Key Highlights of the 1QFY27 Result
Mixed performance but growth prospects remain bright as value-added capacities near commercialization.
Hi-Tech Pipes Ltd. (HITECH) during the quarter reported Revenue/EBITDA growth of 78.5%/20.3% YoY to Rs 1,413 cr/Rs 49 cr respectively driven by robust demand in infrastructure and construction. However, PAT for the quarter declined 4.2% YoY to Rs 20 cr. Sales volume for 1QFY27 increased by 25.9% YoY to 1,56,136 metric tonnes (MT), led by ramp-up of new capacities. EBITDA/t for the quarter stood at ~Rs 3,162, down 4.4% YoY, impacted by higher purchases of stock in trade (Rs 280 cr in 1QFY27 vs Rs 35 cr in 1QFY26) and elevated gas prices.
Project updates: The DFT facility at Sanand Unit-2 (1,50,000 MTPA) is expected to be commissioned by 3QFY27, the full contribution of which shall be seen in FY28. The API pipes facility (which will mark HITECH’s foray into API-grade Oil & Gas pipe manufacturing), is expected to be completed by 4QFY27, while the fully integrated 2,00,000 MTPA ERW pipes & specialized solar pipes production facility at Hindupur, Andhra Pradesh, is also expected to be operationalized by 4QFY27. As these 3 facilities ramp-up into FY28, the share of value-added products in the company’s sales mix is expected to increase from the current 39% to 45%-50%. As of 1QFY27, HITECH’s total annual installed capacity stood at 10,15,000 MT, which management remains confident of increasing to ~20,00,000 MT by FY29.
Stock purchases to rationalize in FY27, expected to lift profitability: During 1QFY27, the company recorded purchase of stock in trade worth Rs 280 cr, up from Rs 35 cr in 1QFY26, but down from Rs 421 cr in 4QFY26. Going ahead, management has indicated that stock purchases shall moderate towards Rs 50 – 100 cr per quarter. Such moderation in purchases, alongside ramp-up of VAP capacities (DFT and API pipes facilities) shall result in gradual improvement in EBITDA/t.
Guidance: For FY27, management has reiterated its sales volume guidance of ~6,50,000 to 7,00,000 MT. Post commissioning of the new DFT facility at Sanand Unit2 and the fully integrated Hindupur plant, sales volumes are expected to reach 10,00,000 MT (up from previous guidance of ~8,00,000 to 8,50,000 MT) in FY28. For FY28, management expects EBITDA/t to inch up to Rs 4,000. We remain conservative on estimates pending greater clarity on the rationalization of stock-in-trade purchases and successful ramp-up of new capacities. We also factor in a degree of caution on energy costs amid the risk of renewed West Asia conflict, which could keep gas prices elevated.
Maintain BUY- Target Rs 104/-
We estimate FY27E/FY28E sales volumes of 6,55,000/7,50,000 MT respectively implying a CAGR of 16.2% over the FY26A-FY28E period. Revenue/EBITDA/PAT is forecasted to grow at a CAGR of 19.9%/24.4%/23.2% respectively between FY26AFY28E period; with EBITDA/t expected to reach Rs 3,107/Rs 3,581 in FY27E/FY28E. At the CMP of Rs 78, the stock is currently trading at a P/E multiple of 19.2x/14.3x based on its FY27E/FY28E EPS of Rs 4.1/Rs 5.5 respectively. We value the stock at a P/E multiple of 19.0x based on FY28E EPS to arrive at our target price of Rs 104, implying an upside of 33.3%.
