Quarterly Update Report
Ratnamani Metals & Tubes Ltd. | Quarterly Update
Ratnamani Metals & Tubes Ltd.
15th August 2022
NEUTRAL
CMP Rs. 1,730
TARGET Rs. 1,824(+5.4%)
Strong growth in turnover, but product mix dented margins
On a lower base, Ratnamani Metals & Tubes Limited (RMTL) posted a strong
YoY growth of 86% and a flat growth on a QoQ basis. Due to changes in
product mix and higher raw material costs, operating margins were down by
3% & 4% on YoY & QoQ basis, respectively. RMTL would deliver a top-line
growth of 15-20% in FY23 based on a strong order book of Rs. 23,450 Mn as
on Q1FY23, which is expected to be executed by the end of FY23.
Company Data
| MCAP (Rs. Mn) | 121,610 |
|---|---|
| O/S Shares (Mn) | 70 |
| 52w High/Low | 1,920 / 1,237 |
| Face Value (in Rs.) | 2 |
| Liquidity (3M) (Rs. Mn) |
48.2 |
Changes in product mix dented operating margins
Carbon Steel (CS) pipes are lower-margin products than stainless steel (SS)
pipes. An increase in revenue proportion of CS pipes & lower value-added
SS pipes lead to a decrease in operating margins.
Shareholding Pattern %
| Jul 22 | Mar 22 | Dec 21 | |
|---|---|---|---|
| Promoters | 60.16 | 60.16 | 60.16 |
| FIIs | 12.28 | 12.13 | 12.01 |
| DIIs | 16.36 | 16.26 | 16.02 |
| Non-Institutional | 11.2 | 11.45 | 11.81 |
Active bidding to fuel order book growth
In water infrastructure projects, RMTL is bidding in areas that are in closer
proximity to its operating plants. In volume terms, cumulative prospectus
order book for Gujarat (250,000 MT), Rajasthan (110,000 MT) & Madhya
Pradesh (200,000-300,000 MT) is 560,000-660,000 MT. Apart from this, RMTL
has already tendered for 100,000 MT in the oil & gas industry.
Ratnamani vs Nifty
Source: Keynote Capitals Ltd.
Capacity expansion (Capex)
In earlier quarters, management indicated that they will be spending Rs. 3.5 Bn
for capacity expansion in SS pipes (brownfield) & Helical Submerged Arc
Welding (HSAW) pipes (greenfield). SS pipes expansion is progressing as per
expectations. As HSAW pipes expansion is a greenfield project, management
requires another six months to give a clarity on development progress.
Key Financial Data
| (Rs mn) | FY22 | FY23E | FY24E |
|---|---|---|---|
| Revenue | 31,388 | 37,665 | 42,413 |
| EBITDA | 4,947 | 6,026 | 6,998 |
| Net Profit | 3,226 | 3,812 | 4,503 |
| Total Assets | 29,625 | 33,061 | 37,308 |
| ROCE (%) | 14% | 16% | 17% |
| ROE (%) | 15% | 16% | 16% |
Source: Company, Keynote Capitals Ltd.
View & Valuation
We maintain our views on Ratnamani Metals & Tubes Ltd with a NEUTRAL
rating and a target price of Rs. 1,824 (32x FY23e earnings), giving it a 15%
premium to median multiples based on a strong order book and execution
track record of the management.
Result Highlights (Rs. Mn)
Research Analyst
Ratnamani Metals & Tubes Ltd. | Quarterly Update
Q1FY23 Conference Call Takeaways
General Highlights
– Change in product mix and higher inventory cost had put some pressure on
operating margins.
– As of June’2022, liquid cash on books & fixed investments are worth Rs.
2,200 Mn+ & debt is worth Rs. 1,500-1,600 Mn.
CS pipes
– Electrical Resistance Welding (ERW) pipes capacity is fully booked till
November’2022. For future projects, RMTL has already bid for a few tenders.
– Management expects a strong pipeline in CS pipes: Longitudinal
Submerged Arc Welding (LSAW) pipes for the oil & gas industry & HSAW pipes for water infrastructure projects.
SS pipes
– In the last few quarters, RMTL has not delivered a growth in SS pipes (volume terms).
– Management indicated that their focus is to increase the value-added proportion in SS pipes. This will help them to differentiate themselves from
the competition.
Management Guidance
– In the short term, RMTL can see blips in operating margins, but in the long
term, they will have stable operating margins in the range of 16-18%.
– In FY23, RMTL will see top-line growth of 15-20%.
CAPEX
– Annual maintenance expense is Rs. 400 Mn.
– SS pipes (brownfield) expansion is progressing as per expectation.
– For any development in HSAW pipes (greenfield) expansion, management
requires six months for a clear guidance.
Order Book
– Currently, RMTL has an order book worth Rs. 23,450 Mn, which includes Rs.
4,550 Mn export orders & 18,900 Mn domestic orders.
– In Water infrastructure projects, RMTL has a prospectus order book of
560,000-660,000 MT, which are close to its manufacturing plants.
– RMTL has already made a bid for 100,000 MT in the oil & gas industry.
Ratnamani Metals & Tubes Ltd. | Quarterly Update
Financial Statement Analysis
Ratnamani Metals & Tubes Ltd. | Quarterly Update
Valuation
KEYNOTE Rating History
| Date | Rating | Market Price at Recommendation | Upside/Downside |
|---|---|---|---|
| 4th August 2022 | NEUTRAL | 1,779 | +2.5% |
| 12th August 2022 | NEUTRAL | 1,730 | +5.4% |
Ratnamani Metals & Tubes Ltd. | Quarterly Update
Rating Methodology
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The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Keynote Capitals Ltd. (KCL) is a SEBI Registered Research Analyst having registration no. INH000007997. KCL, the Research Entity (RE) as defined in
the Regulations, is engaged in the business of providing Stock broking services, Depository participant services & distribution of various financial
products. Details of associate entities of Keynote Capitals Limited are available on the website at https://www.keynotecapitals.com/associate-entities/
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recipients of this report should be aware that KCL may have a potential conflict of interest that may affect the objectivity of this report.
Compensation of Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
Details of pending Enquiry Proceedings of KCL are available on the website at https://www.keynotecapitals.com/pending-enquiry-proceedings/
A graph of daily closing prices of securities is available at www.nseindia.com, www.bseindia.com. Research Analyst views on Subject Company may
vary based on Fundamental research and Technical Research. Proprietary trading desk of KCL or its associates maintains arm’s length distance with
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Ratnamani Metals & Tubes Ltd. | Quarterly Update
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Ratnamani Metals & Tubes Ltd. | Quarterly Update
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