reason behind substantial gross profit in Thailand by stating the lower volume factor and the price pressure.
23. The company stated that it is very confident about China not decreasing the prices of the products any more and things not going South further.
24. The company expects a 10% domestic demand increase in FY24.
25. The company has also seen imports coming from Vietnam and Malaysia last year to the tune of 20,000 tons- 25,000 tons
26. The market share of the company in Thailand dropped to 18-17% from around 25% this quarter. The reason behind this drop was the 5 Chinese companies with deep pockets who buy in huge quantities and a main customer- Sumitomo operating at a lower level.
27. The company is very confident about the Chinese companies not entering the Indian markets because of trade difficulties and logistics.
28. The company is expecting their USA and Europe-based customers will resume buying again in the upcoming financial year.
29. The company achieved an 8.5% EBITDA margin in quarter 4 in Thailand.
30. The company stated that it has an excellent order book for the upcoming Quarter 1.
31. The company stated that there are no disruptive changes in the technology being used as of now.
32. The company stated that there will be no major changes with respect to incoming Electrical vehicles’ age.
33. The company stated that it has installed a capacity of 60,000 tons of bead wire in Thailand, 60,000 tons of bead wire, and 10,000 tons of other wire in India.
34. The company claims that it will be the 4th or 5th largest company globally after having a capacity of 1,80,000 tons.
35.  The Chennai plant will start operating in the second half of FY24.

Analyst’s View

Rajratan Global Wire Ltd. is a leading manufacturer and supplier of bead wire in India and also the only manufacturer of bead wire in Thailand. With a comprehensive group production capacity the company has earned a reputation of being one of the most trusted and preferred brands around the globe. Rajratan Global Wire Ltd. operates in the Metals – Ferrous sector. The management has learnt imperative things this year and is prepared for the upcoming financial years strategically.  It remains to be seen how the company’s near-term performance will pan out given the steady rise in inflation. Given the company’s strong positioning and its growing market, Rajratan Global Wire Ltd. is a good Metal stock to watch out for.

Q3FY23 Updates

Financial Results & Highlights

Detailed Results:    

1. The company’s operating Revenue dropped by 11% YoY to Rs. 21943 Lakhs.
2. The company’s EBITDA was lower by 29% YoY to Rs. 3380 Lakhs and EBITDA margin

lower by 381 bps at 15.40%.

1. The company’s PBT lowered by 36% YoY at Rs. 2580 Lakhs.
2. The company’s PAT lowered by 45% YoY to Rs. 2027 lakhs.

Investor Conference Call Highlights 

1. The company did not have a great year in terms of business, particularly in Thailand business. It has achieved satisfactory results in India Business (55,000-60,000 Tons in sales)
2. Ukraine-Russia War and America’s recession have affected Thailand’s business, reducing sales by 5000 Tons (35,000 Tons, the previous year)
3. The company claims that this year was full of learning and in the upcoming financial year, the company will use these learnings to capture a bigger market share by using full capacity and moderating prices in Thailand.
4. The company is projecting a growth of around 15% in India.
5. The company states that it is optimistic about the upcoming year and when comparing this year’s performance with the global competitors, the chairman claims that he is satisfied with the company’s performance.
6. The company stated that to win the competition coming from the new Chinese company and other probable companies, the company will find a balance between decreasing the selling price and optimizing the cost of production to earn a decent margin.
7. The company was able to have an EBITDA margin of 14-15% in Thailand and above 18% in India in FY22.
8. The company is expecting an 18% EBITDA margin and 15-20% of overall business growth in FY24.
9. The company stated that it is the only supplier to Michelin Ltd.(Tyre production company) in India, but this opportunity will not bring a substantial increase in business for the company.
10. ATMA- Automotive Tyre Manufacturer Association has stated that the tyre market will increase to a minimum of 165,000 Crores in 2030 from 65,000 Crores in 2023 which is a bullish sign for the company.
11.  The company is also in business discussions with companies like Bridgestone, Continental and Goodyear. 
12.  The company has started a marketing office in Europe for the last three months.
13. The company is building a production plant in Chennai too.
14. The company states that even though it’s a highly competitive business, it has certain advantages like profitability because of the low cost of production.
15. The company has invested its resources in adapting digitalisation and has converted Rajaratan Pitampur Mother Factory into a digital factory.
16. Ceat Ltd. has again chosen Rajaratan to become the partner in their Grand Deming Journey.
17. The company states that the only major challenge it sees is a delay because of the consequences of geopolitical problems.
18. The company aims to fulfil 15% of global demand in future and is doing 8% in present.
19. The company states that the price of raw materials increased this quarter which decreased the margins even though the volume increased by 20% in India.
20. The company stated that it will not claim any kind of Production Linked incentive for the Chennai plant in FY24.
21. The company stated that the majority of capex will be dedicated to the Chennai plant and minimal will be dedicated to the Thailand plant.
22. The company justified the reason behind substantial gross profit in Thailand by stating the lower volume factor and the price pressure.
23. The company stated that it is very confident about China not decreasing the prices of the products any more and things not going South further.
24. The company expects a 10% domestic demand increase in FY24.
25. The company has also seen imports coming from Vietnam and Malaysia last year to the tune of 20,000 tons- 25,000 tons
26. The market share of the company in Thailand dropped to 18-17% from around 25% this quarter. The reason behind this drop was the 5 Chinese companies with deep pockets who buy in huge quantities and a main customer- Sumitomo operating at a lower level.
27. The company is very confident about the Chinese companies not entering the Indian markets because of trade difficulties and logistics.
28. The company is expecting their USA and Europe-based customers will resume buying again in the upcoming financial year.
29. The company achieved an 8.5% EBITDA margin in quarter 4 in Thailand.
30. The company stated that it has an excellent order book for the upcoming Quarter 1.
31. The company stated that there are no disruptive changes in the technology being used as of now.
32. The company stated that there will be no major changes with respect to incoming Electrical vehicles’ age.
33. The company stated that it has installed a capacity of 60,000 tons of bead wire in Thailand, 60,000 tons of bead wire, and 10,000 tons of other wire in India.
34. The company claims that it will be the 4th or 5th largest company globally after having a capacity of 1,80,000 tons.
35.  The Chennai plant will start operating in the second half of FY24.

Analyst’s View

Rajratan Global Wire Ltd. is a leading manufacturer and supplier of bead wire in India and also the only manufacturer of bead wire in Thailand. With a comprehensive group production capacity the company has earned a reputation of being one of the most trusted and preferred brands around the globe. Rajratan Global Wire Ltd. operates in the Metals – Ferrous sector. The management has learnt imperative things this year and is prepared for the upcoming financial years strategically.  It remains to be seen how the company’s near-term performance will pan out given the steady rise in inflation. Given the company’s strong positioning and its growing market, Rajratan Global Wire Ltd. is a good Metal stock to watch out for.

Q4FY22 Updates

Financial Results & Highlights

Detailed Results:

1. The company reported a strong quarter with consolidated revenue rising by 34% YoY coupled with PAT growth of 61% YoY. 
2. EBDITA margins stood at 19.21% while PAT margins at 14.96%.
3. EBIDTA for the quarter grew at 46% YoY.
4. ROE stood at 36.9%.
5. Working capital days for the FY reduced from 64 to 27 days owing to increase in creditor days from 53 to 79 days.
6. A Final Dividend of Rs.2 per share has been declared in Q4.

Investor Conference Call highlights:

1. The management states that margin expansion has taken place due to 
   1. capacity expansion in India which has reduced cost of bead wire conversion, 
   2. reduced variable costs, 
   3. improvement in product quality and 
   4. product mix along with change in customer profile leading to the ability to pass on cost of raw material to the consumer.
2. The company currently supplies at prices lower than what China, Malaysia and Vietnam charges thus it is not expensive to customers.
3. Customer contracts are on a quarterly basis while raw material procurement is on a monthly basis.
4. The Thailand unit’s profitability is not at par with the India unit due to increase in capacity utilization to 95%.
5. The company will increase capacity in Thailand to 60,000 tons this year.
6. The company doesn’t expect to get affected with EV disruption since tires will remain the same whether it is traditional auto or EV.
7. The company has received approvals in Thailand from few customers leading to better push of volumes from added capacity.
8. The company expects the tire market to grow at 7-8% CAGR for next 5 years.
9. The management also sees possibility to export products to other countries from India.
10. The management sees high customer stickiness due to relationship with marquee clients & the cost of bead wires being only 3% of total costs for tire makers.
11. The Chennai capacity of 60000 tons will take 2-3 years to be properly utilized.
12. The company is only bead wire manufacturer in Thailand coupled with lower imports from other countries due to supply chain disruption leading to higher share of domestic biz.
13. The management expects profitability in domestic market of Thailand will be higher due to less volatility of freight, storage and better cost of management.
14. The management is targeting 40% of Chennai plant to be catered for exports market.
15. The management believes it is the lowest cost bead wire manufacturer in the world.
16. The company enjoys economies of scale advantage against its customers.
17. Debottlenecking will help in achieving higher utilization.
18. The company plans to produce 10,000-11000 tons of black wire.
19. The company currently supplies 500-600 tons to USA without taking any selling efforts.
20. The company is incurring Rs.300 Cr capex for Chennai plant
21. The company has availed Rs 100 Crs worth of debt from two banks and wont avail any further loans for capex.
22. The company expects 20% volume growth in the coming year.
23. The Indian market size is 120,000 tons and market share of the company is 45% in the auto tier customer segment.

Analyst’s View:

Rajratan had a good quarter with revenue growth of 35% YoY and profit growth of close to 61% YoY in Q4. The company expects good demand from export markets due to its low prices as compared to other exporters from China, Vietnam and others. The management is optimistic for the company’s future as it is EV agnostic in nature and should not be affected by the EV disruption movement. The management maintains that the company will be able to maintain its edge as the lowest cost manufacturer in the world for bead wire. It is also expecting to add to the Thai capacity and use 40% of the production from the Chennai unit for exports. It remains to be seen how the company will be able to retain its lowest cost manufacturer position and how the export market pans out for it. Nonetheless, given the company’s strong market positioning in the domestic market and its inherent low cost manufacturing capacity, Rajratan is a good auto ancillary stock to watch out for.