Key Highlights of the 3QFY25
Result Robust growth outlook for FY24-FY27E
The company during the quarter reported 20.8%/27.4%/33.6% YoY increase in Revenue/EBITDA/PAT to Rs 761.0 cr/Rs 40.2 cr/Rs 19.1 cr respectively. The total sales volume increased by 26% YoY to 1.24 lakh tonnes in 3QFY25 vs 0.98 lakh tonnes, led by increased demand for steel tubes/structural steel products.
Volume, EBITDA/t & % Share of Value-added products (VAP) outlook: For FY25E/F26E/FY27E, we have assumed sales volume of 0.49 mnt/0.59 mnt/0.74 mnt respectively (FY24-FY27E volume CAGR – 23.7%). We expect its blended EBITDA/t to increase to Rs 3,440/t/Rs 3,740/t/Rs 3,911/t in FY25E/FY26E/FY27E respectively from Rs 2,967/t in FY24 on the back of an increase in % share of value-added products to 50%+ in FY26 on a blended basis.
Growth drivers to boost the blended EBITDA/t and % share of VAP: The upcoming new capacities are majorly focused on value-added products (Gujarat, Sanand (Unit 2, Phase 2) and Sikandrabad) and are likely to be operational by end of FY25. This will aid in margin expansion and achieve 50%+ share of value-added products by FY26.
Distribution network: The company aims to increase its number of distributors by 10% over the next 12 to 18 months, from the current total of 450 to push volumes.
Maintain BUY with Price Target Rs 173.0/-
We believe, Hi-Tech pipes has mammoth growth prospects in the structural steel tubes space given its (a) Capacity expansion from 0.58 MTPA in FY23, 0.75 MTPA in FY24 to 1 MTPA in FY25E, (b) Transition from generic products to value-added products, (c) Product portfolio enhancement on back of Solar torque tubes, color coated roofing sheets and (d) Healthy demand for structural steel tube over medium and long term (Budgeted Allocation for Jal Jeevan Mission of Rs 67,000 cr in Union Budget 25-26). At the CMP of Rs 112.3, the stock is currently trading at a P/E of 29.9x/18.8x/13.0x of its FY25E/FY26E/FY27E EPS of Rs 3.8/Rs 6.0/Rs 8.7 respectively. We value the stock at P/E of 20x FY27E EPS of Rs 8.7 to arrive at our TP of Rs 173.0, thus providing an upside potential of 54.1%.
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