RHI Magnesita India Ltd. share price target

We initiate coverage on Refractories, riding on the current boom in the steel industry. Heavy financial stimulus for infrastructure projects - domestic and global is expected to keep demand for refractories robust in the near future. Historically, refractory companies have been steady revenue compounder with stable margins, net cash balance sheets and superior return ratios, a remarkable contrast to its customer steel sector, thereby largely obviating the severe cyclicity of commodity companies. We expect recycling and localisation to support margins for refractory players. We initiate on IFGL Refractories and RHI Magnesita India (RHIM) with a BUY rating with IFGL being our preferred pick....

The World Steel Association (WSA) forecasts the global steel demand to grow by 5.8% in 2021 primarily supported by a robust consumption growth of 9.1% in China and by substantial fiscal stimulus measures in most of the advanced economies. Domestically, India's steel demand is expected to rebound by 19.8% in 2021 21 after declining 13.7% in 2020, while the growth in 2022 is expected to be lower at 5.9%. The economy has been recovering strongly since August last year, much sharper than...

fficial figures suggest that India consumed over 100 MT of steel in 2019. Moody's expects India'ss steel demand to decline by 10% in FY21. Globally the demand for steel is expected to drop by 6.4% on account of the pandemic, while developed and developing economies (excluding China) are forecast to decline by 17.1% and 11.6% respectively primarily led by...

According to Mordor Intellegence, the market for refractories is anticipated to register a CAGR of 5.2% and reach a size of USD 48 billion by 2023. The increase in demand from iron & steel, glass, nonnon ferrous metals, and power generation industries would fuel the refractories market. Intensifying demand for glass, cement, steel etc. in...

The global refractories market demand is set to rise from USD 30 billion in 2018 to around USD 41 billion by 2025, according to a 2019 Global Market Insights Inc. report. Increase in demand...

Orient Refractories' (ORIENT) Q3FY19 revenue rose 26.6% yoy to Rs1.99bn, while our estimate was Rs1.80bn. The strong quarterly performance was a result of stable domestic volumes and higher exports growth, driven by the commencement of new ISO-capacity. EBITDA increased 1.6% yoy and 7.2% qoq, supported by higher revenue, and stood at Rs336mn vs. our estimate of Rs303mn. EBITDA margin contracted 413bps yoy to 16.8%....

First half of current fiscal saw an improvement in finished steel production and consumption, which grew by 6% (yoy) and 7.8% (yoy) to 53.9 mn tons and 47.7 mn tons respectively, compared to a yoy growth of 2.5% and 7.6% respectively...

Our detailed interaction with Orient Refractories (ORL) & RHI Magnesita management on the side-lines of ORL AGM pointed towards i) increased focus of the group in transitioning to a bigger entity in India with substantial market share, ii) addition of production capability for meeting both domestic and export demand and iii) reduction in margins from a high base of FY18 at both ORL and RHI India led by RM cost inflation. Revenue growth is expected to remain solid but earnings growth would be lower due to normalisation of margins. Though we remain structurally positive on ORL led by best in class capital as well as operational costs,...

Joint Plant Committee posits that steel production in India posted a growth of 5.3% (yoy)) in 9MFY18. The country recently ousted Japan with domestic production of 8.4 mn tons (3.4% rise)) in February as against Japan's 8.2 mn tons of production (0.5% de-growth), ), making India the second largest steel...

Orient Refractories Ltd's (ORIENT) Q3FY18 results were above our estimate on all fronts. Revenue stood at Rs1.57bn (v/s Emkay Est. Rs1.42bn) on back double-digit growth in export (+23.2% yoy) and domestic (+21.7% yoy) segments. EBITDA was also above our estimate at Rs331mn (Emkay Est: Rs281mn) on account of higher economies-of-scale and 22% yoy growth in gross profit. As a result, EBITDA margin expanded by 113bps yoy to 21% (Emkay Est: 19.8%). Tax rate stood at 34.4% v/s 34.8% in Q3FY17. Depreciation and other income stood at Rs17.4mn/Rs21.4mn (v/s Rs17.1mn/Rs28.5mn in Q3FY17)....

We maintain Buy on Orient Refractories (ORL), with a revised TP of Rs185 as ORL has remained ahead of competition in maintaining strong growth with superlative margins (well above the industry average). Q2 performance was solid with revenue growth above expectations and margins surprising positively. ORL's growth story remains on track with increasing penetration in both domestic & export markets and margins kicker through operating leverage benefits. We remain structurally positive on ORL and believe that the tremendous scope for brownfield expansion, as well as low capital and operational costs, MNC parentage and strong return ratios...

Higher utilization rate of the steel sector on account of ~38% de growth in finished steel imports and rising exports (up by 102%) according to Joint Plant Committee in the last fiscal amplified the demand for...

Growing at an expeditious pace in the current fiscal, the Indian steel production has seen one of the best growth rates in atleast last five years (10.5% in 9mFY17) on account of production cut by China and import reduction. This has proved propitious for the refractory market in India which is highly correlated with the steel production and demand. The dubiety in the market brought by the phasing out of high value currency impacted the revenues of ORL in the last quarter (though lower than expected) +11.3% (y-o-y) in Q3FY17 vs 19.2% (y-o-y) in H1FY17....

BUY Orient Refractories Ltd at CMP Rs. 115.5 and add on dips to band Rs. 102 - 105 for the Sequential Targets of Rs. 134, 146