Buy Ratnamani Metals & Tubes Ltd for Target Rs. 3,361 by Elara Capitals
Finow: Set to tap nuclear potential, triple capacity
Ratnamani Metals and Tubes (RMT IN) delivered a strong performance in Q4FY25, with consolidated EBITDA rising ~23% YoY/48% QoQ to ~INR 3.0bn, above our estimate of ~INR 2.6bn, mainly driven by favorable product mix. EBITDA margin improved to 17.6% in Q4FY25 from 16.4% in Q4FY24 and 15.5% in Q3FY25 due to higher dispatches of process pipes. PAT was up ~8% YoY and ~58% QoQ to ~INR 2.1bn. Going ahead, we expect earnings to be led by ramp-up at RMT’s subsidiaries and continued focus on improving product mix. Further, asset sweating is expected to improve RoIC from ~22% in FY25 to ~28% in FY28E. Thus, we reiterate Buy with TP unchanged at INR 3,361, based on 25x FY27E P/E.
Standalone EBITDA/tonne up ~12% YoY and ~8% QoQ: Standalone net sales rose ~11% YoY/22% QoQ to ~INR 15.7bn. EBITDA was up ~21% YoY/36% QoQ to ~INR 2.9bn. Blended sales volume (stainless steel-SS and carbon steel-CS) jumped ~8% YoY/27% QoQ to 110,508 tonnes. Blended realization rose ~2% YoY but fell ~4% QoQ to INR 142,503/tonne. Blended EBITDA/tonne rose ~12% YoY/8% QoQ to INR 26,394 versus our estimate of INR 22,407.
Contribution of export orders at new high: Total orderbook, as on 1 May 2025, stood at ~INR 19.1bn, comprising ~INR 7.9bn of SS pipes and ~INR 11.2bn of CS pipes. Orderbook contribution, as on 1 May 2025 versus 1 May 2024, was as follows – Domestic orders at ~42% versus ~71% and exports orders at ~58% versus ~29%. Contribution from the high-margin SS division stood at ~41% versus ~34% in Q4FY24.
Revenue of subsidiaries doubles QoQ; orderbook strong: Among RMT’s key subsidiaries, Ravi Technoforge’s (RTL) net sales grew ~12% YoY/29% QoQ to INR 822mn. EBIT margin improved to 10.7% in Q4FY25 versus 8.4% in Q4FY24 and 7.0% in Q3FY25. Further, Ratnamani Finow Spooling Solutions (Finow) reported a sharp jump in net sales to INR 454mn in Q4FY25 from INR 7mn in Q3FY25 and INR 1mn in Q4FY24. Finow reported a negative EBIT of INR 93mn versus a negative INR 21mn in Q4FY24 and positive INR 40mn in Q3FY25, due to lower utilization. However, at present, Finow has an orderbook of INR 6bn and is in the process of tripling its capacity by end-CY25. This should bolster RMT’s revenue in the upcoming years. We expect Finow to earn a higher margin than RMT’s standalone business due to presence in critical applications of nuclear power.
Reiterate Buy, TP unchanged at INR 3,361: At ~41%, the share of high-margin SS pipe orders is at a 19-quarter peak, positioning RMT for margin expansion. Recent joint ventureshareholder agreement with Saudi Electric Supply Company (SESCO) is a positive step toward diversifying RMT’s revenue mix, which will offset the impact of cyclicality from domestic capex cycles. This strategic move is expected to contribute to RMT’s long-term growth prospects. So, we retain our positive stance and FY26-27E EBITDA estimates and introduce FY28E. Our TP is unchanged at INR 3,361, based on 25x FY27E P/E. Demand slowdown from key end-user industries and lower ramp-up in utilization are key risks to our call. Reiterate Buy.
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SEBI Registration number is INH000000933
