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Hidden Gem - Ratnaveer Precision Engineering

ICICIdirect Research 14 Nov 2024 DISCLAIMER

Ratnaveer Precision Engineering Ltd (RPEL), is a Gujarat based stainless steel (SS) product manufacturer focused on producing finished sheets, washers, pipes and tubes. Demand of SS sheets has been increasing at a CAGR of ~13% over the last 5-6 years. Going ahead, demand for SS sheets is expected to remain healthy at over the next 5 years, mainly driven by increasing usage in elevators, escalators, commercial kitchens, bus bodies, metro and railways coaches etc

Operational performance remained strong during the quarter, driven by expansion of capacities with increasing mix of value-added products

Revenue increased significantly by ~61% YoY (+13% QoQ) to Rs 230 crore. EBIDTA margin also improved by 140 bps YoY to 10.6%. PAT increased by 54% YoY to Rs 12.3 crore. For H1FY25, revenue is up ~67% YoY with EBITDA margin stands at 11.3% (vs 10.7% in H1FY24). PAT is up ~75% YoY to Rs 24.8 crore in H1FY25

Going ahead, we expect company would continue to see substantial revenue growth over the next 2-3 years, led by ongoing capex across its product segments. Demand traction is likely to remain strong from domestic & export markets

Moreover, focus on backward integration, operational efficiencies, favorable product mix and increasing share into better-margin segments like (railways, defence, energy etc) would further help in improving margins

We estimate revenue CAGR at ~24% CAGR over FY24-27E while EBITDA/PAT to grow at ~45%/~47% CAGR over the same period

Valuation at 15x P/E on FY26E looks attractive, considering the strong growth ahead. We have a target price of ₹ 290 (based on 20x P/E to FY26E EPS)

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