Tinna rubber – recycling a rubbery growth path

Tinna Rubber Q4 FY23 concall notes (E & O.E.):

1. Revenue break-up for FY23: Industrial (tyres, conveyor belts etc) – 25 %, Consumer (sports, yoga mats, rubber tiles etc) – 7 %, Infrastructure (i.e., roads mainly) – 50 % of revenues for the year. Remaining is steel which is a by-product

2. Infra is the main segment and it includes rubber, bitumen and emulsion. We expect good orders in this as there is now even a state level interest. Earlier there was interest only from National Highways.

3. Oman Project – Expect to commence production by mid-June. Will contribute 15 % to top line in FY24. Revenue at full capacity will be around Rs.20 crores per annum, PAT around 10 %. Have spent USD 1 million on Oman, no further capex expected this year.

4. IOCL order – Will earn Rs.100 crores over 2 years. IOCL contribution was around Rs.25 crore in the previous year. We can get more orders from them as well. It comes under infra segment. HPCL has a JV with a French company and they make it themselves, but the JV buys from us.

5. Exports (Industrial segment) – Was Rs.17 crores in FY23. Will grow exponentially. Have got a breakthrough with 2 MNCs.

6. Guidance – Expect 20 % plus CAGR growth target in the next 3 years. EBIDTA margins will be 15 % plus for FY24. They were lower in FY23 but are reviving now.

7. Dividend – Aim to give 20 % to 25 % of PAT as dividends.

8. Capex guidance – Around Rs.30 crores for FY24, it will give revenues of Rs.100 crores approx. It will be for a new facility in India for tyre recycling and some downstream products. Funding will be mostly from internal accruals but some debt can be there as our debt situation is comfortable.

9. Other Income this year was Rs.6.33 crores which includes EPCG benefit Rs.2.2 crores and some subsidy benefits from Maharashtra.

10. Other Expenses – Includes Rs.2 crore provision on doubtful debts. Besides this there were Bad Debts of Rs.1 crores as some of the receivables are more than 3 years old. But our sales to provisioning ratio is 0.5 % only over the last few years, which is not high.

11. TP Buildtech – Company made profit of Rs.1.2 crores and Revenues of Rs.60 crores this year, up from Rs.40 crores last year. Company has turned around and is doing very good, we are very bullish on this.

12. Debt currently is Rs.58 crores of which Rs.19 crores from SBI over 7 years maturity and Rs.8 crores is a four-year loan. Cost of funds is 10 %.

13. Virgin polymers – Costs 4X of recycled rubber, so they are not a competition.

(Disc.: Have a token position for tracking purpose)