Cost Efficiency and Sales Growth Should Help Tinna Rubber and Infrastructure Limited

With improvement in domestic and international operating environment, the company should be able to achieve healthy performance. Recent investment and superior R&D capabilities are expected to act as principal growth enablers. Focus on debt reduction should help the company achieve sound profit levels.

About Tinna Rubber and Infrastructure Limited

Tinna Rubber and Infrastructure Limited is a professionally managed company, which is rapidly expanding as fully-integrated company. It deals in converting waste tyres into downstream value-added products. Tinna Rubber and Infrastructure Limited places strong emphasis on using modern technology for qualitative services and business efficiency focused on complete customer satisfaction and achieving milestones. The company helps in transforming ‘end-of-life’ tyres into rubber and steel. These further have application in new tyres/conveyor belts and several other rubber moulded products and roads. Steel extracted from this process can be used for making steel abrasives.

Today, the company is being categorised as a leading integrated waste tyre recycler and is being counted among global leaders in manufacturing of recycled rubber materials. The company’s manufacturing facilities are across India including Panipat, Kalamb, Haldia, Gumudipoondi and Wada. Portfolio of the company includes products such as crumb rubber, high tensile reclaim rubber, coated rubber crumb, micronized rubber powder, crumb rubber modifier, bitumen emulsion, steel shots/cut wire shots. These products are being used in road and non-road applications. Steel scrap which gets generated during process finds its use in smelting units/induction furnaces.

Growth Enablers of Tinna Rubber and Infrastructure Limited:

• Focusing On Organic Growth: During FY21, the company posted EBITDA of INR1,739.45 lakhs in comparison to INR895.82 lakhs in FY20. Revenue grew to INR13,006.55 lakhs against INR12,302.69 lakhs a year prior. Looking forward to FY22, the company continues to focus on becoming lowest cost producer of recycled rubber materials in India. This should be able to grow its sales by 35%-40% against FY21. Plans are there to harvest benefits of scale & better capacity utilization through improving its EBITDA margins. In FY22, its acute focus should be on automation. It should continue to target productivity enhancement, manpower optimization and leveraging benefits of industry 4.0. The company plans on increasing market share in export and overseas market. The company continues to lay emphasis on reducing dependency on long-term debt and it eyes to become zero long-term debt company in two years. In FY22, the company’s priority is to achieve sustainable growth. Despite reaching many milestones on its journey, the company continues to work to further improve manufacturing operations. It will continue to provide innovative products and solutions to support its customers’ needs. It has launched a range of projects to reduce wastage and to promote re-use and re-cycling. Revenue from operations of the company rose to INR13,006.55 lakhs, while EBITDA increased to INR1,739.45 lakhs.

• Sectoral Dynamics: Since there are limited natural resources, recycling has been able to gain attention worldwide. Several companies are working on a vision of using major portion of recycled material in products and formulations. Thus, rubber industry is not an exception. End-of-life tyres continue to be an important source of recycled rubber worldwide. Its status has now changed from waste to resource. Reclaim rubber industry is being developed around this reality. The company continues to be a leading player in field of crumb rubber and bituminous products. It has captured substantial market share as it has maintained high quality, reliability and customer satisfaction. The company established pan-India presence as its manufacturing facilities are situated in strategic centers and are near to hubs of industrial activity. It has strong sourcing tie-ups of end-of-life truck and bus radial tyres from US, Australia, Middle East, Africa and Europe. Given its high ability of product customization and fully integrated operations, the company should be able to achieve above average growth rates.
• Increased Demand and Market Presence Should Stem Growth: In CY22, the company expects implementation of various initiatives and new reforms as envisaged by government. The company introduced new technologies and 2 specialized grades of emulsion like micro surfacing, recycling grades emulsion and eco-friendly cold mix emulsion for rural road. The company continues to expect accelerated growth from road sector. It expects that a new policy is underway which will mandate use of modified bitumen in development of new roads. This should enable accelerated demand for the company’s products. The company has strong market presence and immense corporate trust. The company’s efforts led to successful execution of export contract for supply of products to Thailand, Turkey and Sri Lanka. It expects to see higher exports and it continues to explore opportunity in European market.
• Strong Geographical Presence: The company has strong geographical footprint as 3 of its plants are located near ports to execute import of waste tyres and re-export of finished goods. All plants of the company are situated near vibrant industrial hubs. With diversified geographical presence, the company is able to cater to demand of its customers across India. Within tyre recycling space, the company has scattered product range and none of its peer companies have product mix like Tinna Rubber and Infrastructure Limited.
• Favourable Dynamics: The company is optimistic about road sector industry as 90% of bitumen gets used in road construction in India, with balance of 10% being shared equally for roofing & waterproofing. 90% of demand is being met by domestic production and remaining 10% is imported, principally from UAE and Iran. Modified bitumen market is estimated at 1,50,000 to 2,00,00MT or 3-4% of total bitumen market. Demand is expected to stem from several factors. GOI is in process of making use of CRMB mandatory on top layer of all road surfaces. With government’s policy to develop more roads, consumption/demand for bituminous products should go northwards. Government plans to increase spends on infrastructure industry, including roads. As per revised Ministry of Road Transport and Highways guidelines, inclusion of modified bitumen in roads is essential. Currently, market continues to grow at 30% annually as more and more departments are working to convert from hot mix technology to cold mix technology.
• Non-Road Sector Industry and Growth Potential: India occupies 2^nd largest reclaim rubber market in world at 0.2 million-0.3 million MT. Global reclaimed rubber market size was earlier estimated at USD2.39 billion in 2018 and this should compound at 12.03 % from CY19 to CY26. India continues to recycle and reuse waste tyres for 4 decades, even though 60% are disposed of through illegal dumping. Still, India is counted as 2^nd largest producer of reclaimed rubber after China. India is a large user and producer. Apart from this, expanding Automotive growth in this country is robust. Between 2015 and 2026, this industry’s total turnover should be able to grow by 4x.
• Indian Tyre Industry- On Road to Success: Indian tyre industry is important part of auto sector, contributing to 3% of India’s manufacturing GDP and 0.5% of total GDP directly. Indian tyre industry doubled from ~INR30,000 Cr in 2011 to ~INR59,500 Cr in 2018, out of which 90%-95% was from domestic markets. Capacity of domestic tyre industry has compounded at 14.5% over FY16-FY20 vs. 5.8% over FY11-FY15. Another growth enabler of this industry is ban on import of tyres from China as government imposed anti-dumping duty.

Conclusion

Globally, much emphasis is being placed on building environmental stability and climate resilience into core of future business models. Tinna Rubber and Infrastructure Limited should be able to capitalise on demand/opportunities that will come as a result of these fundamental shifts. In FY22, the company plans to work on bringing cost efficiency and sales growth. These should help the company in expanding its margins.

Principal task of the company is to reduce its reliance on debts. Its debt position has improved over past 3 years. With government of India planning to complete 65,000 km of national highways by CY22, the company should be able to benefit as a result of economies of scale. It should establish a formidable presence in this market for recycled rubber products.

Several growth opportunities are being exhibited by the company’s segments which should help it achieve above average growth rates.

Stock price of Tinna Rubber and Infrastructure Limited has seen a strong run-up in past one year. Stock has increased ~532.66% between Mar 1, 2021- Feb 25, 2022. 

In comparison to this stock, SENSEX has increased only ~12.1%. Thus, stock of Tinna Rubber and Infrastructure Limited has outpaced this index by a wide margin. Stock is expected to continue its run-up over coming months and this should stem from favourable market dynamics and focus on bringing down its debt. Thus, investors can consider going long on this stock.

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