Khambatta Securities is bullish on Rama Steel Tubes has recommended buy rating on the stock with a target price of Rs 243 in its research report dated December 11, 2017.
Khambatta Securities' research report on Rama Steel Tubes
Rama Steel Tubes (RST) reported net revenues of Rs 906 mn in 2Q FY18, growing by 54% y‐o‐y and 27% q‐o‐q EBITDA increased 28% y‐o‐y and 32% q‐o‐q to Rs 70 mn while EBITDA margin came in at 7.7% compared to 7.4% in 1Q FY18. The marginal improvement in EBITDA margins comes on the back of 220 bps sequential increase in 1Q FY18, mainly contributed by reduced power cost. This reduced power cost is attributable to the commissioning of a solar power plant at Khopoli. According to management, this had helped the company to achieve operational efficiency and increase EBITDA margin by 0.5‐0.7% in 1Q FY18.Outlook
We expect the company to report strong results going forward. Based on a P/E multiple of 25x, we value RST at Rs 243 (representing an upside potential of 26%) and assign a BUY rating.
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