We remain structurally positive on Ratnamani Metals & Tubes (RMTL) but retain our Hold rating with a revised TP of Rs985 (vs Rs940 earlier) on the back of limited upside potential with strong growth outlook largely factored in at current valuations. Q2 performance was well above expectations with solid EBITDA growth of 127% YoY & 28% QoQ led by strong execution of previous orders. We continue to believe in RMTLâ€™s long-term growth story, with expected strong domestic capex over FY19-22E and commissioning of new capacities in the high-margin SS & LSAW business in FY20E.
We assume 8% linear growth from FY22-27E, terminal growth of 3.5% and WACC of 10.5% to arrive at a revised DCF-based revised fair value of Rs 985. Maintain Hold. Key downside risks include increased RM volatility and lower margins while upside risk is greater traction in SS segment.
Disclaimer:Â The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.