Ratnamani Metals & Tubes - Seamless Growth; Result Update Q3FY15 ::Edelweiss

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Ratnamani Metals & Tubes Ltd. (RMTL) has reported strong Q3FY15 results ahead of our and consensus estimates. Net sales for the quarter grew by a better-than-expected rate of 39% YoY. The beat on the topline was driven by strong growth in carbon steel (24% QoQ) segment. EBITDA & PAT margin for Q3FY15 were in line with our expectations of 19% and 10.5% respectively but higher than consensus. The order backlog of INR 855 cr is executable over the next 6 months (INR 280 cr order inflow during Q3FY15). Management is targeting INR 1700 cr revenues in FY15 and INR 1900 cr- INR 2000 cr revenues in FY16E. Going forward, RMTL also stands to gain from any nuclear power plants that might be set up in India.

Robust sales growth driven by execution of carbon steel pipes orders

The company’s net sales grew by 39% YoY to INR 500 cr, which was above our estimate of 20%YoY. The growth was driven by 24%QoQ growth in carbon steel business. Growth in sales of Carbon Steel Pipes was driven by the orders the company had picked up in H1FY15 under the SAUNI scheme. Exports accounted for 27% of the quarterly sales.

Margins in line with our estimates; Guidance to maintain at 18%-20%

Q3FY15 EBITDA & PAT margin were in line with our estimates of 19% (up 110bps YoY) and 10.5%( up 50bps YoY) respectively, but above consensus. Gross margins reduced by 390 bps led by unfavorable sales mix, stainless tubes contribution to sales has reduced from 53% to 43% QoQ. However better utilization of carbon pipe capacity led to operating leverage leading to 19% margins during the quarter. We maintain our EBITDA margin estimate for Q4FY15 at 19%. ROCE is expected to increase since there has been a drastic pick up in the utilization levels of the underutilized carbon steel pipes facility.

LINK
https://www.edelweiss.in/research/Ratnamani-Metals-And-Tubes--Seamless-Growth;-Result-Update-Q3FY15/10005521.html