Rapicut Carbides Ltd.
1.) Tungsten is the second hardest substance after diamond and is 3 times stronger than Steel.
2.) Rapicut Carbides stands for "Rapid Cutting Carbides".
3.) Co. manufactures Tungsten Carbide Products which are primarily used in the mining sector as 75% of the revenues comes from this mining & its largest customer is Neyveli Lignite Ltd. which accounts for around 15% of the turnover. The remaining 1/4th sales come from the Industrial Sector. The fortunes of this company are tied up to the domestic mining sector & the greater the mineral production in the country, the higher will be its revenues. The annual demand of Tungsten consumables by the domestic mining sector is estimated at 1200 tonnes p.a.
4.) The co. manufactures consumables for Coal, Granite and O&G sectors. These consumables have a short life span & after certain hours of usage, they need to be replaced.
5.) Around 35% - 40% of sales are coming from PSU's.
6.) Tungsten is a rare earth mineral & is not found in India. It is imported from China which is the largest global producer of Tungsten. Tungstun is traded on LME.
7.) The management is hopeless about exports as the international markets are dominated by Chinese cos.
8.) According to the management, there are only 4 cos. which are manufacturing Tungsten products in India.
i.) Sandvik - http://www.sandvik.com/en/
ii.) WIDIA - http://www.widia.com/widia/en/
iii.) Electronica - http://www.electronicagroup.
iv.) Rapicut Carbides - http://www.rapicutcarbides.
The other 3 cos. are far larger than Rapicut in terms of size and scope of operations. Sandvik & WIDIA are MNC's with the former doing around 500Cr. of sales in India. These cos. make tungsten tools & equipment whereas Rapicut only manufacturers consumables.
9.) The Import Duty on the products that Rapicut manufactures is 12.5%. The management does not perceives a threat from Chinese imports.
10.) Employee Strength = 140.
11.) The sales are booked through tendering. The company also has 5 dealers.
12.) The company imports around 50% of its raw materials from China & the rest is procured through domestic tungsten scrap processors.
13.) The business is inventory intensive.
14.) Co. able to pass on raw material price increases.
15.) Payout Ratio = 25%
16.) Installed Capacity :
FY11 = 90,000 kgs pa
FY12 = 1.04 lakh kgs pa.
FY13 = 1.43 lakh kgs pa.
17.) FY13E Sales = 40 - 45Cr.
18.) Steady State NPM = 10%-12%
19.) 5 year (FY12-17) Capex Plan = 5.5Cr. (out of which 75% is a term loan from SBI @ 12.5% floating)
20.) Rapicut is a brand in the tungsten consumable industry.
21.) The company's registered office & factory property in Ankleshwar measures 3000 sq. meter (4 acres) and has a market value of approx. Rs.60Cr. vs the current EV of Rs.13.5Cr.
22.) Company's Sales have doubled during the last 5 years.
23.) CMP = 52/-
MCap = 11.16Cr.
Debt = 2.25Cr.
Networth = 13.25Cr.
Sales = 30Cr.
EBITDA = 5.25Cr.
PAT = 3Cr.
EV / EBITDA = 2.5x
PE = 3.71x
P/BV = 0.84x
RoE = 25%
DPS = 3/-
Dividend Yield = 5.75%
24.) Portfolio Weightage = 1%
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