This Metal Stock To Offer Potential Gain Of 16% In 12 Months, EBITDA Up 55%: ICICI Direct

ICICI Direct has given buy call to the stock of Ratnamani Metals and Tubes Ltd for a target price of Rs 2000 with a potential gain of 16%. It has registered good quarterly growth in the recent results. And, there is no apparent threat to the stock. The company has a market capitalization of Rs 12,175 crore.

Ratnamani Metals and Tubes Stock Outlook

The current market price of the stock is Rs 1737 apiece with a 52-week high of Rs 1913 and 52-week low of Rs 1237 apiece. The stock has given returns of 216% in 5 years, 179% in 3 years, and 21% in 1 year. According to ICICI Direct, if investors buy the stock now, it can reach its specified target of Rs 2000 apiece in 12 months period.

Ratnamani Metals and Tubes Q1FY23 Results

RMTL reported a mixed bag performance for Q1FY23 wherein the topline came in higher than our estimate. However, EBITDA and PAT came in marginally below our estimate. For Q1FY23, RMTL reported total sales volume of 75662 tonnes, up 45% YoY and 12% QoQ (our estimate of 62000 tonnes). Revenue from operations for the quarter were at Rs 977 crore, up 86% YoY (our estimate: Rs 915 crore). EBITDA for the quarter was at Rs 131 crore, up 55% YoY but 22% QoQ, marginally lower than our estimate of Rs 141 crore. EBITDA margin for the quarter were at 13.4% down 270 bps YoY and 390 bps QoQ, lower than our estimate of 15.4%. During the quarter, gross margins were at 30% compared to 34% in Q4FY22 and 37% in Q1FY23. Ensuing PAT for the quarter was at Rs 87 crore, up 73% YoY but down 22% QoQ, marginally lower than our estimate of Rs 91 crore.

Ratnamani Metals and Tubes Valuation

According to ICICI Direct, "RMTL's share price has given a return of ~25% over the last one year (from ~Rs 1379 in August 2021 to ~Rs 1725 levels in August 2022). We maintain BUY rating on the stock. With improvement in product-mix, going forward, EBITDA margin is expected to improve from Q1FY23 levels. We value RMTL at Rs 2000, 25x FY24E EPS.

Key triggers for future price performance

Order book as on August 1, 2022 was at Rs 2345 crore (Rs 2223 crore as on May 1, 2022). As on August 1, 2022, stainless steel (SS) order book was at Rs 730 crore (Rs 650 crore as on May 1, 2022) while carbon steel (CS) orders were at Rs 1615 crore (Rs 1573 crore as on May 1, 2022). Over FY22-24E, we expect the topline to grow at a CAGR of 20% while EBITDA, PAT are expected to register CAGR of 27%, 32%, respectively.

About Ratnamani Metals and Tubes

Ratnamani Metals & Tubes (RMTL) is a niche player with superior capabilities in the domestic industrial pipes and tube segment. RMTL manufactures a wide range of stainless steel and carbon steel pipes & tubes, which find application in key end user industries like oil & gas refineries, power, healthcare, etc. It has a market capitalization of Rs 12,75 crore.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.