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A thread on RHI Magnesita India Ltd and Refractory Industry in detail.
Why this sector? Refractory business is an indirect play on steel industry and capex cycle with less volatility
#refractories #RHIM #learningsatniveshaay
A thread on RHI Magnesita India Ltd and Refractory Industry in detail.
Why this sector? Refractory business is an indirect play on steel industry and capex cycle with less volatility
#refractories #RHIM #learningsatniveshaay
What led us to research this industry?
Revival in Indian Capex Cycle expected (Govt+Pvt) with favorable Govt. policies & reforms like PLI, NIP, Import Substitution, AMP, reduced corporate tax rate
Highlight of the #Budget2022 was also on reviving CAPEX cycle in India
Revival in Indian Capex Cycle expected (Govt+Pvt) with favorable Govt. policies & reforms like PLI, NIP, Import Substitution, AMP, reduced corporate tax rate
Highlight of the #Budget2022 was also on reviving CAPEX cycle in India
What are Refractories?
•Ceramic materials designed to withstand very high temps(>1200°C) without undergoing physical/ chemical changes while remaining in contact with molten slag/metal/gases.
•Critical product, yet forms 3% of COGS in steel mfg & < 1% in other applications.
•Ceramic materials designed to withstand very high temps(>1200°C) without undergoing physical/ chemical changes while remaining in contact with molten slag/metal/gases.
•Critical product, yet forms 3% of COGS in steel mfg & < 1% in other applications.
Refractories are characterized as Consumable(75%) or Investment Goods(25%) depending on the end user industry.
Application: 75% of refractory demand comes from Iron & Steel industry and remaining is from cement, glass, non ferrous & energy/environment/Chemicals.
#refractories
Application: 75% of refractory demand comes from Iron & Steel industry and remaining is from cement, glass, non ferrous & energy/environment/Chemicals.
#refractories
Methods of steel production:
i.Blast Oxygen Furnace (BOF)- Primary Steel Making
ii.Electric Arc Furnace (EAF)- Secondary Steel Making
i.Blast Oxygen Furnace (BOF)- Primary Steel Making
ii.Electric Arc Furnace (EAF)- Secondary Steel Making
Raw material used:
Brown Fused/White Fused Alumina
Magnesia
Silicon Carbide
Zirconia
Understanding the Ref. Ind. in detail:
- Fragmented Ind.
- High Entry Barrier Bus.
- Consumable Product, less volatile over long term
- Consistent Growth in Ref. Bus. irresp. of steel cycle
Brown Fused/White Fused Alumina
Magnesia
Silicon Carbide
Zirconia
Understanding the Ref. Ind. in detail:
- Fragmented Ind.
- High Entry Barrier Bus.
- Consumable Product, less volatile over long term
- Consistent Growth in Ref. Bus. irresp. of steel cycle
Supply Side Dynamics:
-Raw Material Security is challenging
-Benefit of Vertical Integration
-Recent Trends: Volatile Raw Material Prices,Shift to other countries for procuring raw material, Recycling of raw materials leading to cost savings
-Raw Material Security is challenging
-Benefit of Vertical Integration
-Recent Trends: Volatile Raw Material Prices,Shift to other countries for procuring raw material, Recycling of raw materials leading to cost savings
Why this ind. can do well, going forward
-Shortage of Raw Material can lead to consolidation in ind.
-Ind. is moving towards TRM services or complete business sol model
-Steel Prod. expected to remain high
Refractory maintenance practice is imp. also leads to high vol consumption
-Shortage of Raw Material can lead to consolidation in ind.
-Ind. is moving towards TRM services or complete business sol model
-Steel Prod. expected to remain high
Refractory maintenance practice is imp. also leads to high vol consumption
Why RHI Magnesita India?
-Market Leader ~15.9% market share
-Direct beneficiary of expected consolidation
-TRM
-Superior Margins than peers & comparatively lower on cost curve
-Better capacity utilisation than competitors
-Better Product Mix
-CAPEX Plan (400 Cr. for next 3 yrs)
-Market Leader ~15.9% market share
-Direct beneficiary of expected consolidation
-TRM
-Superior Margins than peers & comparatively lower on cost curve
-Better capacity utilisation than competitors
-Better Product Mix
-CAPEX Plan (400 Cr. for next 3 yrs)
About company
- Incorporated in 2021 with merger of 3 RHI entities
Orient Refractories Ltd., RHI Clasil & RHI India Pvt Ltd.
Total installed capacity : 128000 tons PA
- Geography Wise Revenue: India 75% Exports 25%
- Key Risks:
1.Volatility in RM Prices
2.Downturn in Steel Ind
- Incorporated in 2021 with merger of 3 RHI entities
Orient Refractories Ltd., RHI Clasil & RHI India Pvt Ltd.
Total installed capacity : 128000 tons PA
- Geography Wise Revenue: India 75% Exports 25%
- Key Risks:
1.Volatility in RM Prices
2.Downturn in Steel Ind
Competitive scenario:
1. Vesuvius India Ltd.: RM import dependent, lost market share in last 5 yrs, installedd capacity - 275k tons
2. IFGL Ref. Ltd.: RM import dependent, Product: specialized flow control ref., Installed capacity 27Lakh pieces of shaped & 52K tons of unshaped
1. Vesuvius India Ltd.: RM import dependent, lost market share in last 5 yrs, installedd capacity - 275k tons
2. IFGL Ref. Ltd.: RM import dependent, Product: specialized flow control ref., Installed capacity 27Lakh pieces of shaped & 52K tons of unshaped
3. TRL Krosaki Refractories Ltd. (Unlisted Player)
4. Calderys India (Unlisted Player): more into unshaped refractories, RM import dependent, 40-45% of the total revenue comes from iron and steel industry.
4. Calderys India (Unlisted Player): more into unshaped refractories, RM import dependent, 40-45% of the total revenue comes from iron and steel industry.
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