My Investment Idea No. 6: Rane Brake Lining (RBL)

Long Term Investment Idea No. 6

Rane Brake Lining

1.    Face Value = Rs 10

2.    Equity = 7.92 Cr

3.    Price = Rs 557

4.    Market Cap = Rs 442 Cr (Micro Cap)

5.  Rane Brake Lining, a part of Rane Group which was established in 1964, is engaged in manufacturing asbestos-free brake Linings, Disc Pads and Clutch Facings. These items have application in every segment of automobile Industry. The List of products manufactured by the Company is as given below:-

      (a)   Brake Linings

      (b)   Disc Pads

      (c)   Clutch Facings

      (d)   Rail Brake Blocks

      (e)   Commercial vehicle Brake Pads

      (f)    Sintered Brake Pads

6.    Rane Brake Lining has clientele from around the world and list of some of the Companies which are customers of Rane Brake Lining are:-

      (a)    Hundai

      (b)    Force Motor

      (c)    Escorts 

      (d)    Eicher

      (e)    Tata Motors

      (f)     Ashok Leyland

      (g)    Hero

      (h)    Honda

      (i)     Maruti Suzuki

      (j)     Yamaha

      (k)    John Deere 

      (l)     Toyota

      (m)   Swaraj Mazda

      (n)    Nissan

      (o)    Renault

      (p)    KIA

      (q)    TVS

      (r)     Audi

      (s)     BMW

      (t)     Volks Wagen

      (u)    Daimler

      (v)    FIAT

      (w)   Kubota

      (x)    BRP

      (y)    Ford

      (z)    ISUZU and many more. List is endless. I have stopped writing the names of the companies as the ALPHABETs have finished but I am sure that the point which I want to drive home has been made amply clear.

7.   It can be seen from the above that this company, is a market leader in its segment and has four Manufacturing Facilities. Moreover, its products are shipped to 33 Countries. In addition, Rane Group has Sales offices in Europe as Well as USA. These Sales Offices are also used for the sale of the products made in their other subsidiaries of Rane Group, to name Rane Engine Valve Limited, Rane (Madras) Limited, Rane TRW Steering System Pvt Limited, Rane NSK Steering Systems Pvt Limited, Rane Auto Parts, Rane Precision Die Cast Inc, Rane t4u Private Limited.

Results Overview

        Net Sales (NP)/ Net Profit (NP)/ Earning Per Share (EPS)

Yearly

8.     2010: Rs 236.30 Cr/ Rs 10.09 Cr/ Rs 12.74

9.     2011: Rs 305.84 Cr/ Rs 15.28 Cr/ Rs 19.31

10.   2012: Rs 359.17 Cr/ Rs 16.18 Cr/ Rs 20.45

11.   2013: Rs 376.44 Cr/ Rs   9.10 Cr/ Rs 11.50

12.   2014: Rs 384.11 Cr/ Rs 17.21 Cr/ Rs 21.76

13.   2015: Rs 416.41 Cr/ Rs 16.11 Cr/ Rs 20.37

14.   2016: Rs 448.42 Cr/ Rs 25.76 Cr/ Rs 32.56

15.   2017: Rs 487.48 Cr/ Rs 34.72 Cr/ Rs 43.86

16.   2018: Rs 482.46 Cr/ Rs 35.75 Cr/ Rs 45.16

17.   2019: Rs 513.89 Cr/ Rs 36.53 Cr/ Rs 46.15

Haly Yearly

18.   HY FY 2019: Rs 244.44 Cr/ Rs 11.88 Cr/ Rs 15.01 

19.   HY FY 2020: Rs 230.97 Cr/ Rs 18.68 Cr/ Rs 18.68

Shareholding Pattern:

20.   Promoter Holding:          66.99%

21.   Financial Institutions:     00.06%

22.   Insurance Companies:    09.74%

23.   Other DII:                       02.17%

Justification For Long Term Investment

24.  In spite of the fact that Automobile Industry was in down trend for last 3 years, Rane Brakes Lining has grown in terms of both Net Sales as well as Net Profit, though Marginally. It is a strong positive for this company when many companies had gone into losses. Even on Haly Yearly basis, the Net Profit has grown.

25.   We are in the process of transition from Combustion based Automobile Industry to Electric Technology based Automobile Industry. Therefore, it not difficult to understand that many Automobile Component manufacturing companies would seize to exists in coming years. However, the components manufactured by this Company would continue to be used for time immemorial (as of now) irrespective of the fact whether it a Combustion Engine based vehicle or Electric Vehicle. Therefore, due to upcoming recovery in auto sector and replacement market due to old vehicles on road, it has a very clear earning visibility in a foreseeable future.

26.   It is a market leader and gained the confidence of Automobile Companies across the world. 

27.   The Stock Price of Rane Brake Lining Limited was around Rs 40 in 2009 and it rose to around Rs 100 by 2013 year end. However, it touched a high of Rs 1450 in Jun 2017. Since then, due to poor Stock Market Sentiment and low demand in Automobile Industry, it dropped to a low of approximately Rs 450 in Aug 2019. Now the Stock is trading at Rs 556. Even now, people who bought this stock in 2009, are enjoying approximately 14 times returns. I personally believe that Rane Brake Lining should be accumulated slowly for long term exponential returns, which I am going to do. 

Disclaimer:

28.   Information Provide above has been taken from internet, which may or may not be correct. Therefore, do your own research before investing.

29.    The Post written above is not to be taken as a 'Buy Recommendation' by the author on Rane Brake Lining and no one should take decision to invest in this Stock based on he information given in this Blog. This blog is written only to express the views of the author, which could be right or wrong. You must consult your Financial Adviser before investing in Rane Brake Lining.