Ace Investor Saurabh Mukherjea Makes Fresh Entry in this Steel Stock

The stock market is home to captivating tales of making billions. Folks like Warren Buffet, Rakesh Jhunjhunwala, and Saurabh Mukherjea are just a few examples of the many people who have made billions from small investments.

However, finding such lucrative stocks is no easy feat. To reap sizable profits from the equity market, one must possess substantial skill and adeptly leverage their knowledge to identify top-notch stocks capable of generating exponential returns.

Thus, many investors seek the portfolio of renowned investing experts who have a track record of outperforming the market and a talent for spotting multibagger stocks.

As a result, every move these investing gurus make, including their decisions to buy or sell stakes in specific companies, garners significant market attention.

For investors seeking such news, there is big news today. Saurabh Mukherjea, an ace investor, has added a substantial number of shares of a refractory company to his portfolio.

A word about Saurabh Mukherjea

Endorsing the coffee can approach to investing, Saurabh Mukherjea is the founder and chief investment officer of Marcellus Investment Managers.

Mukherjea is known for his bold, often bearish, stance on the markets and the economy. Being a most erudite equity analyst, he is one of the most followed money managers on Dalal Street.

Living by his thumb rule of 'sustainable growth', Mukherjea is often heard talking about entry barriers, market share potential, and at times, people running the show.

To know more about Saurabh Mukherjea, watch the recent Equitymaster's Investor Hour podcast, where he discussed his personal goals, successful calls, failures, and more.

In the hour-long podcast, he also shared the investment mistakes to avoid and the one question he would like to ask Warren Buffett.

Tune in to follow an interesting conversation with one of the best investing minds.

Which stock did Saurabh Mukherjea add and why?

The stock in question is none other than RHI Magnesita.

RHI Magnesita India (RHIM India) is the Indian subsidiary of RHI Magnesita (RHIM Global), a global leader in manufacturing & servicing refractories with about 30% market share.

Refractories are non-metallic material having very high melting points enabling their usage as internal lining in furnaces, kilns or any other vessels in the metal, cement, and glass industries.

In its latest newsletter to investors, Marcellus Investment Managers discusses the investment rationale behind RHI Magnesita India. The firm highlights a series of compelling factors that combine to render it an appealing inclusion within the portfolio.

#1 Highly critical nature of refractories

The note from Marcellus Investment Managers highlights the pivotal role played by refractories. While these constitute a mere 2-3% of overall costs, they are indispensable for commencing production within a customer's plants.

Moreover, due to natural wear and tear, refractories necessitate periodic replacement. This is a laborious process that often involves plant shutdowns lasting up to a day.

The customer's demand for premium quality, long-lasting products is driven by the modest cost yet significant impact of refractories, leading to reduced downtime risks.

#2 Quality and R&D focus

The note then delves into the superior product quality that underscores RHIM India's leadership in the Indian refractory market.

This elevated product quality emerges as a direct outcome of RHIM Global's dedicated focus on research and development, with an impressive portfolio of over 1,700 active patents. Continuous innovation results in the creation of higher-quality, longer-lasting products.

Market intelligence suggests that RHIM India holds a dominant position in the refractory industry, boasting a market share of over 40% in segments such as basic oxygen furnace and laddle.

#3 Significant reinvestments

Lastly, the note highlights RHIM India's strategic approach to reinvestments. Over the past five years, the company has pursued a acquisition strategy, strategically integrating various assets and capabilities.

Notably, the merger of RHIM Global's subsidiaries into RHIM India, a listed entity, serves to align RHIM Global's interests with those of minority shareholders.

The Dalmia acquisition also reinforces RHIM India's competitive edge with access to a manufacturing base and enabling its entry into new segments like cement/industrial and blast furnace refractories.

How shares of RHI Magnesita have performed recently

The RHI Magnesita stock rose around 28.7% in the past one year. Over a month, the share price has gone up by 17%.

RHI Magnesita share price touched its 52-week high price of Rs 892.9 on 6 January 2023. Its 52-week low was Rs 526.7 touched on 17 August 2022.

The company is currently trading at a PB (price to book value) multiple of 12.6 times.

About RHI Magnesita

RHI Magnesita India formerly Orient Refractories is among one of the top refractory manufactures in India. The company primarily manufactures refractories for the steel industry.

RHI Magnesita India is born out of the integration of three Indian subsidiaries of RHI Magnesita Group, RHI Clasil, RHI India, and Orient Refractories. The integration has synergized, simplified and consolidated our strength in India to serve customers more efficiently as one combined entity.

The company sells its products both in India and overseas. It provides a wide range of special refractories. All products are custom made to suit the casting conditions and grade of steel being cast.

For more details, see the RHI Magnesita company fact sheet and quarterly results. For a sector overview, read our steel sector report.

You can also compare RHI Magnesita with its peers:

RHI Magnesita vs IFGL Refractories

RHI Magnesita vs Vesuvius India

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...