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Sunday, October 4, 2009

Rane Madras Ltd:Future growth prospects and outlook

Scripscan:Rane Madras Ltd

Story:Rane Madras (RML), the flagship company of the Rane Group, is a leading manufacturer of automotive components ike steering linkages, ball joints, axial joints, suspension joints and manual steering gears. RML, established in 1960, operates in two business segments - steering & suspension linkage products and manual steering gear products. The Company has high standards of manufacturing, which gives it an edge over its competitors. It has three manufacturing plants, one each in Chennai, Mysore and Pondicherry.The plants are certified for QS 9000 and TS 16949 standards. It has a technical collaboration with TRW Inc, USA for linkage products.RML enjoys more than 50% market share in the domestic manual steering and linkage products. Sustained spending on infrastructure and continued thrust on agriculture are the beneficial factors that would aid LCVs, PVs and tractors, which in turn would result in volume growth for RML. The Company is the supplier ofsteering components to Tata ACE. RML’s key customers in the domestic market include Tata Motors, Ashok Leyland and M&M. RML also exports manual steering gears to Iran for the Kia-Pride platform. RML’s exports to TRW, its technology partner.RML is a leading player in the manual steering and linkage products, in the domestic market, with more than 50% market share. With the strong growth momentum in its key customer segments, the Company stands to benefit.We believe exports to be the driving force for the Company, going forward. At the current market price of Rs 50, the stock is available at single digit valuations its 1 year forward earnings.The Company offers an attractive dividend yield too. Also, we may see the Return on Capital Employed and Return on Networth improving further. Going forward, the Company is likely to see steady growth rates and improving profitability on the back of strong growth witnessed in the auto sector and also on renewed thrust on exports.A decent buy at dips.

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