Buy Indag Rubber; target of Rs 239: 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.”

“INDAG Rubber Ltd. has reported net profit of Rs 65.04 million for the quarter ended on March 31, 2012 as against Rs 36.48 million in the same quarter last year, an increase of 78.29%. It has reported net sales of Rs 563.57 million for the quarter ended on March 31, 2012 as against Rs 408.67 million in the same quarter last year, a rise of 37.90%. Total income grew by 37.97% to Rs 563.91 million from Rs.408.71 million in the same quarter last year. During the quarter, it reported earnings of Rs 12.39 a share.”

“At the current market price of Rs.208.00, the stock is trading at 4.19 x FY13E and 3.56 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.49.64 and Rs. 58.37 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 26% and 42% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 2.91 x for FY13E and 2.49 x for FY14E. _ Price to Book Value of the stock is expected to be at 1.25 x and 0.92 x respectively for FY13E and FY14E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 239 for medium to long term investment,” says Firstcall Research report.   

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