Thursday, September 15, 2016
RAM RATNA WIRES LTD (BSE:522281) FV RS.5 CMP 68.00
RAM RATNA WIRES LTD (BSE:522281) FV RS.5 CMP 68.00
Company : Ram Ratna Wires, headed by Shri Rameshwarlal Kabra having experience of near 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 both national and international market, including, Gulf, Africa and Europe. The products of the company are utilized in various equipment including transformers, cables, transmission lines, switchgear, capacitors etc. The company has Joint Venture at Bangladesh with RR-Imperial Electricals Limited which would manufacture Enamelled Copper Wire, Cables and Enamelled Strips and have 10% stake in JV and company also hold 2.15% of RR Kabel Ltd.
Products : The Product line includes sixteen products that broadly fall into five groups i.e. Enamelled Copper Wire (ECW), Enamelled Copper Strips (ECS), Submersible Winding Wire (SWW), Bare Copper Strips (BCS) and Enamelled Aluminium Wire (EAW), fiber glass covered strips and enamelled fiberglass covered and varnished strips. The end products meet all of the well-known Indian and international standards including IS, IEC, JS and NEMA. The company operate in the transmission and distribution (T&D) industry, and it is the first choice for large Original Equipment Manufacturers (OEMs) and top electrical companies of India as well as MNCs. Through dealer-market nationwide, the company also cater to thousands of small manufacturing and repairing units of electrical equipment in the country, thus company has equal share of organized and un-organized sector spread across the country. The Company continues to develop value added products like corona resistant wires, triple insulated wires as per customer’s requirements, keeping pace with developments across the world.
Production & Technology : The state of the art production facilities spread across two units located at Silvassa, equipped with the latest machinery have the expertise in manufacture of winding wire of all types – Copper and Aluminium, round and rectangular. The production systems are often customized to the client needs. The company is focused on production of more value added items like enamelled aluminum winding wire, fiberglass insulated wires & strips and paper covered wires & strips which have also shown substantial increase in production, compared to that of previous years. Even though an economic slowdown has plagued the power sector recently, company had a record production over the last couple of years. Future expansion plans are in the pipeline to meet the growing potential in the industry.
The Company has developed, processed and supplied the high tech products like corona resistant enameled wires as per RDSO specification. This product has the capacity to safeguard the electrical equipment from the danger of premature burning of coils of equipment like Motors which are fed from inverter. Likewise, triple insulated wires manufactured as per Japanese specification (JIS :3005) and UL safety Standards 60950 is ideal for items like power supply units of in Electrical & Electronic equipment.
Sector Outlook : The demand for winding wire is directly linked with the growth in power sector, Both Hydrocarbon based as well as Green and Clean Power. The Union budget for the financial year 2016-2017 focus on accelerated growth within power sector with increased outlay of the tune of ` 79,884 crores. This combined with programs like “Make in India” and “Skill India” will give a big boost to domestic production of Electrical & electronic equipment and hence greater demand for winding wires is expected.
Winding wires & strips form a very important segment of Indian Electrical Equipment Industry which includes both power generation, Transmission and Distribution (T&D) equipment. If the coil of any electrical equipment like Generator, Motor, Transformer, Relay or Switchgear, Domestic appliances etc. burns or fails, the equipment is dead and hence, winding wire/strip is often known as the “Heart” of the equipment. It is used in all sectors namely Railways, Defence, Agriculture, Infrastructure etc. of Indian economy.
Valuation : This closely held company with 73% promoter stake and having book value of 35 Rs, dividend payout ratio of 21.62%, TTM Sales of over 700 Cr, ROE of 15.63% and ROCE of 16.95%, with improving OPM and profits in coming quarters the ROE and ROCE will only improve. Falling copper price and weak USD to benefit the company as copper is the main Raw material of which 32.74% of the total consumption is imported by the company alongwith state of the art machinery for quality production. With expected EPS of over Rs 9 for FY17, as compared to Rs 4.25 for FY16, the stock is available at PE of just 7.5 FY17 (Industry PE above 20).
As per the projection by Union Power Ministry, by the year 2020, every home in the country will be electrified. The Union Budget 2016-2017, have given prominence to Agriculture and Rural sector, apart from infrastructural development. All these factors will boost the demand for Electrical equipment for Industry and domestic consumption in the vast rural sector which in turn will result in huge demand for winding wires.