Our detailed interaction with Orient Refractories (ORL) & RHI Magnesita management on the side-lines of ORL AGM pointed towards i) increased focus of the group in transitioning to a bigger entity in India with substantial market share, ii) addition of production capability for meeting both domestic and export demand and iii) reduction in margins from a high base of FY18 at both ORL and RHI India led by RM cost inflation. Revenue growth is expected to remain solid but earnings growth would be lower due to normalisation of margins.
Though we remain structurally positive on ORL led by best in class capital as well as operational costs, strong local management, MNC parentage and strong return ratios but recent sharp re-rating caps upside. Maintain Hold with an unchanged TP of Rs230.
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