Metal Stock Hits Upper Circuit Despite Weak Markets

Shares of Rama Steel Tubes Limited (RSTL), an Indian manufacturer of steel pipes and tubes, have hit 5% in the upper circuit. This stock has crossed the upper circuit for eight straight sessions in an otherwise weak market. It has logged a total of 75% rise from its Rs. 234.25 levels as of 27 December 2021.

As of 11:17 AM 7 January 2021, RSTL opened at Rs. 428.40 and was up 5% at an intraday high of Rs. 432.70. If an investor had invested Rs. 1 lakhs in this metal stock just a month ago, his investment would have been worth around Rs. 1.78 lakhs.

Now let us take a deeper dive into the particulars of the company and its stock.

About Rama Steel Tubes Limited (RSTL)

Rama Steel Tubes is a manufacturer in the steel tube industry. The company is involved in manufacturing, supplying, and exporting steel pipes, fittings, and steel tubes. RSTL has an international presence, with a 20% export rate and exporting to over 15 countries.

This company has built a subsidiary in UAE and a step-down subsidiary in Nigeria to strengthen its global presence. In India, it has 4 state-of-the-art manufacturing facilities located at Anantapur (Andhra Pradesh), Khopoli (Maharashtra), and Sahibabad (Uttar Pradesh). It also has a strong distributor network in the country.

Its popular products include the following:

• MS ERW black pipes (15 mm to 200 mm diameters)
• GI Pipes (15 mm to 150 mm) in light, medium, and heavy sizes
• Standard highway and street lighting poles (Rama Light Poles)
• Pipes with grooves rolled at ends (Rama Glaze)
• Rama Steel Fire-Fix end piping system (Rama Fire Fix)
• Casing pipes (Rama Casing)
• Square/rectangular pipes and tubes hollow section (Rama Hollow)

Over the years, RSTL has completed over 400 projects with end-to-end execution. The company has supplied its products to public institutions like Gujarat Gas Limited, Uttarakhand Power Corporation Limited, Noida Power Corporation Limited, Himachal Pradesh State Electricity Board, etc.

Reasons for Rise of Price of RSTL’s Shares

On 20 December 2021, Brickwork Ratings (BWR) upgraded the company’s long-term ratings to BWR BBB. RSTL had a stable long-term and short-term rating of BWR A3+ for bank loan facilities. This recent rating upgrade has pushed the company’s stock as one of the multi-bagger stocks of 2022 on Indian stock exchanges.

RSTL’s business profile has improved considerably since FY21 due to an increase in overall capacity. This has increased to 228,000 metric tonnes per annum (MTPA) in FY21 from 168,000 MTPA in FY20.

As a result, its financial profile has improved with an increase in revenue and EBITDA. In addition, RSTL has managed to retain its profits and secure interest-free unsecured loans from promoters. This has improved its overall credit ratios and capital structure with net debt to EBITDA of 2.85x in FY21.

Recently, RSTL has received orders from the Uttar Pradesh Power Corporation Limited (UPPCL) for the supply of 580 MT electrical poles. The large-scale infrastructure project worth Rs. 43.3 million is in addition to its previous order amounting to 1624 MT worth of electrical poles from UPPCL.

Earlier, this company had announced to expand its manufacturing capacity to 30,000 MTPA at its Maharashtra plant. RSTL intends to complete the expansion by the end of Q4 FY22 and to commence commercial production as soon as possible.

Share Price History of Rama Steel Tubes

Since RSTL closed at Rs. 234.35 on 27 December, it has been hitting the 5% upper circuit for nine straight days. An otherwise weak market demand outlook has not been able to curb this stock’s performance. Since 9 December, i.e. 22 days, the stock has increased 79.58% with Rs. 432.70 being the highest.

In the last three months, this stock has increased 75.75% from Rs. 229.95 in November 2021. A year ago, this stock was worth only Rs.64.25 and thus, witnessed a whopping 607.03% increase, a difference of Rs. 368.45.

Parting Thoughts

The demand outlook for RSTL looks stable, with many end-use sectors such as telecom, infrastructure, and irrigation witnessing rolling orders. With an increase in its financial and business profile, the future outlook of this stock seems to be promising.

However, investors are always advised to exercise due caution and do sufficient research before investing. Equity investments carry market risks, and their returns are hard to predict.

Source: Livemint

Frequently Asked Questions

1. What much capacity has RSTL added in FY21 at Khopoli?

RSTL has added around 60,000 MTPA in the current financial year. As of right now, its total capacity at Khopoli, Maharashtra, stands at 132,000 MTPA.

2. Is Rama Steel Tubes a profitable company?

As of its quarterly report in September 2021, this company is profitable. Its net profits after tax in this period stood at Rs. 7.13 crores.

3. How much would an investment of Rs. 1 lakhs be worth if made 6 months ago?

An investment of Rs. 1 lakhs made six months ago would be worth Rs. 2.65 lakhs as of 6 January 2021.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.