RCI Industries & Technologies Ltd
(BSE Code: 537254) (CMP: Rs.175.45) (FV: Rs.10)
Incorporated in 1992, Delhi-based RCI Industries & Technologies Ltd (RCI) offers and exports Copper Wires including Annealed Copper Wires, Bunched Copper Wire Ropes and Copper Ingots, which are used in various electrical and industrial applications. With over 25 years of experience in this business, RCI is an established name in the Indian Handicrafts industry especially handicrafts made from Copper and Brass metals. It offers a wide range of customized products that cater to the requirements of various manufacturing units, automobile and engineering industries. RCI’s manufacturing units are located in a tax and excise duty exemption zone at Nalagarh and Baddi in Himachal Pradesh. Currently, its Baddi plant has a capacity of 3,000 TPA for flat products and is fully operational. The Company plans to expand this facility, where-after its total installed capacity will stand at 24,000 TPA for copper and copper alloys/ brass/ strips/ foils/ coils/ wires, etc. Further, it recently purchased additional factory land (7,749 sq.mtrs) and a factory building in Baddi. The Company’s expansion plans are on track and are expected to be completed by the end of FY18.
RCI's products have various applications and are used as connectors, radiators, bulb and lamp caps, imitation jewellery, eyelets, thimbles, clocks, pens and various sheet metal pressed components. Other uses include all electronic appliances and goods, PCB (printed circuit board), mobiles, etc.
RCI posted excellent results for Q4FY17 and FY17. For FY17, RCI’s turnover grew 37% YoY to Rs.17348.3 mn from Rs.12701.9 mn in FY16. EBITDA soared 84% to Rs.546 mn from Rs.296 mn while PAT zoomed 140% to Rs.358.3 mn from Rs.149.3 mn in FY16. On an equity capital of Rs.134.4 mn, it posted an EPS of Rs.26.7 v/s Rs.13.7 in FY16. ROE and ROCE stood at 25% and 24% respectively and we expect these numbers to improve further going forward. During Q4FY17, it achieved a turnover of Rs.5427.9 mn (up 15% YoY and 42% QoQ). EBITDA zoomed 231% YoY to Rs.281 mn from Rs.85 mn while EBITDA margin expanded by 336 bps to 5.15%. PAT zoomed 293% YoY to Rs.227.8 mn from Rs.57.9 mn in Q4FY16 while PAT margin expanded by 296 bps to 4.2%.
We expect RCI to achieve a turnover of Rs.2100 crore in FY18 and Rs.2600 crore in FY19 with PAT of Rs.47 crore in FY18 and Rs.60 crore in FY19 thus notching an EPS of Rs.34 and Rs.44 respectively. Going forward, the Company plans
to raise its production capacity through acquisition and capacity enhancement. It aims to increase revenue and improve margins post expansion. It also plans to introduce new high-value products for supply to the Defence segment. The overall outlook for the Company is positive considering that the demand for copper is expected to grow 9-10%. The major consumers of copper products are building & construction, engineering, transport and consumer durables. Over 30% of India’s copper demand comes from the telecom sector and 26% from the electrical sector. A conservative forward P/E of 10x on FY18E EPS of Rs.34 will take its share price to Rs.340 in the next 12-18 months, which is almost 100% appreciation from the current level.