Buy Ratnamani Metals; target of Rs 1050: ICICI Direct
ICICI Direct is bullish on Ratnamani Metals has recommended buy rating on the stock with a target price of Rs 1050 in its research report dated August 10, 2018.
Aug 13, 2018 / 05:13 PM IST
ICICI Direct's research report on Ratnamani Metals
Ratnamani Metals and Tubes reported a mixed set of Q1FY19 numbers. Topline and PAT came in higher than our estimates while the EBITDA margin came in lower than our estimates The stainless steel division reported sales of 3983 tonnes (down 11.4% YoY, 25.3% QoQ) lower than our estimate of 4900 tonne while the carbon steel division sales came in at 71128 tonnes (up 125% YoY, down 5% QoQ) lower than our estimate of 78750 tonne. On the back of healthy realisations, the topline came in at Rs 609.4 crore, up 106.9% YoY, down 1.6% QoQ, higher than our estimate of Rs 584.6 crore EBITDA for the quarter was at Rs 90.5 crore, up 92.1% YoY, down 2.5% QoQ broadly in line with our estimate of Rs 93.5 crore. Higher raw material cost impacted the EBITDA margin, which came in at 14.9% against our estimate of 16% (Q1FY18: 16%, Q4FY18: 15%). The raw material cost as a percentage of sales was at 68% (Q1FY18: 63.3%, Q4FY18: 65% and our estimate: 64.7%) The company reported other income of Rs 16.7 crore. Hence, PAT came in at Rs 57.7 crore (our estimate: Rs 55.6 crore).
We continue to remain positive on the demand prospects of the company from the oil & gas sector, fertilisers, city gas distribution and water transportation given significant investments have been in these segments. With competitively placed capacities, the company is well poised to cater to upcoming demand. We expect the overall sales volume to pick up, going forward, given the healthy traction in the orderbook for both stainless steel and carbon steel segments. The topline, EBITDA and PAT are likely to register a CAGR growth of 17.4%, 22.2% and 23.7%, respectively, in FY18-20E. We continue to value the stock on 12x EV/EBITDA of FY20E and arrive at a target price of Rs 1050. We have a BUY recommendation on the stock.
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