Ratnamani Metals & Tubes Limited (520111) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Ratnamani Metals & Tubes Limited Q2 FY '27 Earnings Conference Call, hosted by Monarch Networth Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sahil Sanghvi from Monarch Networth Capital. Thank you, and over to you, sir.

Thank you, Yousuf. Good evening to everyone. On behalf of Monarch Networth Capital, we welcome you all to the 2Q FY '26 Earnings Conference Call of Ratnamani Metals & Tubes. We are delighted to host the management of Ratnamani. And from their side, we have Mr. Manoj Sanghvi, Chief Executive Officer; and Mr. Vimal Katta our Chief Financial Officer. So without taking much time, I'll hand over the call to Mr. Manoj Sanghvi for the opening remarks. Thank you, and over to you, sir.

Yes. Thank you, Sahil. Good evening, everyone. I warmly welcome you all and thank you for joining us for our performance update for the quarter and half year ended 30th September. For Q2 FY '27, consolidated revenue from operations grew by 13% to INR 1,348 crores compared to INR 1,192 crores in the corresponding quarter last year. Consolidated EBITDA stood at INR 220 crores with a margin of 16.3%. PBT was INR 174 crores and PAT was INR 133 crores. At the stand-alone level, revenue from operations grew by 18% to INR 1,104 crores. EBITDA stood at INR 139 crores with a margin of 12.6%. While PBT and PAT were INR 106 crores and INR 80 crores, respectively. On the profitability front, we have been able to maintain our gross margin and overall cost structure has remained largely stable. The key exception has been freight and forwarding expenses, which have increased significantly due to the prevailing geopolitical uncertainties and their impact on global logistics. This increase has put pressure on our overall profitability. On the business front, we have witnessed an improvement in overall carbon steel division sales volume. Our stand-alone business continues to remain debt free and the order book has increased to over INR 2,600 crores, around 30% higher than the previous quarter. During the quarter, we have made good progress in specialized product segments. In the fertilizer sector, we have received approval to supply stainless steel, seamless tubes for carbonate condensers from a leading global technology licensor and engineering company. In the nuclear and aerospace segments, we've secured several important orders and development opportunities. This includes order for HP heater unfinished uses and hurricane heat exchanges seamless tubes for nuclear projects. Along with the development order for in generator uses from Nuclear Power Corporation, we've also entered into a global supply frame agreement for aerospace tubes and successfully supplied a critical seamless tube in the size of 138 by 1 mm. On the capacity front, Piramil 3 to manufacture pipes up to 18 meters with an annual capacity of 100,000 tonnes has been commissioned. We have also commissioned our external coating plant with an annual capacity of 25 square lakh meters at Orissa. Further, Ratnamani stand-alone credit rating has been upgraded to Crasil AA+. Now I would talk a little about subsidiary performance. Coming to Ravi Tecnocos quarterly revenue increased to INR 99 crores from INR 96 crores, in the corresponding quarter last year. EBITDA was INR 12 crores with a margin of 11.8%. At Ratnamani Pinos pooling solutions, quarterly revenue increased to INR 157 crores from INR 110 crores. EBITDA stood at INR 86 crores with a margin of 54.7% while PAT was INR 65 crores. IRFS has secured a new export order with approximate worth approximately INR 2,700 crores, taking its order book to over INR 3,000 crores. A part of its expansion project has been commissioned and production of induction bands is expected to commence next quarter. Its credit rating has also been upgraded to Cris AA. Thank you.

So should we start Q&A session?

Yes, yes.

[Operator Instructions] First question is from the line of Salil Desai from Marcellus Investment Managers.

Thank you. Good evening. Manoj, this aerospace order you signed a supply agreement with Safran. So that is part of Ratnamani is this also under IRFS?

No. That is with Ratnamani Metals and Tubes, it is supply of hubs. It's a global frame agreement with them.

Okay. But there's no kind of order with a specific quantum right now is just that you will be a supplier in and when they need you in supply? Or is there some contract signed for number of...

It is with, say, it is a 5-year frame agreement with some value, which they have indicated. Now that value, of course, maybe year 1 can be x, year 2 will be 1.2x, 1.3x slow and steady, there will be an increase.

I see. All right. Okay. Great. And secondly, you said the broader volume growth this quarter was driven by carbon steel and then there is freight increase I think from a gross margin point of view, if you maintain this then I'm just trying to figure out if carbon steel was a higher proportion overall, then why they did not have as much an impact on gross margins?

Edition for this last quarter, I mean is part of any growth from exports. We are metals basis. So that element is in the pricing, dieting into the margins being so better than what on EBIT had for normal order. And because of the dropping of effect past came as part of the face-end transportation cost. So that is the thing. Otherwise, this 35% startup can be taken as a norm over a longer period?

All right. Great. And to go back to how demand overall has been then what would you think on the 2, 3 drivers of this 24% volume growth -- sorry, order flow, 30% order growth that you see, what ever segments are you seeing this coming from?

So historically, for last 9 months or, say, 12 months, we've been struggling with the demand outlook, both stable steel and especially carbon line pipes. But now stainless steel demand, we are seeing it has picked up. Order book is also increasing. As we speak, current order book in stainless steel is close to INR 1,000 crores. and carbon steel is close to INR 1,700 crores. So historically, our order book, which was INR 2,000, INR 2,200 crores, yes, saying that shift. The order book is increasing. It is becoming healthy. So of course, this year, still, there are a lot of challenges. We have to see how the geopolitical situation is there for the remainder of the year. But next year, definitely, if we start with such order book seems to be quite promising.

And any particular segment you want to call out as driving growth in order?

It is receivable -- if we see stainless steel, it is thermal power projects, even oil and gas, we are globally like LNG plants in the U.S., data center in the U.S. So those all are the big demand drivers right now. In India, thermal power plant -- of course, some oil and gas, chemical, fertilizer, heat exchanger. So those are big demand drivers.

[Operator Instructions] Next question is from the line of Pranav Mehta from Equita Securities.

Manoj, I just wanted to understand on the order pipeline that you are seeing on the domestic front as well as on the export opportunity in the stand-alone business. So any number that you can share in terms of the order pipeline that is already active in, let's say, Middle East and rest of the world that you guys are seeing or have started participating and the same for the oil and gas and water pipe business?

So stainless still see there are various projects, small, small orders, right? So difficult to pinpoint any particular project and inform [Foreign Language] Because the order quantum there is maybe INR 5 crores, INR 10 crores various projects, different projects, exports, data center, different industry. Carbon steel, yes, there are a few projects which are ongoing big size in oil anf gas. Middle East, of course, has just started just started seeing some pillars, not like a major one, which cause recently, 1 of the major EPC contracts are around India. So those all projects, definitely total bidding currently in pipeline carbon steel both line pipes as well as implant fighting is close to INR 5,000-plus crores.

Okay. And by when do you face that the orders in the carbon steel pipe division, let's say, in India and across the world should start seeing meaningful pickup in terms of order pipeline. Do you expect it in the second half of '27 or it will be more of a '28 kind of a story or might get shifted to second half FY '28. Any take on that?

No, we've already started seeing some projects where the order -- and that's how our order book is also increasing, right? The INR 2,700 crores includes both stainless steel and carbon steel -- so there is jump what we see or there is -- of course, stainless steel is much more, I would say, than the carbon steel pipes. However, carbon steel pipes is also improving. The demand side or the finalization of the project as we talk.

Sure. And what about the Reno JV, what kind of order pipeline you are seeing in there on the global level?

On a global side Currently, we already have an order book of INR 3,000-odd crores. There are few projects which are under bidding right now. So by the end of this year, we still will have room for, I think, some INR 40 crores, INR 50-odd crores, we should book more.

[Operator Instructions] Next question is from the line of Sonal from Prescient Capital Investment Advisers LLP.

This is Sonal Minhas. I hope I'm audible?

Yes, yes.

Sir, first question, just wanted to call out the other expense number, which is materially higher this particular quarter, looking at the consolidated numbers. So can you just call out any onetime or any exceptional numbers wel?

So see, as Mr. Katta briefed earlier, the domestic demand for both stainless steel welded pipe as well as carbon steel ERW pipe is quite less However, there is a huge pickup in the demand from the U.S., right? So -- but all the export orders to the U.S. is basis -- so which includes duty as well as transportation, the ocean plate as well as the local transportation and custom clearance costs. Now considering the tariff 50%, so it is reflected in the revenue as well as in the other expense. So that number, that's why you see such a growth.

Major impact in recent rate and components in respect of the orders, which we had executed for U.S.

Got it, sir. So now given the tariff volatility is behind us, and is this number expected to come down? Because quarter-on-quarter, this is up by roughly [indiscernible]?

Still continues to remain -- so any future or any order which is still there in hand or any future orders that we receive will have that 50% plus the ocean rate plus the local transport element. So your actual FOB value is maybe, say, INR 10? However, your selling price is INR 160, INR 60 been cost as other expense.

Yes, we are in the continued geopolitical situation, which impacted the percent rate cost basically.

Okay. So your guidance is this is expected to stay elevated basically. This is what you say.

Yes. Yes. For next 6 to 12 months, yes, it is going to be remain because that is a market which is -- which has the highest demand at the moment.

Got it, sir. And sir, on the gross margin front, do you want to call out any directional data on wherever margins are expected to improve or stay the same or dip in the subsequent.

No. Next year, I feel there should be an improvement sale. It is -- as far as the utilization improves, the demand which we are seeing already now the demand improving. So next year, the utilization will jump back again to the optimum level. So we have all your fixed cost and everything remaining same, margins will improve.

See, in the longer run, that 15%, 16% to 18%, broader range, plus minus 1% can be taken. In particular reporting period some fluctuations may be there because of external factors or the product mix. This is unfortunately, external factors have impacted both cost also and the capacity utilized.

Got it, sir. So even in H2, this volatility is expected to stay basically, the margins are expected to take lower than the longer-term range that you mentioned. The EBITDA margin, 16%, 18% longer-term EBITDA margin, right? In H2...

We can see a little improvement as the utilization. However, yes, third quarter also, we feel that it will be around the same level.

Got it, sir. And sir, the stainless steel pipe order that you were talking about in thermal. Can you give some subjective guidance on the fact that do you expect more of these to come as in the next quarters to come. And are we seeing competition in these orders there are 6, 7 people or bidding for the same orders. If you could just give some guidance on competition and the volume of these orders, that will be helpful.

So the demand will continue to be strong, maybe not only for the remainder part of the year, but next 2, 3 years in this segment. because a lot of thermal power plants are being announced, not only by the government but also by private players. So yes, on the competition side, now since we have competition from the players who manufacture through other process route also Yes, the intensity of competition is higher. However, the demand also is quite strong.

[Operator Instructions] Next question is from the line of Madhu Agarwal from Agarwal Family Office.

On RFSF, is it possible to share what's our realization per tonne? Or what would be the MAX revenue potential once we expand our capacity to 4,000 tons?

So revenue per ton will vary on the input material of the school. So it is quite difficult because of carbon steel, alloy steel, stainless steel, titanium, nickel and noise. So very difficult to say or throw a number at full potential, depending on the material INR 1,200 crores to INR 1,500 crores.

[indiscernible] At to put sort of thing INR 500 per kg, roughly.

Understood. And would you say the sort of 50% EBITDA margins we're doing right now are sustainable in that segment?

Is but long-term margin should be 25% to 30% at the teller. For any reporting period, deals can keep on fluctuating based on the material which has been these.

Next question is from the line of Chetan Thakkar from M3 Investments Private Limited.

Am I audible?

Yes, sir.

Sir, 3 questions. One is, like you mentioned, given that a lot of supplies are to U.S., which are inclusive of freight and duties. On a per ton basis, is the profitability better compared to where we were because it will have a knock-on effect, like you said, on both revenue and other expense. So per profitability, how does that look for the supply?