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    Ratnamani Metals

    RATNAMANIGood
    Capital Goods·18 Nov 2024
    Management Summary

    Ratnamani Metals delivered a resilient performance in Q2 FY25 despite a 16.6% drop in realizations and muted domestic oil and gas demand. The company is pivoting towards high-value exports and the Middle East market to offset domestic headwinds. Aggressive capacity expansion plans in India and overseas, coupled with a strong order book, underpin management's confidence in achieving 8-10% revenue growth for the fiscal year.

    Highlights

    8

    • Standalone Q2 revenue stood at ₹917 crores with EBITDA of ₹168 crores.

    • H1 FY25 revenue reached ₹2,039 crores with EBITDA of ₹335 crores and margins at 16.4%.

    • Order book remains robust at ₹2,900+ crores as of November 1, 2024.

    • Management maintained FY25 revenue guidance of ₹5,000 - ₹5,200 crores (8-10% growth).

    • EBITDA margin guidance maintained at 16% to 18% for the full year.

    • Announced significant capex: ~$40 million for a Middle East greenfield plant and ₹240-250 crores for India expansion.

    • Pipe spooling business has an order backlog of ₹650 crores, targeting ₹150 crores revenue in FY25.

    • Blended realization decreased by approximately 16.6% YoY due to soft steel prices.

    Concerns

    1

    • Soft and Volatile Steel Prices

    What Changed1

    vs Q4 FY25

    Guidance items7 → 5 (-2)
    Key financials

    Metrics

    5

    Periods

    2

    Headline

    2
    • Order Book
      ₹2,900 Cr
    • Realization Decrease (Blended)
      -16.6%
      YoY-16.6%

    Standalone Q2

    3
    • Revenue
      ₹917 Cr
    • EBITDA
      ₹168 Cr
    • EBITDA Margin
      18.3%

    Segment breakdown

    Pipe Spooling Business
    ₹650 Cr Order Backlog₹150 Cr FY25 Revenue Target
    Ravi Technoforge (Subsidiary)
    ₹138 Cr Revenue10% EBITDA Margin11% Revenue Growth
    List

    Guidance & targets

    5
    CategoryTargetPriority
    Revenue
    Standalone Revenue
    ₹5,000 - ₹5,200 crores
    		High
    Revenue
    Spooling Business Revenue
    ₹400 - ₹500 crores
    		Medium
    Margin
    EBITDA Margin
    16% - 18%
    		High
    Capex
    Middle East Greenfield Plant
    $40 million
    		High
    Capex
    India RTL Expansion
    ₹240 - ₹250 crores
    		High

    Risks & concerns

    5
    RiskSeverity

    Soft and Volatile Steel Prices

    Blended realizations dropped 16.6% YoY, impacting top-line growth despite stable volumes. — Both acknowledged

    high

    Muted Domestic Oil & Gas Demand

    Domestic oil and gas projects and CGD business are expected to remain muted in the near future. — Management acknowledged

    medium

    Project Execution Delays

    Slowdown in dispatch clearance due to seasonal factors (monsoon) and project delays at the customer end. — Management acknowledged

    medium

    Areas of Evasion(2)

    • Specific sector breakdown of the order book (claimed not to have it at the moment).
    • Specific competitor names in the stainless steel segment.

    Q&A highlights

    3

    “About 50% of this would be water pipe and balance would be all other products... So, this quarter, most of it will be liquidated and will come to a normalized level of inventory.”

    Explains the ₹120 crore inventory spike as a temporary monsoon-related delay in water projects, easing working capital concerns.

    asked by Dheeraj Dave, Samvad Financial Services

    2 min read5 chapters

    Detailed Narrative

    01

    Revenue Resilience Amidst Realization Headwinds

    Ratnamani reported a standalone Q2 revenue of ₹917 crores, which was impacted by a significant 16.6% YoY decline in blended realizations due to soft steel prices. Despite this, management maintained its full-year revenue guidance of ₹5,000 - ₹5,200 crores, implying a stronger second half. The growth is expected to be driven by a recovery in water project dispatches, which were delayed by the monsoon, and a robust export pipeline.

    02

    Strategic Pivot to the Middle East

    The company announced a $40 million greenfield project in the Middle East for cold finishing activities. This move is strategic, aimed at meeting local content requirements in protective markets and capturing the high traction seen in the MENA region. Management noted that while domestic oil and gas demand is muted, the Middle East is providing substantial order inflows, with the current order book mix shifting towards a 50:50 export-domestic ratio.

    03

    Spooling Business: The New Growth Vertical

    The pipe spooling joint venture is emerging as a key growth driver with an order backlog of ₹650 crores, primarily from the nuclear sector. The company targets ₹150 crores in revenue from this segment in FY25, scaling up to ₹400-500 crores in FY26. EBITDA margins for this business are expected to be in line with the company's blended average of 16-18%, with Phase 1 and Phase 2 capex totaling approximately ₹300 crores.

    04

    Aggressive Capex for Specialized Products

    Ratnamani is investing heavily in specialized, high-value-added products. Beyond the Middle East plant, it is spending ₹240-250 crores on expanding capacities in India for auto parts and has recently commissioned a project for heavy thickness pipes. Total capex for the next financial year is estimated at ₹300-350 crores, focusing on products with higher asset turnover and better margins.

    05

    Working Capital and Inventory Management

    Q2 saw a ₹120 crore increase in inventory, largely attributed to the monsoon delaying the uplifting of pipes for water projects. Management expects this inventory to liquidate in Q3 and Q4 as laying activities accelerate. The company remains confident in its cash flow and financial leverage, maintaining its margin guidance despite the temporary working capital buildup.

    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.