RAM RATNA WIRES (GROWTH COMPUNDING QUARTERLY)

RAM RATNA WIRES

Pros

Headed by Shri Rameshwarlal Kabra having experience of nearly 48 years in enameled copper winding wire and cable industry, with its leading and trusted brand in winding wires, RR Shramik is the leading manufacturer and suppliers of winding wire in the electrical equipment industry
Promoter owns 73% of the company, another 10% by anchor investors, only 17% is owned by around 4000 shareholders.
Company is engaged in manufacturing of enamelled copper winding wires

DEBT

Company though is debt ridden, but is having enough cash flow to pay interest on debt.Long term debt of the company is very low. Short term debt keeps fluctuating q-o-q and company has been able to quite comfortably service it. Also, the credit rating has improved. Which means, interest will reduce. If you observe last 6 quarters, profit margin is increasing and interest on debt is reducing.

Govt focus on infrastructure development, affordable housing, Make in India is positive for the company and can become a substantial tail wind for the company.
Last 3 yrs profit was above 4crs, inspite of overall trend being sluggish.
Last year Balance Sheet indicates debt of 100 plus crores, long term debt stands at 12-15%, and rest all could be working capital.
Market Cap to sales ratio is 0.29 giving ample opportunity for appreciation.
Crisil has upgraded company’s bank limit rating from BBB- to A3.
Regularly paying dividend since last 6-7 years without fail.

Cons

Fluctuating price along with global demand and supply of copper, which is the main unit to winding wire industry could affect company’s turnover.
Taking into consideration the above factors, i have a target price of Rs 230 for RRW in medium term and Rs 400 in long term. Invested from Rs 100/- levels.
Current Action - Buy on dips

Comments

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