Rain Industries: Is it a multi-bagger Mid Cap Value Buy
Rational and Logic:
2022 CY profit – close to INR 1600 cr, 2021 CY profit – INR 700 cr, and expected CY 2023 profit will be around INR 700-1000 cr,
Sector PE at 34, EPS of last year at more than 40, and the current stock price based on these parameters should be at least eight times INR 1200, even at an average EPS of 20 going by past year averages, the stock price should be INR 600. So appears a value buy. stock is a value buy at a current price of INR 160.
Consistent EPS growth over the last few years
Significant sales growth as well, which is stable
The company have honest promoters, also Mohnish Pabrai, a US based investor and follower of Warren Buffet, is a big shareholder in the stock.
High debt seems to be playing on the company’s valuation, but the company will have increased cash flows as a result of savings in their cash flows now that capital expenditure is over.
Triggers for Upgrade: Recent re-rating of stock by India Ratings, Increase in Book Value over the past few years, Start of a plant in India going forward (this will take some time in my view depending upon the availability of the raw material).
Ind-Ra expects net adjusted leverage (net debt/EBITDA) to have reduced to around 2x in 2022 (2021: 3.20x; 2020: 4.28x, 2019: 4.63x) and the interest coverage (gross interest expense / operating EBITDA) to have increased to 7x-7.5x (4.9x; 3.5x, 3.3x), due to an improvement in the operating profit, led by a strong recovery in the commodity prices.
link to India Ratings Report – India Ratings and Research: Most Respected Credit Rating and Research Agency India
Disclosure: I am a current shareholder, too.
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