Recommendation: Buy
CMP = Rs 786 (at the time of this recommendation) Price target: Rs 1,110
Key points: -
The revenues of Ratnamani Metals and Tubes Ltd (RMTL) grew by 31.4% to Rs 249.7 crore on account of a strong volume growth in both the stainless steel and carbon steel pipe segments. The operating profit of the company grew by 24.1% to Rs 56.4 crore in the quarter. The operating profit margin declined by 133 basis points to 22.6% due to an increase in the other expenses. The company's other expenses as a percentage of sales increased by 353 basis points to 11.2% in Q1FY2009. -
RMTL's interest cost declined by 29.8% while its depreciation charge rose by 20.9% in Q1FY2009. During the quarter, the company made a provision to the tune of Rs 7.86 crore for a mark-to-market loss on its exposure to forex contracts. The reported net profit increased by 12.6% in the quarter. -
The combined order book of the company stood at Rs 700 crore at the end Q1FY2009 as against Rs 650 crore for the same period last year. At the current market price, the stock trades at price-to-earnings of 6.2x and 5.2x its FY2009 and FY2010 estimates. -
I maintain a strong Buy call on this stock with a price target of Rs 1,110. |
