Ratnaveer Precision Engineering Business analysis
Contents
Business
Industry overview
Operating metrics
Financials
Points to consider
Valuation
Business
Ratnaveer Precision Engineering, started in 2002, by Vijay Ramanlal Sanghavi ( promoter & MD) is an stainless steel manufacturer based out of Vadodara. Main products are SS finishing sheets and SS washers.Products of Ratnaveer are used in various industries including automotive, solar power, wind energy, power plants, oil & gas, pharmaceuticals, sanitary & plumbing, instrumentation, electro mechanics, architecture, building & construction, electrical appliances, transportation, kitchen appliances, both for residential and commercial use.
Ratnaveer Precision has total of 2500 SKUs of SS washers.
Ratnaveer Precision Engineering has 4 manufacturing facilities located in Vadodara.
Products
Ratnaveer Precision operates in these product segments
1. SS Finishing sheet
2. SS washer
3. Solar roofing hooks
4. SS tubes and pipes
1. SS Finishing sheet
SS flat piece with thickness < 6 mm is considered as SS sheet, > 6mm as SS plates. Based on type of finish, products may be categorized into 4 categories-satin, hairline, scotch bright, mirror surface finish.
2. SS Washer
SS Washers have high load bearing capacity, and offers resistance to corrosion and rust. Different type of SS washers produced by Ratnaveer Precision are inner ring washers, spring washers, nord lock washers, retaining rings, internal tooth washers, external tooth washers.
3. Solar roofing hooks
These frameworks allow solar panels to rest comfortably and place them at a perfect tilt angle to maximize solar energy harvesting.4.SS Tubes and pipes
In the industrial sector, SS tubes and pipes are used in the manufacturing of the heat exchanger, condensers, chemical plants, fertilizer plants, pharmaceuticals. It comes in different shapes rectangular, square, cylindrical.
Industry overviewChina produces 55% of global steel output, with India at 3rd position producing 7%, after Indonesia.
Metal products – manufacturing of kitchen utensils and home ware – is the largest end use of stainless-steel, both globally as well as in India. Globally 37% of total SS consumption goes towards metal products segments, 12% of the stainless steel, 13% in automobiles, railways and transport (ART).
SS Finishing sheet
Key segments that are driving the demand for SS sheets are Architecture, Building & Construction (ABC) and Automotive, Railway & Transport (ART). In ABC, the usage is primarily on roofing and cladding and in elevators & escalators .
ABC sector demand comes from office building construction, organized retail construction and hospitality space.
Under ART segment, used in construction of bus bodies, as well as railway/ metro coaches. Huge expansion is going on currently with respect to railway coaches, metro rail expansion in different cities.
SS Sheet manufacturing industry is highly fragmented. Other prominent players are Panchadeep Metal Corp, Jyoti Steel, Jindal Stainless Steelway (JSSL)- part of Jindal Stainless ( leading stainless steel manufacturer of India)
SS washer
SS washer industry of India is Rs 950cr.
Incremental demand of SS washer originating from automobile particularly EV segment, infra and real estate, water transportation mainly driven by Jal Jeevan Mission and solar energy.
SS tubes and pipes
SS tubes and pipes industry of India is 55000cr. Oil & gas and chemical & petrochemical industry are the largest consumers. In the industrial sector, it is used in the manufacturer of the heat exchanger, condensers, and similar industrial equipment that are used in chemical plants, fertilizer plants, pharmaceuticals, sugar, dairy & dairy products, water desalination and automotive industry amongst other.
Ratnamani Metals, Jindal Saw, Welspun are prominent companies.
Points to consider
It needs to be seen if Ratnaveer can benefit from demand from railway coaches and metro coaches, otherwise other demand drivers of SS finishing sheet ( their main product) are aesthetic and decorative in nature.
Ratnaveer Precision is already at very high debt, and requires very high working capital to operate. While IPO proceeds of 85cr may help in near term, they will have to take further debt to service working capital needs for high growth, until they achieve a scale.
Industry does not have any pricing power, the lowest cost producer wins. Further dependent on steel price fluctuations.
50% of revenues come from top 10 customers, so there is very high customer concentration.
Valuation
Ratnaveer Precision Instruments is valued at P/E of 18.8. No similar comparable listed peer available.
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Operating metrics
Geographical presence
Out of total revenues- 69% comes from West, rest 11.6% from North.
81% of revenues come from domestic, rest 19% from exports.
Segment wise revenues
Out of total revenues of 480cr, segment wise revenues are
SS finishing sheet 63.5%
SS washer 17.5%
SS scrap metal 10%
SS tubes & pipes 7%
SS solar roofing hooks 2%
81% of revenues from SS sheets and SS washers.
Top 10 customers account for 50% of revenues- very high customer concentration.
Raw material cost is 87% of revenues. Key raw materials are SS Coils, sheets, wires.
Financials
Annual revenues of Ratnaveer Precision is 480cr. PAT 25cr.
Revenue from operations increased at CAGR of 14.5% for the last 13 years.
PAT became 5X in last 2 years.
EBITDA margins 9.8%
PAT margins 5.2%
ROCE at 12.6%, debt/ equity ratio 2.2 is very high.
Balance sheet
Total debt 230cr
Interest coverage ratio 3.8
Inventory is 205cr. Quite high.
Trade receivables 63cr, not that high.
Cash equivalent of 30cr.
Ratnaveer has negative cashflow from operations.