Buy Indag Rubber; target of Rs 230: Firstcall Research

“The Khemka Group founded Indag Rubber during the early 80’s and pioneered the introduction of cold retreading technology in India. The company has provided retreading material to its customers ranging from precured tread to curing envelopes. The tread rubber is made from superior raw materials and pressed at a very high pressure resulting in a product that gives high performance both in terms of mileage and tread life. Indag uses advanced technology in terms of machinery, equipment and raw materials. As a result, our products give mileage that result in LOWEST COST PER KILOMETER. Its processes have been certified as ISO 9001:2000 compliant. The company’s factories are located in Nalagarh, Himachal Pradesh and Bhiwadi, Rajasthan to ensure speedy delivery of our product to our customers all over India and different parts of the World.”

“The company’s net profit jumps to Rs.66.54 million against Rs.38.21 million in the corresponding quarter ending of previous year, an increase of 74.14%. Revenue for the quarter rose 22.55% to Rs.590.03 million from Rs.481.47 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.12.67 a share during the quarter, registering 74.14% increase over previous year period. Profit before interest, depreciation and tax is Rs.92.59 millions as against Rs.76.33 millions in the corresponding period of the previous year.”

“At the current market price of Rs 205, the stock P/E ratio is at 3.82 x FY13E and 3.22 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.53.63 and Rs.63.63 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 26% and 46% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 2.67 x for FY13E and 2.27 x for FY14E. Price to Book Value of the stock is expected to be at 1.20 x and 0.87 x respectively for FY13E and FY14E. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 230 for medium to long term investment,” says Firstcall Research report.

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