We expect that companies with a robust global network and sales in diverse geography will likely benefit the most. A few mid-cap and small-cap companies are poised to do well in this space near to medium term.
Rajratan Global Wire Ltd
Established in 1988, Rajratan Global Wire manufactures high carbon steel wire in India. It specializes in the manufacturing of automotive tyre bead wire, high-quality spring and rope wires. The company is one of the largest bead wire manufacturers in Asia. The company has two manufacturing facilities at Pithampur in Madhya Pradesh and Ratchaburi in Thailand. The Company exports products to customers in India (from Thailand), Italy, the USA, The Czech Republic, South Korea, Malaysia, Indonesia, Philippines, Vietnam, Sri Lanka, Finland, and Bangladesh. The Indian tyre industry is projected to grow 13-15% by value and 7-9% by tonnage in FY2022, driving the growth in the OEM and replacement segments. The Government of India's focus on infrastructural development is expected to shoot up automobile offtake and, in turn, tyres.
Rajratan Global Wire is mulling to up a new manufacturing facility of tyre bead wire with a capacity of 60,000 tonnes per annum with a proposed capital expenditure of Rs 300 crore. It is currently operating at 80%- 90% at both India and Thailand locations. The company posted stellar results in the quarter ended June 2021. Its revenue grew 182% to Rs 182.3 crore in Q1FY2022 from Rs 64.6 crore in Q1FY2021. Its net profit skyrocketed a mind-blowing 1228.5% to Rs 21.9 crore from Rs 1.6 crore in Q1FY2021. Rajratan has achieved a leadership position in India's tyre bead wire business with a global scale of operations in a short period. Promoters have steadily increased their holding to 65% at the end of June 2021. In a year, the scrip more than six folded increased investors' wealth. It is up 263.7% in six months and 41% in a month. The stock was in upper circuit closing at Rs 1867.2 on Friday, July 23.
Sundram Fasteners Ltd
Sundram Fasteners is a 55-year old company belonging to the TVS Group. The company manufactures fasteners, power train components, sintered metal products, iron powder, cold extruded parts, radiator caps, water pumps, oil pumps, and wind energy components. Sundram's high precision and critical components are used in the automotive, infrastructure, windmill, and aviation sectors. Sundram's revenue comes from 52% domestic OEMs, 13% aftermarkets, and 35% exports. The government's infrastructure development drive and focus on urban transportation, a better outlook for the automotive sector driven by scrappage policy, sequential recovery in the US markets should push the company's top-line growth. Sundram's diverse product and customer portfolio reduces the associated operational risks. The company intends to grow the share of exports in its overall revenue to 50% through new, value-added products launches. It has recently introduced transmission products apart from working on hybrid electric vehicle products to increase revenue to minimize dependence on traditional fasteners business.
In FY2021, although its revenue declined roughly 2% year-over-year, its EBITDA increased 5.5%. On a 9-year CAGR basis, revenue growth was 4%, and operating profit growth remained 6.8%. Net profit CAGR during the same time was 12.7%. In Q4FY2021, revenue rose 14.4% year-on-year, and net income grew 4.7%. The stock increased investors' wealth by 90.9% in a year, 38% in six months. The scrip is roughly trading at a 12% discount to its 52-week high of Rs 867.7.
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