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Ratnamani Metals & Tubes Ltd

| Q2 FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤10th Nov 25

Summary : Ratnamani Metals & Tubes reported strong Q2 consolidated growth driven by subsidiaries and strategic expansions, despite subdued domestic demand and margin pressures in some segments, with significant future capacity and revenue targets.

Management Perspective positive : I am happy to share that our performance for Q2 has been strong. We remain optimistic of achieving 15% to 20% year-on-year growth. We are confident to continue scaling our performance in the years ahead.

Concall Report Analysis & Insights

Business Overview

  1. Q2 FY26 consolidated sales grew 23% to INR 1,191 crores.
  2. Standalone sales increased 5% to INR 940 crores, driven by Carbon Steel.
  3. RTL revenue grew 40% to INR 95.6 crores, with EBITDA margins improving to 13%.
  4. RFSS achieved INR 110 crores revenue, maintaining INR 300+ crores full-year guidance.
  5. Commissioned Orissa plant Phase-I; Kutch plant received API 5LC certification.

Future Growth Prospects

  1. Orissa plant Phase-II expected to be commissioned next quarter.
  2. RTL anticipates 15-20% year-on-year growth for the next 2-3 years.
  3. Saudi stainless-steel manufacturing plant activities begin in January 2026.
  4. Consolidated revenue target of INR 7,000-7,500 crores in 2-3 years.
  5. RFSS capacity expanding to 3,000-4,000 tons, targeting INR 600-650 crores revenue.

Management Insights

  1. Confident in maintaining volume growth across all product categories despite flattish revenue.
  2. Expect EBITDA margins to remain in the 16% to 18% range.
  3. Expansion projects at RTL are progressing well, increasing capacity and customer segments.
  4. RFSS has strong order inflow visibility and improving execution processes.
  5. Confident in scaling performance due to expansion projects and positive industry outlook.

Signs of Skepticism

  1. Management could not provide a detailed breakup of process vs. line pipe orders.
  2. CFO was unaware of the reason for a significant increase in 'other financial assets' on the balance sheet.
  3. Uncertainty regarding potential European tariffs and quotas for stainless steel products.
  4. Volume numbers for carbon steel and stainless steel were not shared during the call.

Risk Factors

  1. Domestic market demand remains somewhat subdued across all product categories.
  2. Revenue growth modest due to softer input prices and product mix.
  3. Margin pressure in carbon steel line pipes, especially the water segment.
  4. Potential increase in tariffs or quota reduction for stainless steel in Europe.
  5. Working capital cycle might increase with more water industry orders.

Good To Know

  1. Successfully pioneered supply of hydrogen-compliant carbon steel welded pipes to Europe.
  2. Kutch plant received National Award of Excellence in Energy Management by CII.
  3. Acquired remaining 40% equity in Ratnamani Trade EU, making it wholly-owned.
  4. Restructured RTL shareholding, reducing parent holding from 80% to 75%.
  5. Developing new products like carbon capture, clad pipes, and electro-polished tubes.

Key Drivers

  1. Orissa Phase-II commissioning soon.
  2. Saudi plant setup commencing January.
  3. Subsidiaries showing strong growth.
  4. Hydrogen-compliant pipe supply.

Key Analyst Discussions

Competitive Environment

  1. Strong demand in GCC (Saudi, Abu Dhabi) and some projects in Europe.
  2. Limited supply to the US due to high duties and anti-dumping measures.
  3. Saudi stainless-steel plant aims to establish presence before competitors.
  4. RTL sees increased forecast due to shift from China and capacity moving to India.
  5. Bearing market CAGR expected 7-10% until 2035.

Market Trends & Consumer Behavior

  1. Domestic demand for steel pipes remains subdued, with few tenders.
  2. Expect more domestic tenders next year, especially for line pipes.
  3. Strong demand for oil and gas projects, particularly city gas distribution.
  4. Nuclear power industry is the primary user for RFSS spools currently.
  5. European market outlook uncertain post-January 1st due to potential tariffs.

Financial Highlights

  1. Carbon steel order intake was INR 750 crores, total order book INR 1,100 crores.
  2. RFSS order book stands at INR 500 crores, to be executed by 1Q FY27.
  3. Consolidated order book is INR 2,000-2,050 crores on a standalone basis.
  4. Volume growth of 10% guided for standalone pipes, but revenue impacted by commodity prices.
  5. Working capital decline attributed to product mix shift away from water pipes.

Product Composition

  1. Carbon steel orders are 60% oil & gas, 40% water segment.
  2. RFSS orders are currently 100% for the nuclear power industry.
  3. Future RFSS strategy aims for 70% nuclear, 30% oil/gas/thermal power.
  4. Developing hydrogen-compliant pipes, carbon capture, and clad pipes.
  5. Stainless steel products supplied to Europe include pipes and hollow bars.

Strategic Considerations

  1. CAPEX plans for FY26-27 include INR 225-250 crores for subsidiaries.
  2. Orissa Phase-II coating plant by March 2026; Saudi cold finishing by Dec 2026.
  3. RFSS EBITDA margins targeted at 20-22%+, even with diversification.
  4. RTL aims for INR 450-500 crores revenue with current capacity and manpower.
  5. Export for RTL is 30-40%, including to Timken's USA plant.