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    Ratnamani Metals

    RATNAMANIGood
    Capital Goods·3 Nov 2023
    Management Summary

    Ratnamani delivered a strong Q2 performance characterized by significant margin expansion driven by a favorable product mix and high-value special jobs. While H1 margins exceeded 20%, management remains conservative, guiding for a 16-18% range due to an increasing mix of lower-margin water projects. The company is aggressively expanding capacity with major projects slated for completion in mid-to-late 2024.

    Highlights

    8

    • Standalone Q2 revenue reached ₹1,084 crores, representing a 19.9% YoY increase.

    • EBITDA grew 63% YoY to ₹252 crores, with margins expanding by 600 bps YoY to 23.2%.

    • Net profit for the quarter stood at ₹169 crores, up from ₹100-odd crores in the previous year.

    • Order book as of October 1st remains robust at ₹2,979 crores, with 30% from the water segment.

    • H1 FY24 revenue witnessed 16% growth to ₹2,204 crores with a net profit of ₹305 crores.

    • Management maintained a conservative long-term EBITDA margin guidance of 16% to 18%.

    • Ongoing major capex of ₹250-300 crores for new Carbon Steel and Stainless Steel plants.

    • Forayed into pipe spooling through a 51:49 JV with Technoenergy, Switzerland.

    What Changed1

    vs Q4 FY24

    Guidance items6 → 5 (-1)

    Key financials

    Single quarter

    05 metrics
    1. 01Revenue₹1,084 Cr+19.9%YoY
    2. 02EBITDA₹252 Cr+63%YoY
    3. 03EBITDA Margin23.2%
    4. 04Net Profit₹169 Cr+69%YoY
    5. 05Order Book₹2,979 Cr

    Segment breakdown

    Ravi Technoforge (Subsidiary)
    ₹124 Cr Revenue₹12.6 Cr EBITDA10.2% EBITDA Margin
    List

    Guidance & targets

    5
    CategoryTargetPriority
    Margin
    Annualized EBITDA Margin
    16% to 18%
    		High
    Revenue
    Annual Revenue Range
    ₹4,500 crores to ₹5,000 crores
    		Medium
    Revenue
    Long-term Revenue Target
    ₹6,000 crores
    		Medium
    Capex
    Ongoing Major Projects Capex
    ₹250 crores to ₹300 crores
    		High
    Market Share
    ROCE Target
    25% to 30%
    		Medium

    Risks & concerns

    5
    RiskSeverity

    Steel Price Volatility

    Softer steel prices led to a marginal sequential revenue decline and impacted realizations at Ravi Technoforge. — Management acknowledged

    medium

    Geopolitical Issues in Europe

    Impacted demand from European bearing manufacturers, affecting Ravi Technoforge's export volumes. — Management acknowledged

    medium

    Dull Oil & Gas Line Pipe Demand

    Management noted that oil and gas line pipe tenders are currently seeing lower volume, though process pipes remain stable. — Management acknowledged

    low

    Areas of Evasion(2)

    • Customer-wise breakup of order book (specifically L&T exposure).
    • Precise volume mix for the water segment in H1.

    Q&A highlights

    3

    “Positive surprises are possible. We'll definitely try our best, but to be practical that 17%, 18% range should be there.”

    Management is intentionally guiding lower than current performance (23%) to account for a shift toward lower-margin water projects.

    asked by Vikas Singh, PhillipCapital

    1 min read4 chapters

    Detailed Narrative

    01

    Margin Outperformance vs. Conservative Guidance

    Ratnamani reported a stellar EBITDA margin of 23.2% in Q2 FY24, significantly higher than its historical 16-18% band. This was driven by a favorable product mix and execution of high-margin special jobs. However, management refused to raise its full-year guidance, citing that upcoming execution will involve more water segment projects which typically carry lower margins. They expect the blended margin for the full year to settle around 17-18%.

    02

    Aggressive Capacity Expansion Underway

    The company is investing ₹250-300 crores in two major ongoing projects. The Stainless Steel expansion is expected to be completed by June 2024, while the new Carbon Steel plant is targeted for September 2024. These expansions are central to management's vision of scaling revenue toward the ₹6,000 crore mark in the medium term. Additionally, a new JV for pipe spooling is expected to start commercial operations within 3-6 months.

    03

    Ravi Technoforge Facing Export Headwinds

    Subsidiary Ravi Technoforge saw a YoY degrowth in realizations, primarily due to falling steel prices and weak demand from European bearing manufacturers. Export sales mix dropped from 38-40% to 30% in H1. Despite this, management expects a recovery by Q4 FY24, aiming to return to 13-14% EBITDA margins. They maintain a long-term target of ₹500+ crores in revenue for this segment within 2-3 years.

    04

    Order Book Dynamics and Sector Mix

    The order book stands at ₹2,979 crores, with a healthy mix of 70% from Oil & Gas/Power and 30% from the booming water segment. While the domestic market remains the primary driver (₹2,370 crores), management is seeing strong traction for special grades in the export market, particularly in the Middle East. They are booking fresh orders at a rate of ₹100-150 crores per month for stainless steel alone.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.