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Business News/ Markets / Stock Markets/  Responsive Industries shares jumped over 145% in 14 months; should you invest now?
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Responsive Industries shares jumped over 145% in 14 months; should you invest now?

Ventura Securities initiates coverage on Responsive Industries, citing long-term growth opportunities in vinyl tiles. Imposition of 25% import duty on Chinese products in the US creates opportunities for Indian manufacturers.

In addition to its flooring segment, the company diversifies its manufacturing portfolio to include mooring ropes, artificial leather, and vinyl flooring for various transportation sectors such as railways (including Vande Bharat, Garib Rath, and conventional coaches), metro rails, and buses. (Pixabay)Premium
In addition to its flooring segment, the company diversifies its manufacturing portfolio to include mooring ropes, artificial leather, and vinyl flooring for various transportation sectors such as railways (including Vande Bharat, Garib Rath, and conventional coaches), metro rails, and buses. (Pixabay)

Shares of Responsive Industries have delivered a 146% return over the past 14 months. Between April and September 2023, the stock experienced a significant rally, surging by 234% in just six months. According to projections by domestic brokerage firm Ventura Securities, the stock is expected to continue its upward trajectory.

The brokerage firm in its latest research note has initiated coverage on Responsive Industries, a leading manufacturer of PVC products with a 'buy' rating and a 24-month target price of 436 apiece, citing long-term growth opportunities in the vinyl tiles. The target price implies an upside of 44% from the stock's latest closing price of 302. 

It noted that the imposition of a 25% import duty on Chinese products in the US, coupled with rising production costs in Europe and America, is driving India's export of vinyl flooring.

The global LVT market, valued at $18.8 billion in CY24, is projected to expand to $35.9 billion by CY29. Within this market, the US currently contributes $2.7–3.0 billion in sales, accounting for a 14.4% global share, and is expected to nearly double to $7.2 billion by CY27.

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Given that the US market predominantly relies on Chinese imports, the imposition of a 25% duty by the US government on imports from China has created favorable conditions for Indian manufacturers to capitalise on lucrative opportunities in the US market, said the brokerage. 

The brokerage emphasised that Responsive Industries, as a leading and fully integrated producer of vinyl flooring, holds a strong position in the US market and is well-positioned to capitalise on the growing trend. 

Additionally, Responsive Industries operates an offshore facility that caters to markets in Southeast Asia, the Asia Pacific, and South America, further expanding its market reach and potential.

Furthermore, the brokerage highlighted Saudi Arabia's efforts to elevate its infrastructure to align with Dubai's standards, aimed at attracting global investments, which will drive up demand for vinyl flooring solutions in the country.

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Due to the high cost of European and American products and India's logistical proximity, Saudi Arabia is sourcing vinyl flooring from India.

The demand for vinyl flooring in India is also expected to reach $20.7 billion by CY32 (CAGR growth of 6.6% during CY24–32), led by urbanisation activities, a revival in the real estate market, increasing disposable income, the growing influence of home décor trends & ideas through digital platforms & social media, and the recent development of innovative vinyl flooring products.

Other growth drivers

In addition to its flooring segment, the company diversifies its manufacturing portfolio to include mooring ropes, artificial leather, and vinyl flooring for various transportation sectors such as railways (including Vande Bharat, Garib Rath, and conventional coaches), metro rails, and buses. 

Furthermore, it produces PVC membranes used as waterproofing solutions in infrastructure projects like tunnels and roads.

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According to the brokerage, these segments demonstrate substantial growth potential. The global mooring ropes market, currently valued at $2.3 billion, is expected to experience a robust growth rate of 26.6%, reaching $12 billion by CY30.

Moreover, with railways embarking on the upgrade of 40,000 standard coaches to Vande Bharat and metro rail projects witnessing 2,000 kilometers under construction, the demand for Responsive Industries' products remains promising, it stated. 

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Additionally, a shift towards electric buses is underway, with plans to replace 800,000 diesel buses with electric ones by 2030. These efforts are expected to boost the demand for vinyl flooring in transport vehicles, according to the brokerage. 

RESP has strong B2B relationships with Indian Railways, Metro Rail Systems, Tata Motors, Mercedez Benz, etc and supplies its vinyl flooring solutions under long-term contracts.

Lastly, it said the tunnelling segment presents an attractive pipeline, with 1,208 tunnels spanning over 4,000 kilometres in length, further bolstering growth opportunities for the company.

 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.

 

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Published: 23 May 2024, 01:36 PM IST
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