Rane Brake Lining For Eco – Friendly Friction Solutions

Rane Brake Lining is engaged in the manufacturing and marketing of auto components for transportation industry. They offer a range of products, such as disc pads, brake linings, clutch buttons, clutch facings, brake shoes and railway brake blocks. Their products are used in passenger cars, utility vehicles, commercial vehicles, two wheelers, windmills, aircrafts and railways. The company also supply composite brake blocks to Indian Railways, with presence in passenger, freight, locomotive, electrical multiple unit (EMU), and metro rail. 

Rane Brake Lining ltd is one of the Multibagger Shares, identified by Dynamic Research team based on technical and fundamental research. 

Rane Brake Lining share price has touched a 52 week high of Rs. 670.65 on 22 -Jul -2016 and a 52 week low of Rs.262.25 on 08 -Sep -2015, and is currently trading at Rs. 617.

 Share Holding

The promoters holding in the company stood at 66.59%, while Institutions and Non-Institutions held 9.75% and 23.66% respectively.Some of the Non-Promoters holding securities more than 1% of total number of shares are United India Insurance Company Ltd: 6.05%.General Insurance Corporation of India Ltd: 3.68%.Body Corporate 1.16%.

Financial Analysis

Quarterly Results

For the quarter ended June 2016, the total income from operations of Rane Brake Lining (RBL) ltd has reported a growth of 17.21 % on Y-o-Y basis to Rs. 121.46 cr as against Rs. 103.62 cr during the same quarter last year. A boost up in total income from operations shows strong development in business.

The operating profit of RBL ltd on standalone has shown a growth of 100% Y-o-Y to Rs. 12.88 cr as against Rs. 6.44 cr during the same quarter last year, This is mainly due to rise in topline of the company.

The net profit of RBL has registered a growth of 117.63% Y-o-Y to Rs.10.49 cr as against Rs 4.82 during the same quarter previous year.

The earnings per share of the company have showed a growth of 117.73% Y-o-Y to Rs. 13.26 as against 6.09 during the same quarter last year.

Annual Results 

For the year ended March 31, 2016  RBL ltd on Standalone basis reported net sales of Rs. 448.42 cr compared to Rs. 416.41 cr FY2015 increased by 7.68% annually.For the year ended March 31, 2016 Rane Brake Lining on Standalone basis reported net profit of Rs. 25.76 cr compared to profit of Rs. 16.11 cr FY2015, registering a growth of 60% annually. The above ratio suggests that the company is operating with a very minimal level of debt on it shoulders, and have enough liquidity to pay its short term obligation and can easily meet up with the interest expenses pertaining to its debt obligations. The company is generating good returns with the money the share holders have invested; the above ratio also suggests that the management is efficiently using its assets to generate earnings.

Manufacturing Plants

Chennai: Composite brake blocks, Brake linings, Disc pads and Clutch facings

Hyderabad: Composite brake blocks ,Brake linings, Sintered clutch buttons

Puducherry: Composite brake blocks and Disc pads

Trichy: Brake linings and Disc pads.

Investment Rationale 

Given the positive sentiments about Indian economy across the Globe and favorable GDP numbers reflects signs of further possible growth in Automobile industry.

The Company experienced 8% growth in the domestic market across all the products.

Leader in passenger car / commercial Vehicle /utility vehicle and two wheeler applications.

Leading supplier of composite brake blocks to Indian Railways.

Rane group is amongst preferred suppliers, engaged mainly in manufacturing of auto components, to major OEMs across the globe and in India.

Through its 24 strategically located plants across India and USA, Rane group commands a sizable business in the replacement segment catering to well diversified clientele in the automobile industry including Light Commercial Vehicle, Medium & Heavy Commercial Vehicle, Passenger Car, Two-wheeler, Three-wheeler, Multi Utility Vehicle and Farm Tractor.

New product launches in both OE and Aftermarket, sustenance of strategic saving initiatives, manufacturing process improvements in shop floor on yield with product mix helped in mitigating raw material cost.

Overall vehicle production grew by 2% in volume. M&HCV, MUV and LCV have all registered double digit growth, while Passenger Cars, MPV and 2W had shown a single digit growth. However Small Commercial Vehicles (SCV), Farm Tractors (FT) and 3 – Wheelers (3W) numbers need to be improved.

Technical collaboration with Nisshinbo brakes Inc, Japan for knowhow in asbestos free brake linings, disc pads and clutch facings.

Supply products to 15 countries, and have supply experience to Sri Lankan Railways for composite brake blocks.

Investment Option 

At CMP of Rs.617 the stock is trading at a P/E of 14.47, the market cap of the company is 454.36 crores. Dynamic Levels recommends a buy on Rane Brake Lining (RBL) at correction at around 583 levels which is a good weekly support (1 week low) for the stock, with a price target of Rs. 670.The recommended entry price is below current market price, as 583 is an important weekly support and to keep a good Risk to Reward ratio.