About the Company

Ratnaveer Precision Engineering Limited, incorporated on 20^th February 2022 is a stainless steel (SS) product manufacturer focused on producing finished sheets, washers, solar roofing hooks, pipes, and tubes.

he Company is promoted and managed by Promoter and Managing Director Vijay Ramanlal Sanghavi. He holds a bachelor's degree in Commerce from MS University, Baroda, and has over two decades of experience in ferrous and nonferrous metal industries.

The products of the company find application across various industries including automotive, solar power, wind energy, power plants, oil & gas, pharmaceuticals, sanitary & plumbing, instrumentation, electromechanics, architecture, building & construction, electrical appliances, transportation, kitchen appliances, chimney liners, etc.

The products are used in both commercial and residential sectors and are sold within India and overseas. For the FY 2022-23, the Domestic turnover of the company was 80.79% and the Export turnover was 19.21%. Further, the contribution of various business segments to the revenue from operations was as follows:-

The company has four manufacturing units, out of which two are in Savli GIDC, Vadodara, one in Waghodia, Vadodara, and the other one in Vatva, Ahmedabad.

Industry Overview

Since 2000, steel production in the country has seen a phenomenal increase as the sector witnessed high investments in capacity addition as well as technology up-gradation. According to the World Steel Association (WSA), India produced 125.3 million tons of crude steel in CY 2022 and accounted for a 7% share of global crude steel production.

According to WSA’s June 2023 update, India produced approximately 67.9 million tons of steel during the January to June 2023 period, which is nearly 7.4% higher than the same period the previous year. Unless there are no major disruptions, the Indian steel industry will end the year with approximately 136 million tons of crude steel.

The presence of a vast primary steel manufacturing infrastructure coupled with low-cost workers has helped in the growth of secondary and finished steel products. On the consumption side, India is the second largest consumer of finished steel.

Since 2011, stainless-steel production has increased at a CAGR of 7.8% per annum from 2.16 million tons in 2011 to 3.92 million Tons in 2019.

However, despite being one of the largest producers as well as consumers of stainless steel, the per capita stainless-steel consumption in India remains lower than the average global consumption of 6 kg. This indicates the inherent opportunities existing in the sector.

Financials

Over the observed period, the company experienced notable growth across various financial metrics. Operational revenue rose from Rs. 359.66 crores in FY 2020-21 to Rs. 479.75 crores in FY 2022-23, with a CAGR of 15.49%. EBITDA expanded significantly from Rs. 24.32 crore in FY 2020-21 to Rs. 47.02 crore in FY 2022-23, demonstrating a CAGR of 39.04%, and net profit surged from Rs. 5.46 crore to Rs. 25.04 crore over the same period, reflecting a CAGR of 114.15%. Both EBITDA margin and net profit margin showed significant improvement because of lower production costs in FY 2022-23. Return on Equity (ROE) also increased from 10.15% in FY 2020-21 to 29.12% in FY 2022-23; however, Return on Capital Employed (ROCE) remained relatively flat.

Valuation

The company's PE Ratio is 13.50, while the industry's PE Ratio stands at 34.40. Additionally, the company's PB Ratio is 3.19, whereas the industry's PB Ratio is 5.96. The company is undervalued based on both these metrics.

Peer Comparison

M.M. Forgings Limited could be considered the market leader due to its top position in terms of Revenue, Earnings Per Share, and NAV per share. On the other hand, Ratnaveer Precision Engineering Limited is falling behind the industry when it comes to EBITDA Margin and PAT Margin. Nevertheless, it appears to maintain respectable levels of ROE and ROCE.