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Ratnamani Metals & Tubes Ltd>
  • CMP : 3,403.5 Chg : -19.65 (-0.57%)
  • Target : 2,500.0 (15.53%)
  • Target Period : 12-18 Month

14 Feb 2023

Healthy show; EBITDA margin surprises positively…

About The Stock

Ratnamani Metals & Tubes (RMTL) is a niche player with superior capabilities in the domestic industrial pipes and tube segment. RMTL manufactures a wide range of stainless steel and carbon steel pipes & tubes, which find application in key end user industries like oil & gas refineries, power, healthcare, etc.

  • RMTL has an impeccable capital allocation strategy and best in class operating margins and return ratios
  • RMTL has healthy cash flows and a strong balance sheet. It is one of the few players in the steel pipe sector having net cash position on its balance-sheet

RMTL reported a healthy Q3FY23 performance aided by robust EBITDA margins.

  • For Q3FY23, RMTL reported total sales volume of 66314 tonnes, up 18% QoQ but down 8% YoY, broadly in line with our estimate of 67500 tonnes. Standalone revenue from operations for the quarter was at ₹ 1057 crore, up 14% YoY, 18% QoQ, higher than our estimate of ₹ 1029 crore


  • Standalone EBITDA was at ₹ 195 crore, up 50% YoY, 34% QoQ, higher than our estimate of ₹ 154 crore. EBITDA margin was at 18.4%, up 440 bps YoY and 230 bps QoQ, significantly higher than our estimate of 14.9%. During the quarter, RMTL’s gross margins were at 35.2% compared to 28.7% in Q3FY22 and 34.3% in Q2FY23. Gross margin expansion aided RMTL to report healthy EBITDA margins during the quarter


  • Ensuing standalone PAT for the quarter was at ₹ 132 crore, up 49% YoY and 34% QoQ, higher than our estimate of ₹ 105 crore
What should Investors do?

RMTL’s share price has given a return of ~54% over the last one year (from ~₹ 1407 in February 2022 to ~₹ 2164 levels in February 2023).

  • We maintain BUY rating on the stock
Target Price and Valuation

We value RMTL at ₹ 2500, 28x FY25E EPS.

Key Triggers for future price performance
  • RMTL’s order book as on February 1, 2023 was at ₹ 3102 crore (₹ 3244 crore as on November 1, 2022). As on February 1, 2023, stainless steel (SS) order book was at ₹ 747 crore (₹ 765 crore as on November 1, 2022) while carbon steel (CS) orders were at ₹ 2355 crore (₹ 2479 crore as on November 1, 2022)


  • Over FY22-25E, we expect the topline to grow at a CAGR of 18% while EBITDA, PAT are expected to register CAGR of 21%, 25%, respectively
Alternate Stock Idea

In our metal sector coverage, we also like Jindal Stainless.

  • Jindal Stainless (JSL) operates an integrated stainless steel plant at Jajpur, Odisha
  • BUY with a target price of ₹ 300

Key Financial Summary

(Year-end March) FY20 FY21 FY22 CAGR (17-22) in % FY23E FY24E FY25E CAGR (22-25E) in %
Total Operating Income (| crore) 2,583.1 2,298.1 3,138.8 17.0 3,964.5 4,600.8 5,217.5 18.5
EBITDA (| crore) 423.9 399.7 494.7 14.0 634.3 747.6 880.2 21.2
EBITDA Margin 16.4 17.4 15.8 - 16.0 16.3 16.9 -
Net Profit (| crore) 307.5 275.9 322.4 17.0 427.3 531.2 625.7 24.7
EPS (|) 65.8 39.4 46.0 - 61.0 75.8 89.3 -
P/E (x) 31.9 35.5 30.4 - 34.4 27.7 23.5 -
P/E (x) 31.9 35.5 30.4 - 34.4 27.7 23.5 -
RoCE (%) 19.0 15.7 17.3 - 19.8 20.3 20.4 -
RoE (%) 18.0 13.9 14.3 - 16.4 17.2 17.2 -
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
Source: Company, ICICI Direct Research



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