Ratnamani Metals & Tubes Ltd - Rs 65.00
Established in 1983, Ratnamani Metals & Tubes Ltd (RMTL) has emerged as a multi-product, multi location company providing total piping solutions to a diverse range of industries. Its business can be categorized mainly into two segments — stainless steel tubes & pipes and carbon steel pipes. Under the carbon steel division, company makes high frequency welded (HFW) & electric resistance welded (ERW) pipes apart from manufacturing longitudinal submerged arc welded [L-SAW] pipes & helical submerged arc welded [H-SAW] pipes of large diameter. These pipes are primarily used for continuous transportation of large quantities of oil, natural gas and water over the long distances. On the other hand, its stainless steel division produces seamless and welded tubes and pipes in various grades, conforming to different ASTM and DIN standards. It also manufactures large diameter electric fusion welded (EFW) stainless steel pipes in single long seam upto length of 12 meters. Stainless steel tubes and pipes are typically used in heat exchangers, boilers, condensers, refrigeration, instrumentation, hydraulics, fuel injection, exhaust systems for automobiles apart from being used as general piping for power plants, space application and special piping for nuclear applications. Thus, RMTL mainly caters to the niche markets of emerging sectors like oil & gas, petrochemicals, fertilizer, water distribution, refinery, chemical, power plants, sugar, automobile, food and dairy, paper, pharmaceutical, nuclear, aeronautics, space research centres, atomic energy, ship building, railway coaches etc. About 50% of its turnover comes from oil, gas, petrochemical industry followed by 20% from power and rest from others. It enjoys a large domestic customer base like BHEL, L&T, Reliance Industries, IOCL, HPCL, BPCL, GAIL, Alfa Laval, Alstom Power, NTPC etc. At the same time exports represent 45% of revenue as RMTL is an approved vendor of hydrocarbon majors like Shell, Total, Chevron, Exxon Mobil, Agip KCO, Bechtel, TOYO Eng, Aker Kvaerner, Linde, BASF, Chiyoda, Dow Chemicals, BTT France etc.
RMTL has two state-of-the-art manufacturing plants at Chhatral and Kutch in Gujarat having total installed capacity of 19000 MTPA for stainless steel and 300,000 MTPA for carbon steel. However last fiscal the capacity utilization for stainless steel segment remained at 70% and for carbon steel segment stood at 30%. Remarkably, RTML meets its 100% power requirement from its own 24 windmills generating 20.54 MW of green power. It has also got itself partly backward integrated by establishing hot extrusion line which has reduced its dependence on imported material to some extent. Apart from above units, company operates two mobile plants for making large diameter SAW pipes at the customer’s site. These plants can be dismantled and re-erected within a short span and can produce pipes having diameter in excess of 36” NB upto 135” NB in various thicknesses depending upon the project requirements. As a part of forward integration, RTML has recently set up a 3 layer polyethylene and epoxy coating line with capacity of 2.7 million sq mtrs. To maintain its growth momentum it has also expanded its SS welded tube capacity by 3000 MTPA and is in the process of doubling its H-SAW pipe capacity by 100,000 MTPA thru Brownfield expansion in two phases. Post expansion, its production capacity for stainless steel will stand increased to 22000 MTPA and that of carbon steel to 400,000 MTPA. Company has also developed titanium tubes for application in power industry to begin with which will be later on extended to cover aerospace, defense, water desalination, etc. Further, company has outlined capex of Rs 90 cr in FY10, which includes setting up large diameter and higher thickness stainless steel welded pipe plant with capacity of 1500 MTPA and re-organisation of the existing plant at Chhatral.
As of now RTML has a decent order book of more than Rs 500 cr to be executed over the next 6~9 months. Out of these 50% order is for carbon steel and 50% for stainless steel division. And moreover only 20% is export order with rest 80% to be supplied locally. Incidentally, the demand for pipes is expected to remain strong for next 3~5 years due to committed investment in power as well as oil & gas exploration and production sectors. Besides, sizable demand is also anticipated from replacement of old pipes. In Sept 2007, to fund its expansion plan company made a pref allotment of 4.50 lac warrants to be convertible @ Rs 950 (FV Rs 10/-) per share. But looking at the CMP, the conversion may not take place hence no equity dilution is expected in near future. Financially, for FY08 it recorded 50% growth in sales to Rs 845 cr and 40% increase in PAT to Rs 90 cr despite taking a hit of Rs 27.50 cr due to M2M losses on derivative instruments. For H1FY09, its sales improved by 25% to Rs 498 cr but net profit remained flat at Rs 49 cr. However company didn’t make provisions for notional forex loss, else its NP would have been lower by approx Rs 10 cr. Meanwhile, the recent fall in the steel and other commodity prices will relieve some pressure on its operating margin thereby having a positive impact on company’s bottomline. So taking everything into consideration, RTML is estimated to end FY09 with sales of Rs 1000 cr and profit after tax of Rs 80 cr leading to an EPS of Rs 18 on equity of Rs 9 cr having face value as Rs 2/- per share. Although company recently did a stock split but since its having huge reserves of more than Rs 200 cr on such a small equity and being in the 25th year of operation, it may declare a liberal bonus to cheer the shareholders. Hence investors are strongly recommended to accumulate this scrip at declines for a price target of Rs 110 in 15 months.
RMTL has two state-of-the-art manufacturing plants at Chhatral and Kutch in Gujarat having total installed capacity of 19000 MTPA for stainless steel and 300,000 MTPA for carbon steel. However last fiscal the capacity utilization for stainless steel segment remained at 70% and for carbon steel segment stood at 30%. Remarkably, RTML meets its 100% power requirement from its own 24 windmills generating 20.54 MW of green power. It has also got itself partly backward integrated by establishing hot extrusion line which has reduced its dependence on imported material to some extent. Apart from above units, company operates two mobile plants for making large diameter SAW pipes at the customer’s site. These plants can be dismantled and re-erected within a short span and can produce pipes having diameter in excess of 36” NB upto 135” NB in various thicknesses depending upon the project requirements. As a part of forward integration, RTML has recently set up a 3 layer polyethylene and epoxy coating line with capacity of 2.7 million sq mtrs. To maintain its growth momentum it has also expanded its SS welded tube capacity by 3000 MTPA and is in the process of doubling its H-SAW pipe capacity by 100,000 MTPA thru Brownfield expansion in two phases. Post expansion, its production capacity for stainless steel will stand increased to 22000 MTPA and that of carbon steel to 400,000 MTPA. Company has also developed titanium tubes for application in power industry to begin with which will be later on extended to cover aerospace, defense, water desalination, etc. Further, company has outlined capex of Rs 90 cr in FY10, which includes setting up large diameter and higher thickness stainless steel welded pipe plant with capacity of 1500 MTPA and re-organisation of the existing plant at Chhatral.
As of now RTML has a decent order book of more than Rs 500 cr to be executed over the next 6~9 months. Out of these 50% order is for carbon steel and 50% for stainless steel division. And moreover only 20% is export order with rest 80% to be supplied locally. Incidentally, the demand for pipes is expected to remain strong for next 3~5 years due to committed investment in power as well as oil & gas exploration and production sectors. Besides, sizable demand is also anticipated from replacement of old pipes. In Sept 2007, to fund its expansion plan company made a pref allotment of 4.50 lac warrants to be convertible @ Rs 950 (FV Rs 10/-) per share. But looking at the CMP, the conversion may not take place hence no equity dilution is expected in near future. Financially, for FY08 it recorded 50% growth in sales to Rs 845 cr and 40% increase in PAT to Rs 90 cr despite taking a hit of Rs 27.50 cr due to M2M losses on derivative instruments. For H1FY09, its sales improved by 25% to Rs 498 cr but net profit remained flat at Rs 49 cr. However company didn’t make provisions for notional forex loss, else its NP would have been lower by approx Rs 10 cr. Meanwhile, the recent fall in the steel and other commodity prices will relieve some pressure on its operating margin thereby having a positive impact on company’s bottomline. So taking everything into consideration, RTML is estimated to end FY09 with sales of Rs 1000 cr and profit after tax of Rs 80 cr leading to an EPS of Rs 18 on equity of Rs 9 cr having face value as Rs 2/- per share. Although company recently did a stock split but since its having huge reserves of more than Rs 200 cr on such a small equity and being in the 25th year of operation, it may declare a liberal bonus to cheer the shareholders. Hence investors are strongly recommended to accumulate this scrip at declines for a price target of Rs 110 in 15 months.
No comments:
Post a Comment