Sharekhan reiterates buy on Ratnamani Metals, target Rs 1,110

MUMBAI: Sharekhan has reiterated 'buy' call on Ratnamani Metals and Tubes for a target price of Rs 1,110 per share. The Apr-Jun 2008-09 results of the company are in line with the brokerage expectations. The company's revenues grew by 31.4 per cent 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 per cent to Rs 56.4 crore in the quarter. The operating profit margin declined by 133 basis points to 22.6 per cent 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 per cent in Apr-Jun 2008-09.

Ratnamani Metals and Tubes interest cost declined by 29.8 per cent to Rs 3.6 crore while its depreciation charge rose by 20.9 per cent to Rs 6.4 crore in Apr-Jun 2008-09.

During the quarter, the company made a provision to the tune of Rs 7.86 crore for mark-to-market loss on its exposure to foreign exchange contracts. Sharekhan has considered this as one-off item. Consequently, the net profit of the company grew by 35.6 per cent to Rs 30.6 core. The reported net profit increased by 12.6 per cent to Rs 25.5 crore in the quarter.

The combined order book of the company stood at Rs 700 crore at the end of Apr-Jun 2008-09 as against Rs 650 crore at the end of Jan-Mar 2007-08.

Sharekhan has revised their earnings estimates for 2008-09 and 2009-10 mainly to factor in the lower operating margin in the future and mark-to-market forex loss. Sharekhan’s fully diluted earnings per share estimates for 2008-09 and 2009-10 now stands at Rs 126.2 and Rs 152.3 respectively.

At the market price the stock trades at price-to-earnings of 6.2x and 5.2x its FY2009 and FY2010 estimates.