Centrum Broking

Ratnamani Metals (Buy)

CMP: ₹740.50

Target: ₹990

We initiate coverage on Ratnamani Metals & Tubes (RMTL) with Buy on the back of proven track record of superior earnings trajectory — best in industry, robust margins and strong return ratios driven by sustainable competitive strength of its niche business of stainless steel (SS) pipes and tubes. RMTL is poised to benefit from a pick up in domestic investment cycle and significant entry barriers and expertise required in SS business puts it in a sweet spot. Superior capital allocation record and a proactive management provide the icing on the cake and make RMTL an attractive investment for long-term growth investors.

We expect Ebitda/PAT CAGR of 17.3 per cent/17.4 per cent during FY14-17E led by strong traction in SS segment and operating leverage from CS business. This is one of the better options in the otherwise debt-ridden industrial pipes segment and a key beneficiary of likely capex revival. Key risks are a slow pick up in capex in user industries and margin pressure due to raw material volatility. The stock has limited institutional sell side coverage.

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