We discussed Indag Rubber recently and the stock has done quite well in a challenging environment.
We recently visited 3 companies to get a better understanding of them – 1. Indag Rubber 2. P I Industries 3. MBL Infra. The meetings went on well and all the three companies are optimistic. Here are the key highlights of our meeting with Mr. J K Jain (CFO), Indag Rubber:
Indag as a brand has got fairly established. A certain segment of quality conscious customers do ask for Indag brand.
Our quality has stood out over the years. For example we are the only retreader who can collect advance payment from some State Transport Units (STU) like the UP STU.
We have introduced newer materials and more effective tread patterns that have started paying off in the last couple of years. We have started growing at a much faster pace now.
If a new CV tyre costs Rs. 18000 then retreads usually sell at 4500-4800 range and a good retread runs approx. 80-85% of a new tyre. Hence it’s a logical cost saving proposition and the business will continue growing.
Roughly 40% of tyres come for retreading at the end of useful life.
Demand is robust, we have not seen any slowdown in demand of retreads.
Please check out the complete management interview (requires free login)
One of the key take away from the meet is that the company is being professionally managed and management is quite conscious on the quality of earnings rather than just growth. Company maintains strict control on debtors and inventories and hence it has good free cash flows.
Company is confident of maintaining the volume growth seen in first two quarters of FY 2012 and we expect an EPS of Rs.30-35 for current year.
