India presents a booming market for rubber industry with expansion of roads and increase in automobiles while there is an equally strong non-tyre manufacturing sector in the country. There are as many as 6711 manufacturing units in the non-tyre sector making varied products such as tread rubber, foam products, beltings, gloves, adhesives.
There is a captive production of rubber as India is the sixth largest producer of natural rubber (NR) and second largest consumer of NR and fourth largest producer of NR and fourth largest consumer of all types of rubber.
India’s strength in the industry comes from extensive plantation sector with highest yield and indigenous availability of material, lower labour costs, availability of quality technologists and quality of material that has been accepted in global markets.
The potential of rubber sector can be harnessed further with the right incentives as high interest costs and lack of technology upgradation for MSMEs and free import of rubber products have hindered growth.
Amidst the positive trends, here is a look at the prospects of key players in rubber products industry:
Rubfila International Ltd (BSE:500367 NSE:RUBFILINTL Category: Small Cap
Rubfila International Ltd was setup in 1993 by Rubpro Sdn Bhd. Malaysia and Kerala Industrial Development Corporation. It is the only manufacturer of talcum coated and silicon coated rubber threads. The company caters to niche areas of toys, fishing, catheters, meat packing, medical webbing. It produces threads for sizes ranging from 3.1 mm (8 count) diameter. The company achieved a growth of 7.01% in turnover in FY17 and profit rose from Rs8 cr to 12.52 cr. The company raised its installed capacity adding two more lines and expects to full capacity utilization despite the global competition and pricing policies of latex by government.
In Q4FY18, the profits have fallen by 11.19% to Rs 4.77 cr while sales rose 34.52% to Rs 58.04 cr. It has underperformed the Sensex by 17.74% on annualized basis while the valuation is attractive with a PE of 14.05 as against industry PE of 40.75. On a half yearly basis, net sales had grown 23.38% to rS 103.49 cr while profit after tax has fallen 9.7% in quarter.
On technical charts, Relative Strength Index (RSI) of 43.10 is bearish, while ADX of 27 indicates range bound trading and MACD has witnessed a bearish crossover.
Cupid Ltd (BSE: 530843, NSE: CUPID) Category: Small Cap
Cupid was set up in 1998 aand began with the production of male condoms and first exports took place in 2000. The company received the first order from Ministry of Health and Family Welfare in 2002. In 2010 it launched the Cupid Female Condom that was exported to South Africa and it has worldwide patent on specialty condoms and production facilities are approved by UNFPA and WHO. It also ventured into water based lubricant jellies in 2015. The turnover of the company increased to Rs 85.21 cr from Rs 62.80 cr last year representing a growth of 36% and profit rose to RS 32.40 cr from RS 24.82 cr. Contract manufacturing business contributes 20% to overall sales.
It had underperformed the Sensex by 30.24% on annualized basis but it is available at an attractive PE of 15.48 much below industry PE while on the negative site quarterly net profit has fallen 43.7% to Rs 2.71 cr while return on capital employed is lowest at 38.66%. Operating profit to net sales is lowest at 24.15%.
On charts, RSI of 41.69 indicates bearishness while ADX of 14 indicates range bound trading and MACD has witnessed a bearish crossover.
Pix Transmissions Ltd (BSE: 500333) Category: Micro Cap
Pix Transmissions Ltd is a leading manufacturer of belts, related mechanical power transmission products in India. It has a modern belt manufacturing unit and completely auetomated rubber mixing facility in Nagpur. It has a global customer base and has presence in key markets such as UK, Germany and UAE. It has a growing network of independent channel partners in India and 80 countries worldwide.
In FY17, the company reported 8.17% growth in turnover at Rs 256.74 cr whil 163.77% growth in profits at Rs 14.96 cr. Net debt of the company stands at RS 14.96 cr. It has underperformed the Sensex by 19.21% but quarterly and half yearly results are quite positive this year. Debt-Equity ratio is lowest at 0.55 times and return on capital employed (ROCE) is highest at 15.33 (half-yearly) while operating profit to interest is highest at 5.98 times (Q4). Cash and cash equivalents is lowest at Rs 9.25 cr (H2). Valuation is attractive at a PE of 9 while RSI of 57.48 indicates bullishness and ADX of 35.56 indicates uptrend and MACD has witnessed a bearish crossover.
Target: 158 Duration : 3 weeks.
Apcotex Industries Ltd (BSE: 523694, NSE: APCOTEXIND) Category: Small Cap
Apcotex Industries is a leading producer of synthetic rubber (NBR &HSR) and Synthetic Latex. It has the broadest range of emulsion polymers.The products have application in automotive components, hoses, gaskets, rice dehusking, rollers, printing and industrial rollers, friction materials, belting and footwear.
The scrip has outperformed the Sensex by 12.88% annualized basis and available at an attractive PE of 26.99%. On half yearly basis, net profit is higher at Rs 25.86 cr and profit before tax highest at rS 22.79 cr and net profit highest at Rs 19.72 cr (Q4FY18).
On technical charts,, RSI of 64.44 is bullish, while ADX of 48.35 indicates uptrend and MACD has witnessed a bullish crossover.
Target: 551 Duration : 3 weeks.
The rubber industry has potential for high volume growth thanks to economic growth in India and rising demand from abroad. But the industry continues to be plagued by product and raw material import issues. The All India Rubber Industries Association (AIRIA) has demanded immediate review of the anti-dumping duty on carbon black, an important raw material. The industry is recovering from the impact of imposition of Goods and Services Tax (GST) but the anti-dumping duty on raw materials offsets any progress made in this sector. Domestic natural rubber production has hit multi-year low compounding the worries of the industry.
The anti-dumping duty for carbon black from China is $350 per tonne and $60 for carbon black import from Russia. It was imposed five years ago when the scenario was different but needs to be reviewed as things have changed now, according to AIRIA. On the other hand, import duty for rubber products remain low at 10% while the industry has demanded that it be raised to 30%. Despite the struggles faced by the industry, they have performed relatively well over the years.