Ratnamani Metals & Tubes Ltd. share price target

We maintain Accumulate rating but raise TP to Rs1,830 due to increase in FY22/FY23 EPS, increase in valuation multiple and roll over of valuations to FY23 estimates. Higher multiple is attributed to continuous recovery in Carbon Steel (CS) pipe orders, clarity on revival of Stainless Steel (SS) pipe orders and new demand drivers for SS pipes as we believe RMT will be foremost beneficiary of any revival in spending from refineries. Pandemic related weakness in order booking led to ~55% YoY drop in CS pipe sales impacting revenues in...

Valuation and risks: We value RMT at an average of 20x Sept'22 PE and 12x Sept'22 EV/EBITDA (10% premium to its FY16-20 average 1-year forward multiple) to arrive at TP of Rs1,420. Despite lowering our FY21E and FY22E estimates to account for lower sales volumes, the cash accumulation (due to working capital release in 1HFY21) aids in maintaining our older target price. Key risks: Steel pipe demand slowdown due to the pandemic, delayed payments from EPC contractors...

Channel checks with Pipeline engineers from a leading oil & gas company regarding demand recovery. Industry-wise list of on-going expansion projects which will drive demand for SS and CS steel pipes....

Post decline in Q1FY21; order book to increase, going forward RMTL's order book as on August 1, 2020 was at | 860 crore (| 1380 crore as on June 1, 2020). Higher margin SS order book was at | 483 crore (| 660 crore as on June 1, 2020) with CS orders of | 377 crore (| 720 crore as on June 1, 2020). In terms of domestic and exports mix, domestic orders were at | 533 crore while export orders were at | 327 crore. Of the | 533 crore domestic order book, | 373 crore is in the SS segment while balance | 160 crore is in the CS segment. Of the | 327 crore export order book: | 110 crore...

Ratnamani Metals & Tubes Limited (RMTL) reported in-line revenue performance, while margins and net profit remained above our expectations. RMTL reported revenue decline of 12.1% y-o-y, in line with our modest estimates, owing to closure of plants during the last 10 days of March due to nationwide lockdown restrictions. Ease in input cost pressures along with revenue mix change led to 320 bps y-o-y improvement in gross margin to 33.3%. However, gross margin expansion was offset by 29.5% y-o-y and 31.2% y-o-y increase in employee expenses and other expenses, resulting...

to be flattish being capacities running at optimum level. Carbon Steel volume stands at 72525 tons flat yoy and Stainless Steel volume 6246 tons (up 16% YoY) higher than our estimates but volume gain was partially offset by lower realization/t. EBITDA stood at INR 1084mn up 7.4%YoY on back of Sector Outlook...

RMTL's order book as on February 1, 2020 was at | 1569 crore. Higher margin SS order book was at | 516 crore (| 536 crore as on October 1, 2019) and CS orders of | 1053 crore (| 1390 crore as on October 1, 2019). This is the third consecutive quarter wherein higher margin SS orders have stayed above the | 500 crore mark, auguring well for RMTL. In terms of domestic and exports mix, domestic orders were at | 1121 crore while export orders were at | 448 crore. Of the | 1121 crore domestic order book: | 403 crore is in the SS segment while balance | 718 crore is in the CS segment. Of the | 448 crore...

Ratnamani Metals & Tubes (RMTL) is expected to deliver healthy performance during Q3FY2020E on the back of healthy pace of order execution. Moreover, net profit growth is expected to see a significant jump during Q3FY2020E owing to reduced tax rate, as the company will opt for lower corporate tax rate of 25.2% (a one-time impact). Revenue visibility for the next 12-15 months remains strong, backed by robust order in-take (order book of Rs 1800 crore as of December 2019 and order intake of Rs 300 crore post that) as there has been a favourable...

Ratnamani Metals & Tubes (RMTL) is expected to deliver healthy performance during Q3FY2020E on the back of healthy pace of order execution. Moreover, net profit growth is expected to see a significant jump during Q3FY2020E owing to reduced tax rate, as the company will opt for lower corporate tax rate of 25.2% (a one-time impact). Revenue visibility for the next 12-15 months remains strong, backed by robust order in-take (order book of Rs 1800 crore as of December 2019 and order intake of Rs 300 crore post that) as there has been a favourable...