Buy Ratnamani Metals; target of Rs 1000: ICICI Direct

ICICI Direct's research report on Ratnamani Metals

Ratnamani Metal and Tubes (RMTL) reported a mixed set of Q3FY19 numbers wherein the topline came in higher than our estimate while EBITDA, EBITDA margin and PAT came in lower than our estimate The stainless steel division reported sales of 5405 tonnes (flattish YoY; down 4% QoQ) in line with our estimate of 5425 tonne. The carbon steel division sales came in at 73680 tonnes (up 5% YoY, down 4% QoQ and higher than our estimate of ~70000 tonnes). Total operating income for the quarter was at Rs 728.5 crore (up 36% YoY, flattish QoQ) higher than our estimate of Rs 711.5 crore The EBITDA margin came in at 13.9% (Q3FY18: 15.7%, Q2FY19: 15.9% lower than our estimate of 15.8%). EBITDA for the quarter was at Rs 100.9 crore, up 20% YoY, down 13% QoQ (our estimate: Rs 112.1 crore) PAT was at Rs 62.8 crore, up 37% YoY, down 9% QoQ (our estimate of Rs 67.7 crore).

Outlook

We remain positive on the overall demand prospects given significant investments planned by the government in the oil & gas sector, city gas distribution and water transportation boosting the overall pipes demand (both stainless steel and carbon steel). We value the stock on 12x EV/EBITDA FY20E and arrive at a target price of Rs 1030. We maintain our BUY recommendation on the stock.

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Read More First Published on Feb 28, 2019 04:00 pm