Buy Ratnamani Metals and Tubes; target of Rs 1320: ICICI Direct

ICICI Direct's research report on Ratnamani Metals and Tubes

Ratnamani Metals and Tubes (RMTL) reported a steady performance in Q1FY21 wherein the topline came in higher than our estimate while EBITDA came in marginally lower than our estimate. Ensuing PAT came in broadly in line with our estimate. For Q1FY21, net income from operations was at Rs 578 crore (down 2% YoY, 8% QoQ), higher than our estimate of Rs 517 crore. Carbon steel (CS) sales volume was at 58546 tonnes (up 25% YoY), higher than our estimate of 50750 tonnes. Stainless steel (SS) sales volume was at 4024 tonnes (down 12% YoY), lower than our estimate of 4550 tonnes. On account of higher sales volume of carbon steel business (relatively a lower margin business compared to stainless steel business), EBITDA margin came in lower than our estimate. EBITDA margin was at 12.7% (15.3% in Q4FY20, 17.5% in Q1FY20), lower than our estimate of 15.0%. EBITDA came in at Rs 74 crore (down 29% YoY) vs. our estimate of Rs 78 crore. PAT came in at Rs 50 crore (down 21% YoY), broadly in line with our estimate of Rs 52 crore.

Outlook

Ratnamani reported a steady performance for Q1FY21. While in Q1FY21, the company’s order book declined sequentially on account of Covid-19 related shutdowns, the same is likely to gain traction on account of gradual opening up of economy. We value the stock on 20x FY22E PE and arrive at a target price of Rs 1320. We maintain our BUY rating on the stock.

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