Rane Holdings (RHL IN, INR 198, Not Rated)
We recently attended the analyst meet organised by the Rane Group. The group manufactures automobile spare parts (steering & suspension, valve, friction material etc.) and is a supplier to all major OEMs across segments worldwide. Rane Holdings (Not Rated) is the group’s holding company with investments in five subsidiaries (S), three JVs (JV) and two associates (A). The company expects challenges in near-term due to weak outlook across the automobile industry, though it is positive on long-term growth.
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Key takeaways from analyst meet:
Rane Madras (S): The company expects the electric power steering (EPS) segment to grow exponentially in the coming years and is well equipped to meet the demand. Product portfolio diversification will also be key to growth. The company expects to grow its sales at 18% CAGR with ROCE of 25% over the next couple of years.
Rane Engine Valve (S): The company is well placed to post 15% sales CAGR with ROCE of 18% by leveraging its leadership position in the engine valve segment. Productivity improvement at older plants will help improve margin.
Rane Break Lining (S): Use of friction material in India has to go a long way. The JV with Nisshinbo Japan will help the company post 18% sales CAGR with 20% ROCE.
Rane TRW Steering (JV): With a dominant market share in steering systems and seat belts across segments in domestic markets, the company is planning to grow the niche export business through a JV with TRW, US (world’s No.1 airbag manufacturer).
Rane NSK Steering (JV): a major supplier of EPS to Maruti, is working on increasing localisation, in line with Maruti’s thrust on lowering import content.
Dividend payout policy: Rane Holdings @45-50% of PAT.
Outlook: Challenges in near term; positive in long term
FY13 is expected to be challenging. Though, in the medium to long term, demand from domestic OEMs and aftermarkets as well as export markets is expected to revive.
Regards,
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