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EBITDA margin surprises positively...

Ratnamani Metal and Tubes (RMTL) reported an operationally healthy performance for Q4FY21 wherein robust EBITDA margins were the key highlight of the quarter. EBITDA margin for Q4FY21 was at 22.8% compared to 18.3% in Q3FY21 and 15.4%in Q4FY20, notably higher than our estimate of 15.7%. Overall, RMTL’s performance was higher than our estimate on all fronts. For Q4FY21, RMTL reported a net income from operations of | 696.1 crore (up 57% QoQ), higher than our estimate of | 664 crore. Stainless sales volume was at 5792 tonnes (up 16% QoQ), higher than our estimate 5750 tonnes while carbon steel sales volume was at 63511 tonnes (up 93% QoQ), higher than our estimate of 47500 tonnes. EBITDA came in at | 158.8 crore (up 96% QoQ, 64% YoY), higher than our estimate of | 104 crore. Ensuing PAT for Q4FY21 was at | 109.4 crore (up 82% QoQ, 62% YoY), higher than our estimate of | 75 crore.

Aggregate order book increases sequentially…

RMTL’s order book has improved QoQ. RMTL’s order book as on May 1, 2021 was at | 1498 crore (| 1359 crore as on January 1, 2021). Stainless steel (SS) order book was at | 330 crore (| 347 crore as on January 1, 2021) while carbon steel (CS) orders were at | 1168 crore (| 1012 crore as on January 1, 2021). In terms of domestic and exports mix, domestic orders were at | 1357 crore while export orders were at | 141 crore. Of the | 1357 crore domestic order book, | 251 crore is in the SS segment while balance | 1106 crore is in the CS segment. Of the | 141 crore export order book: | 79 crore is in the SS segment while the balance | 62 crore is in the CS segment.

For FY22E, EBITDA margins expected in ~16-18% range…

For FY22E, the management has given a topline guidance of ~| 3000 crore. Furthermore, management has guided that EBITDA margins for FY22E is likely to be in the range of ~16% and 18%.

Valuation & Outlook

Ratnamani’s Q4FY21 performance was aided by healthy EBITDA margins. Going forward, for FY22E and FY23E, we model EBITDA margin of 17.5% and 18.0%, respectively (FY21 EBITDA margins were at 17.4%). We value the stock at 25x FY23E EPS of | 96 and arrive at a target price of | 2400 (earlier | 1900). We maintain our BUY recommendation on the stock.

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