Rain Industries Limited (RAIN) is one of the world’s leading producers of calcined petroleum coke, coal tar pitch, and other high-quality basic and specialty chemicals. The group continues to grow through capacity expansions and mergers and acquisitions across the world. RAIN operates in three key business verticals: carbon, chemicals, and cement. Rain Industries is headquartered in Hyderabad, India. However, the bulk of its operations (and revenues) are in the United States and Europe. Rain is the world’s largest producer of coal tar pitch (CTP) and the second-largest manufacturer of calcined petroleum coke (CPC). It has 18 production facilities in eight countries across three continents. Employees around 2600 People worldwide.
For more info check, http://www.rain-industries.com/
Industries Served by Rain:-
NUMBERS- THE LATEST
Market cap: 3620 crores CMP on 20May 2019 : Rs 105.75 BV: 138 Apx
Revenue TTM: 13936 Cr Net profit TTM: 399Cr FV: 2
- Experience:- It has a Legacy of over four decades, backed by industry-leading production capacities
- Global Leader:- Rain is a global leader in essential carbon products for the aluminum industry.
- Lowest cost manufacturer: Rain is the lowest cost manufacturer of CPC in the world so it has been a prioritized supplier to smelters.
- Excellent capital allocation by management:- Jagan Mohan has been an excellent capital allocator, which is evident from Investments in the Flue gas desulphurization Unit, Waste heat Recovery Plant, Buyout of a company bigger than rain in past and still able to keep debt at reasonable levels.
- High Competitive Advantage: Due to its lowest-cost manufacturing ability it remains profitable even during the bad phase of the cycle.
- Huge Entry Barriers:-
- Long-term contracted raw material supply with suppliers like Motiva, Exxon Mobil, Phillips66 for sourcing GPC.
- A long-standing relationship with customers like Alcoa, Rio Tinto Alcan, Norsk Hydro ASA, Century Aluminum and Aluminerie Alouette Inc, Vedanta Aluminum Limited, etc.
- The rain has patented ICE Technology which allows usage of inferior grades of
GPC to produce CPC, without compromising the quality of the product materially.
- Sector Tailwinds:
- China’s government-mandated (Ministry of Environmental Protection) environmental restrictions that target reducing air pollution resulting in shutdowns and curtailments in the country, which has helped Ex China Producers of CPC as the price shot up.
- The capacity utilization of the Aluminium Industry in the U.S. is currently only around 50%, as trump’s tariff imposed on Chinese exporters, more US-based Aluminum production will be live again after a long haul. This will benefit the most rain industries as it has the majority of its plants based in the US.
- Decrease in finance cost and deleveraging:- Rain’s Interest outgo dropped from 593Cr in CY13 to 457Cr in CY18 due to refinancing of debts. Rain’s Debt to Equity Improved from 2.3 in CY2013 to 1.68 in CY18 and has the potential to improve further due to free cash generation from its operations.
- Rain employees have published more than 20 key technical papers and patents over the last 15 years.
- The rain has a market share of near 36% share in the United States(CPC). Rain has a
market share of 8% globally and 16% ex-of China.
The rain has an Excellent dividend payout track record for the past 2 decades and has brought buybacks in 2011,2012 and 2013 which shows management’s care towards minority shareholders.
- Ace Investor Dolly Khanna owns 2.22% (74.78lakh Shares) in Rain Industries.
- Mohnish Pabrai’s pabrai Investment Fund owns a 9.8% Stake in Rain Industries
NEGATIVES – POSSIBLE RISKS
- Stricter environment norms can impact production and in turn profitability.
- Change in global refining production patterns or crude oil specifications impacting GPC availability( GPC -Raw Material for Rain)
- Volatile commodity market impacting margins.
- Exposure to various currencies (USD, EUR, Ruble, INR) impacting overall profitability.
Rain is an obvious potential multi-bagger!!!!!!!!
Important Note: Potential multi-baggers are those stocks that have the potential to give 100 – 500% profits. Obviously, such returns take time. Probably 3 – 4 years or more. Short-term volatility is the reality of the stock market and that will always happen. Short-term movements(upside and downside) are impossible to predict. Only invest funds that you will not need for the next 3 – 4 years. As long as you buy a stock for the right reason and are convinced about the future prospects of the company, there is no need to worry if the share price goes down and stays down for a period of time after you buy; provided you have followed the cardinal stock market mantra BUY LOW.
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