August 11, 2015

Ratnamani Metals & Tubes Ltd

Q1FY16 result update

Q1 FY16 results Recovery in sight

After delivering a weak set of numbers for Q4 FY15 due to delayed off-take from
end users, Ratnamani Metal and Tubes Limited (RMTL) delivered an encouraging
set of numbers for Q1 FY16 with revenue growing 20.9% YoY and 14.6% QoQ to
Rs 4,298 mn. EBITDA was up by 31.5% YoY and 58.1% QoQ, while PAT was up
by 29.8% YoY and 54.6% QoQ. EBITDA margin for Q1 FY16 was at 20.5%.
Dispatches of certain high value items (including dispatches delayed in Q4 FY15)
and benefits of operating leverage resulted into EBITDA margin expansion of 165
bps YoY and 415 bps QoQ in Q1 FY16. RMTLs current order book as on 01Aug-2015 stood at Rs 9,400 mn which is up 13.7% QoQ and as new orders are
taken at lower price realizations due to fall in steel prices, volume growth in order
book is higher than value growth which is a very encouraging sign considering the
fact that for last many quarters the order book position was maintained in the
range of Rs 8,000 mn- Rs 9,000 mn.

Rating
Target Price
CMP
Upside/(Downside)
CNX Smallcap

HOLD
Rs 630
Rs 673
(6%)
5,848

Key Data
RMT IN
Equity

Bloomberg Code
Reuters Code

RMT.NS

NSE Code

RATNAMANI

Current Share o/s (mn)

46.7

Diluted Share o/s (mn)

46.7

Mkt Cap (Rs bn/$ mn)

31.5/490.8

52 WK H/L (Rs)

806/400

Avg. Traded Volume. (6 Mnths)

19,538

Face Value (Rs)

Outlook and valuations

1 USD/ Rs

In current update, we have slightly revised our estimates for FY16 and FY17.We
expect RMTLs high margin SS tubes & pipes (SSTP) segments growth to be
muted in FY16 with growth recovering only in FY17 (we estimate volume degrowth of 3.6% YoY in FY16 followed by volume growth of 10.0% YoY in FY17,
volume CAGR of 3.0% during FY15-17 period). However, we estimate revenue
growth to remain flat for SSTP segment due to lower realizations on account of
decline in steel prices. We estimate RMTLs Carbon Steel (CS) pipes segment
volume to grow at a CAGR of 14.1% and revenue to grow at a CAGR of 9.2%
during FY15-17 period. We expect EBITDA margins of both the segment to
improve in percentage terms on back of lower raw material prices as RMTL works
on conversion margin basis. At, CMP of Rs 673, the stock of RMTL trades at
14.9x FY17E EPS of Rs 45.1 and 8.1 x FY17E EV/EBITDA. We continue to
recommend a HOLD on RMTLs stock with a price target of Rs 630.

Shareholding Pattern

Exhibit 1: Revised Estimates

Rs mn
Revenues

Revised
FY16E
FY17E
16,873
18,455

Earlier
FY16E
FY17E
18,005
20,526

Change(%)
FY16E FY17E
-6% -10%

EBITDA

3,305

3,590

3,335

3,776

-1%

-5%

PAT

1,959

2,108

1,993

2,264

-2%

-7%

64.1
(%)

Promoters

60.04

FII

12.46

DII

0.66

Others

26.84

Price Performance (%)

1M
RMT
21.7
CNX Smallcap
6.3
Financials
(Rs bn)
Sales
Growth %
EBITDA
Margin %
PAT
Margin %
EPS (Rs)
ROE (%)
ROCE (%)
P/E(x)
EV/EBITDA (x)

FY15
16.7
23.8
2.99
17.9
1.73
10.3
36.9
20.6
21.7
18.2
10.3

6M

-4.3
9.9

1yr
63.8
19.4

FY16E

FY17E

16.9
0.7
3.31
19.6
1.96
11.6
41.9
19.8
22.3
16.1
9.0

18.5
9.4
3.59
19.5
2.11
11.4
45.1
18.2
21.8
14.9
8.1

Analyst:
Vipul Shah
Vipul.shah@networthdirect.com
Ph. No. 022 3064 1745

Associate:
Riddhi Shah
Riddhi.shah@networthdirect.com
Ph. No. 022 3064 1639

Institutional Research

Exhibit 2: Segment Performance

Q1 FY16

Q1 FY15

YoY (%)

Q4 FY15

QoQ (%)

FY15

Sales Volume (MT)

4,874

5,375

-9.3%

4,866

0.2%

22,680

Sales, Rs mn

1,689

1,936

-12.6%

1,629

3.7%

7,744

346,495

360,113

-3.8%

334,700

3.5%

341,441

42,689

26,624

60.3%

37,109

15.0%

156,933

2,487

1,440

72.7%

2,027

22.7%

8,574

58,249

54,102

7.7%

54,610

6.7%

54,634

Product Segment
SS Tubes & Pipes

Realization, Rs / MT
CS Pipes
Sales Volume (MT)
Sales, Rs mn
Realization, Rs / MT

Exhibit 3: Stainless Steel Tubes & Pipes Volumes (MT) & YOY Growth

Exhibit 4: Carbon Steel Pipes Volumes (MT) & YOY Growth

Institutional Research

Exhibit 5: Q1 FY16 result analysis

Q1 FY16

Q1 FY15

YoY (%)

Q4 FY15

QoQ (%)

FY15

Income from Operations

4,298

3,555

20.9%

3,749

14.6%

16,756

Operating Expenses

3,415

2,884

18.4%

3,191

7.0%

13,762

Raw material consumed

2,722

2,269

20.0%

2,530

7.6%

10,945

Cost of RM

2,791

2,565

8.8%

2,429

14.9%

11,488

Income Statement (INR mn)

Purchases of Stock-in-trade

14

79.8%

1649.9%

11

Changes in Inventories of FG & WIP

(83)

(303)

-72.8%

100

-182.4%

(554)

Employee benefit expenses

256

211

21.0%

210

21.6%

915

Other Expenses

438

404

8.4%

451

-2.9%

1,902

EBITDA

883

671

31.5%

558

58.1%

2,993

20.5%

18.9%

Other Income

36

53

-32.6%

76

-52.9%

251

Finance costs

15

14

3.9%

31

-52.4%

94

Depreciation

136

127

7.6%

119

14.4%

544

PBT

767

583

31.5%

484

58.4%

2,607

Tax provision

268

199

34.9%

161

66.1%

882

Reported PAT

499

385

29.8%

323

54.6%

1,725

Adjusted PAT

499

385

29.8%

323

54.6%

1,725

Paid up Equity

94

94

94

94

Face Value, Rs

10.7

8.2

6.9

36.9

Cost Structure (%)

Q1 FY16

Q1 FY15

YoY (bps)

Q4 FY15

QoQ (bps)

FY15

Raw Material Consumed

63.3%

63.8%

(49)

67.5%

(415)

65.3%

6.0%

5.9%

5.6%

34

5.5%

Other Expenses

10.2%

11.4%

(117)

12.0%

(184)

11.3%

Total Expenses

79.5%

81.1%

(165)

85.1%

(564)

82.1%

EBITDA

20.5%

18.9%

165

14.9%

564

17.9%

Tax rate

34.9%

34.0%

88

33.3%

161

33.8%

EBITDA %

E/o Income / (loss)

Adjusted EPS (Rs)

14.9%

17.9%

% of Sales

Employee Expenses

Institutional Research

Capital Expenditure Plans

RMTL is planning to expand its SS seamless tubes & pipes capacity from current 8,000 MTPA to 28,000 MTPA in next
3-4 years with an outlay of Rs 3,500 mn to meet increased demand. This coupled with routine maintenance capex and
debottlenecking & balancing of existing capacities, RMTL is likely to spend ~ Rs 4,500 mn in capex in next 3-4 year
(Rs 1,000-1,500 mn capex /year for next 3-4 years) mainly from internal accruals (No incremental borrowing going
forward and co will remain almost debt free next 3-4 years). RMTL is not planning any capacity expansion in carbon
steel (CS) pipes segment due to sufficient unutilized capacity. With this planned capex in SS seamless tubes & pipes
segment, the management of RMTL is expecting SS tubes & pipes segment to contribute c.60% of steel pipes & tubes
revenue in long run compare to 47% in FY15.

Order Book
RMTLs current order book as on 01-Aug-2015 stood at Rs 9,400 mn which is up 13.7% QoQ and as new orders are
taken at lower price realizations due to fall in steel prices, volume growth in order book is higher than value growth
which is a very encouraging sign considering the fact that for last many quarters the order book position was
maintained in the range of Rs 8,000 mn- Rs 9,000 mn. The management of RMTL is confident of improving demand
outlook on followings:

Ongoing up gradation & expansion by PSU refineries and Rs 800 bn up-gradation capex by year 2020 by
existing refinery in India to meet cleaner Euro IV/V fuel specifications (c.10% of this capex will be spend on
steel tubes & pipes, mainly for SS tubes & pipes)
Greenfield refinery project ongoing/announced in Kuwait, Malaysia and Nigeria (total investment of ~ USD 38
bn over a period of next 3-4 years
Planned investment ~ USD 30 bn/year by Saudi Arabia in oil & gas sector, infrastructure, etc
Residual order from Reliance J3 refinery project
Orders from river interlinking / irrigation / urban infrastructure projects from Gujarat, Rajasthan, Madhya
Pradesh, and Telangana and Andhra Pradesh

Exhibit 6: Order Book Position, (Rs mn)

Product Segment

DOMESTIC

EXPORTS

TOTAL

SSTP

2,850

910

3,760

CS Pipes

5,660

20

5,680

TOTAL

8,500

930

9,440

@ - As on 01-Aug-2015

Institutional Research

Financial Statements
(Rs mn)

Summary Financials
Income Statement (Standalone)
(YE March 31st)
Total Revenues
% growth
Total Expenditure/Cost of Sales
EBITDA
% growth
Depreciation
EBIT
Interest
Other Income
EBT
Tax
Reported PAT
Adj. PAT
% growth

Rs mn

FY 14
13,530
12.6%
10,965
2,565
7.8%
459
2,106
103
139
2,142
714
1,428
1,428
5.0%

FY 15
16,756
23.8%
13,762
2,993
16.7%
544
2,450
94
251
2,607
882
1,725
1,725
20.8%

FY 16E
16,873
0.7%
13,568
3,305
10.4%
581
2,724
23
267
2,968
1,009
1,959
1,959
13.6%

FY 17E
18,455
9.4%
14,865
3,590
8.6%
656
2,933
8
269
3,194
1,086
2,108
2,108
7.6%

Balance Sheet (standalone)

(As on March 31st)
Cash & equivalents
Debtors
Inventory
Others
Total Current Assets
Current Liabilities
Net Working Capital
Loans & Advances
Investments
Net Fixed Assets
Total Assets
Other Liabilities
Debt
Shareholder's Equity
Reserves
Total Networth
Total Liabilities

Cash Flow Statement (standalone)

(YE March 31st)
EBT
Depreciation
Tax paid
Change in Deferred Tax Liability
Net Working Capital
Other Operating activities
Operating Cash Flow
Capital Expenditure
Investments
Investing Cash Flows
Change in Borrowings
Change in Equity
Dividend paid
Financing Cash Flow
Net Change in Cash
Closing Cash balance

Rs mn

FY 14
2,142
459
(647)
(233)
10
1,731
(873)
(249)
(1,123)
(544)
16
(246)
(774)
(166)
434

FY 15
2,607
544
(871)
(653)
(170)
1,457
(661)
340
(321)
(506)
0
(307)
(813)
323
757

FY 16E
2,968
581
(1,009)
(75)
81
2,546
(1,250)
(1,250)
(150)
(333)
(483)
813
1,570

FY 17E
3,194
656
(1,086)
(382)
(16)
2,367
(1,250)
(1,250)
(150)
(358)
(508)
609
2,179

Ratio Analysis (%)

(YE March 31st)
EBITDA Margin
Net Profit Margin
Average Return on Equity
Average ROCE
Inventory(days)
Payable(days)
Receivables(days)
Net Debt to Equity
(YE March 31st)
Dil. No.of Shares (mn)
Diluted EPS (Rs)
P/E (x)
P/BV (x)
EV/EBITDA (x)
EV/Sales (x)
Face Value (INR)
BVPS (INR)

Rs mn

FY 14
434
2,781
2,517
575
6,307
2,533
3,774
80
541
4,548
8,943
467
811
93
7,572
7,665
8,943

FY 15
757
2,234
3,431
719
7,140
2,390
4,750
249
201
4,666
9,866
478
304
93
8,990
9,084
9,866

FY 16E
1,570
2,265
3,467
740
8,042
2,404
5,638
169
201
5,334
11,342
478
154
93
10,616
10,710
11,342

FY 17E
2,179
2,478
3,792
809
9,258
2,629
6,628
185
201
5,928
12,942
478
4
93
12,366
12,460
12,941

FY 14
19.0%
10.6%
20.2%
21.0%
68
41
75
0.0
FY 14
466.8
30.6
22.0
4.1
12.2
2.3
2
164

FY 15
17.9%
10.3%
20.6%
21.7%
75
28
49
-0.1
FY 15
467.3
36.9
18.2
3.5
10.3
1.8
2
194

FY 16E
19.6%
11.6%
19.8%
22.3%
75
28
49
-0.2
FY 16E
467.3
41.9
16.1
2.9
9.0
1.8
2
229

FY 17E
19.5%
11.4%
18.2%
21.8%
75
28
49
-0.2
FY 17E
467.3
45.1
14.9
2.5
8.1
1.6
2
267

Institutional Research

Disclaimer: This document has been prepared by Networth Stock Broking Ltd. (NSBL). NSBL is a full service, integrated investment
banking, portfolio management and brokerage group. Our research analysts and sales persons provide important input into our
investment banking activities. This document does not constitute an offer or solicitation for the purchase or sale of any financial
instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other
sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied on as such. NSBL or
any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in
the information contained in this report. This document is provided for assistance only and is not intended to be and must not alone be
taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of
this document should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in the
securities of companies referred to in this document (including the merits and risks involved), and should consult his own advisors to
determine the merits and risks of such investment. The investment discussed or views expressed may not be suitable for all investors.
We and our affiliates, officers, directors, and employees may: (a) from time to time, have long or short positions in, and buy or sell the
securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn
brokerage or other compensation or act as advisor or lender / borrower to such company (ies) or have other potential conflict of interest
with respect to any recommendation and related information and opinions. This information is strictly confidential and is being furnished
to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any
form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution
to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such
distribution, publication, availability or use would be contrary to law, regulation or which would subject NSBL and affiliates to any
registration or licensing requirements within such jurisdiction. The distribution of this document in certain jurisdictions may be restricted
by law, and persons in whose possession this document comes, should inform themselves about and observe, any such restrictions.
The information given in this document is as of the date of this report and there can be no assurance that future results or events will be
consistent with this information. This information is subject to change without any prior notice. NSBL reserves the right to make
modifications and alterations to this statement as may be required from time to time. However, NSBL is under no obligation to update or
keep the information current. Nevertheless, NSBL is committed to providing independent and transparent recommendation to its client
and would be happy to provide any information in response to specific client queries. Neither NSBL nor any of its affiliates, directors,
employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information. The analyst for this report certifies that all of
the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their
securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views
expressed in this report. Analyst holding in stock: no.
Networth Stock Broking Ltd. (www.networthdirect.com)
Office: - 10th Floor, Atlanta Centre, Sonawala Lane, Opp. Udyog Bhavan, Goregaon (E), Mumbai 400 063. Tel No.: 022 30641600

Institutional Research