Broker’s call: Ratnamani Metals (Reduce)

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Target: ₹3,230

CMP: ₹3,488.15

In Q1 FY25, Ratnamani Metals & Tubes Ltd (RMTL) posted flat revenue growth on a y-o-y basis due to a change in product mix and a slowdown in sales due to general elections. The Company’s EBITDA margin declined by 370 bps on a y-o-y due to a change in product mix towards water projects and higher other expenses.

We believe that on the consolidated levels, the company will do a topline of ₹5,600 crore. Due to a higher mix of SS pipes and water projects, we believe the Company wouldn’t see higher EBITDA margins for FY25 but would be able to maintain aout 16-17 per cent.

We have revised our estimates and changed our rating on Ratnamani Metals & Tubes from Neutral to Reduce, with a target price of ₹3,230 about 35x FY25 earnings). With the change in product mix towards water-based projects, we anticipate that the company’s EBITDA margin would shrink to 16-17 per cent from18 per cent in FY24. This adjustment is expected to lead to a stable growth trajectory in the company’s bottom line for FY25E.

While we foresee a promising long-term future for the Company, we believe that the current stock price accurately reflects its value.