RHI Magnesita India gaining momentum post strong Q2 results

RHI Magnesita India gaining momentum post strong Q2 results

by 5paisa Research Team Last Updated: Nov 17, 2021 - 02:27 pm 46.1k Views
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RHI Magnesita India zoomed 5% today with positive results and a capacity expansion plan from the company. 

RHI Magnestia India Ltd is in the business of manufacturing and marketing special refractory products, systems and services to the steel industry in India and Globally. It is a market leader for special refractories in India and has many global customers for its international quality products.

Business model

Revenue Breakup: Presently, the company earns 74% of its revenues from the manufacturing of refractories and 22% from the trading of refractory items.

Dependent Industries: Demand for refractory is primarily dependent on the steel industry, which accounts for 75% of total sales. Refractory products are also used in glass, cement, non-ferrous, petrochemicals industries. 

Manufacturing Facilities: The company has 2 manufacturing facilities located in Bhiwadi, Rajasthan and Tangi, Odisha, Vizag, Andhra for its manufacturing operations.

Today, the parent company has announced to make India a research and development hub, and a manufacturing hub. They have established a new R&D centre in Rajasthan. They have allocated Rs 400 crore to increase the production capacity of its existing plants, planning for brownfield expansion and automation of these facilities.  

Financials

Recent: Two days back, they have reported strong Q2FY22 sales growth of 25%YoY stood at Rs 432 crore beating the estimates, with domestic steel production jumping 18% YoY. This was led by volume growth of 19% and a 6% price hike.

EBITDA grew 33% YoY stood at Rs 66 crore, however as EBITDA margin stood at 15.16% rose 95bps YoY though down 213bps QoQ, with inflationary cost pressures. Net profit grew 34% YoY stood at Rs 43 crore, however, the margin stood at 9.96% rose 60bps YoY.

5-year history: In the last five years from FY16 to FY21, revenue has grown at a CAGR of 24% and profit has grown at a CAGR of 20% which shows the steep growth of the company. The operating margin is consistent and stable in the range of 15% to 20% for the last 5 years.

Brokerage outlook

With capacity expansion (underway) aimed at capturing strong domestic and exports opportunity, Edelweiss estimate RHIM would log CAGRs of 19% in sales and 21% in PAT over FY21-23 with RoCE expansion of 310bps to 26.5%, with a target price of Rs 438 in next 12 months.

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