With a market capitalization of Rs. 2,496 crores, the shares of this smallcap company started Friday’s trading session on a higher note at Rs. 14.74 compared to its previous close of Rs. 13.87. During the trading session, the shares clocked a 20 percent upper circuit at Rs. 16.50 apiece.
The stock has experienced a notable gain of approximately 56 percent within just five trading sessions and has achieved around 33 percent in returns on a YTD basis. Over the past three years, Rama Steel Tubes has demonstrated impressive performance with returns nearing 400 percent.
Financials:
Looking at Rama Steel Tubes Ltd’s financial performance, the revenue decreased by around 19 percent from Rs. 268.27 crores during the March quarter to Rs. 216.64 crores in the June quarter. On the other hand, the net profits declined by 18 percent from Rs. 7.65 crores to Rs. 6.20 crores during the same timeframe.
Comparing the same metrics on a YoY basis, the revenue decreased by around 31 percent from Rs. 312.52 crores during Q1FY24 to Rs. 216.64 crores in Q1FY25. Contrastingly, the net profits zoomed by around 17 percent from Rs. 7.46 crores to Rs. 6.20 crores during the same period.
Reflecting on strategic collaboration and expansion, the stock has moved significantly over the previous few days. Here are the reasons:
Partnership with Onix Renewable:
On 4th September, Rama Steel Tubes announced a strategic collaboration with Onix Renewable Ltd., focusing on the development of green and renewable energy solutions, particularly in the solar energy sector.
This partnership aims to leverage Rama Steel Tubes’s expertise in providing high-quality steel structures and components, which are essential for solar projects. These include single-axis trackers that enhance the efficiency of solar panels.
With this expansion, the company is entering the Green Energy sector and is poised to create new revenue streams, especially as the demand for renewable energy solutions continues to rise.
Formation of a Wholly Owned Subsidiary:
Previously, the company has also announced a significant expansion into the defence sector and has incorporated a wholly-owned subsidiary named Rama Defence Private Limited.
The new subsidiary will engage in a broad spectrum of activities within the defence sector, including trading, importing, exporting, manufacturing, assembling, and supplying defence equipment such as arms, ammunition, explosives, and other military and security hardware.
This move marks a strategic diversification for Rama Steel Tubes, as it ventures into a high-growth industry beyond its traditional steel tube manufacturing operations.
Moreover, in July 2023, the company signed a strategic Memorandum of Understanding (MoU) with JSW Steel Limited and JSW Steel Coated Products Limited which included procuring hot-rolled coils (HRC) for its steel products and becoming an official distributor for JSW Steel in the western region.
Important Financial Ratios:
In terms of key financial metrics, the company reported a Return on Equity (RoE) of 8.69 percent and a return on capital employed (RoCE) of 15.41 percent for the period spanning FY23-24. Further, the net profit margin during FY23-24 was at 2.79 percent.
Future Outlook:
According to the company’s latest annual report, the company had a production capacity of 2,94,000 metric tonnes in FY23, enabling it to effectively address various market needs. It plans to expand its installed capacity to 394,000 metric tonnes by FY25.
Furthermore, the company aims to allocate at least 25 percent of its installed production capacity of 394,000 metric tonnes to meet government sector demand, targeting an EBITDA margin of 9-10 percent.
Rama Steel Tubes Ltd aims to enhance its product offerings significantly by introducing 10 new SKUs each month, with a target of reaching 2500 SKUs by the fiscal year 2025 (FY25).
Incorporated in 1974, Rama Steel Tubes is one of the leading manufacturers of Steel Pipes and Tubes, Rigid PVC and G.I. Pipes and square section products in India.
The stock may be subject to hype or manipulation, and past performance is not indicative of future results.
Written By Vaibhav Patil
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