RATNAMANI METAL (RESEARCH DONE 8 months ago)
BUSINESS:
· Companies Product line include Stainless steel, Nickey Alloy, Titanium Welded Tubes, Carbon Steel, Coating Solutions and Induction Bending.
· Market leader in manufacturing Tubes and Pipes in Stainless Steel/Exotic .
· Largest manufacturer on Nickey Alloy Pipes and tubes and Titanium Welded Tubes.
· Nickel alloy speciality corrosion resistance,easily welded used where high and low tempreture comes into play.
· Titanium provides low weight, thermal properties, corrosion resistance.
· Companies products finds its usage in wide range of industry
Ø Oil & Gas, Refinery, Thermal Power,Nuclear Power
Ø Chemicals,Petrochemicals,Fertilizers, water distribution
Ø Sugar, Food & Dairy,Paper
Ø Pharmaceuticals, Automobiles,Defence,Aeronautics, Space Applications
Ø Ship Building, Pumping stations and Infrastructure
MANAGEMENT:
· Prakash M. Sanghvi Promoter Chairman/MD
Ø 42 years of experience in Metal Industry
· Jayanti M Sanghvi Promoter
Ø 39 years of experience in Corporate H.R. Management, Administration etc.
· Shanti M. Sanghvi Promoter
Ø 37 years experience in Corporate relations, Business development and customer management.
(3 promoters have 3 different areas of expertise together making a great combination)
· Pravinchandra Mehta and indepenedent director who has vast experience working in L&T limited who was incharge of 9 different business units.
· Divyabhash C Anjaria (MBA from IIM Ahemdabad) and worked for Citi bank and UTI.
Shareholding:
· Promoter Holding at 60.16%, FPI holding 9.72% and Mutul Funds 11.84%
· In Mutul Funds include L&T mutul Fund 5.52%, Kotak Emerging Fund 3.26% and DSP Small cap Fund 2.44%.
· Mutul Funds holding rose from 4.67% in June 2017 to 11.84% in March 2020
· FII holding reduced from 14.69% to 9.72% during the same time
· Overall holding of MF and FIIs increased from 19.36% to 21.56% during the above time.
(Quality mutul funds holdings and also good FII holding is very positive)
· FUNDAMENTALS/FINANCIALS
Ø From FY17 to FY20 Revenue grew by 83% from 1412cr to 2583cr and while profit grew by 114% from 144cr to 308cr.
Ø Of total revenue in FY19 21% came from exports.
Ø Country it exports include USA,UK, France, Germany, Italy, Netherlands, Japan , South Korea and Middle east countries thus negligiable dependence on China.
Ø Stainless Steel Tubes/Pipes Capacity 28K MT and Carbon Steel pipes capacity 350k MT
Ø ROCE and ROE are good at 24.3% and 19% respectively.
Ø Trading at a PE of 15.9, PB of 2.9 and DE ratio of just 0.13
Ø Although for FY20 Revenue declined by 6% but profit rose by 22% YoY.
Ø Profit rose due to decline in Cost of material consumed as % of revenue from 70.3% to 67.8% and also rises in other income from 41cr to 62cr.
Ø On net debt basis company is almost debt free i.e. net debt stands at just 46cr.
Ø Companies PPE+ Capital WIP increased from 486cr as on 31 March 2017 to 871cr i.e. rise of 385cr while net debt is just at 46cr shows good cash flow generation by company.
Ø IN FY20 Free cash Flow for firm comes negative due to capex of around 298cr which led to rise in borrowings.
Ø The company have set up country’s first High capacity Hot extrusion facility for seamless SS pipes in FY20.
Ø Sources of Raw material Finland, India, Slovenia, US, Japan,South Korea , Germany and negligible dependence on China.
Ø Current Order in Hand is at 1380cr of which 503cr is exports and 180cr worth order may come in July and On 1 June 2020 received order worth 57cr.
Ø In Other current liabilities which increased from 88cr on 31 march 2019 to 210cr as on 31 March 2020 which is Advances from customers so balance sheet is clean and company has comfortably liquidity.
Ø In FY18-19 Industry dependence
ü 57.6% Refineries, Petrochemicals, Oil and Gas
ü 10.45% Power ( Nuclear and Thermal)
ü 23.61% Water and Infra
ü 3.44% Chemical and Fertilizers
ü Others.
CONCERNS:
ü Decline in Oil prices has resulted in delaying of projects and will take more time to finalize.
Although company is earning call told they are expecting major order in second quarter.
ü This year Revenue is expected to be around 2000-2400 cr (earnings call).
Although as oil prices improve business will see great opportunities.
ü Current capacity utilization is around 60-70% due to many labors have not returned back, Labour problem and how much capacity needed if demand is slow as expected by management for FY21.
ü IN FY19 No R&D expense is done.
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