Sharekhan Investor's Eye dated June 14, 2006

[Sunil]

 

Investor's Eye [June 14, 2006] Please see the attachment for details Share khan www.sharekhan.com

Summary of Contents STOCK UPDATE Ratnamani Metals and Tubes Cluster: Ugly Duckling Recommendation: Buy  Price target: Rs520 Current market price: Rs275 Q4FY2006 numbers shine Result highlights The Q4FY2006 numbers of Ratnamani Metals and Tubes Ltd (RMTL) are above our expectations.  During the quarter the company's revenues grew by a strong 50.5% year on year (yoy) to Rs77.3 crore on the back of a strong order book. The operating profit grew by 105% yoy to Rs19.1crore, as the operating profit margin (OPM) improved by 657 basis points. The profit before tax (PBT) increased by 125% yoy to Rs15.4 crore. The net profit almost tripled to Rs12.6 crore as the effective tax rate for the quarter came down to 17.8% from 37.8% in Q4FY2005.  RMTL's order book stands at Rs350 crore currently, with orders worth Rs240 crore for exports and export equivalents. In view of the strong ramp-up in the order book and the company's excellent performance for FY2006, we have upgraded our earnings per share (EPS) estimates for FY2007 and FY2008 by 12% and 10% to Rs46.8 and Rs57.2 respectively. At the current market price of Rs275, the stock is trading at 4.8x its FY2008E EPS and 3.1x its FY2008E enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA). We reiterate our Buy recommendation on the stock with a price target of Rs520.

Regards, The Sharekhan Research Team myac...@sharekhan.com

FREE FirstStep Seminar! Book your seat TODAY! To buy and sell shares, log on to www.sharekhan.com or call our DialnTrade unit on 1-800 227050/ 30307600. For account related queries call our Customer Service cell on 1-800-22-7500/ 39707500.