Capacity expansion to drive growth!!!
Hi-Tech Pipes Ltd. is one of India’s leading steel processing companies having more than three decades of experience with a strong presence in steel pipes, hollow sections, tubes, cold rolled coils & strips, road crash barriers, solar mounting structures, GP/GC sheets, color coated coils and a variety of other galvanised products. The company operates six state-of-the art integrated manufacturing facilities located at Sikandrabad (UP), Sanand (Gujarat), Hindpur (AP) – near Bangalore and Khopoli (Maharashtra), with an installed capacity of 0.75 million tonnes per annum (MTPA) as of FY24 on a consolidated basis and is on its way to reach 1 MTPA capacity in FY25. The company has a direct marketing presence in over 20 states with more than 450+ dealers & distributors across India.
Advancing ahead, 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 70,163 cr in Budget 24-25).
We expect Revenue/EBITDA/Net Profit to grow at a CAGR of 24.9%/41.9%/78.9% between FY24-FY26E to Rs.4,208 cr/Rs.231 cr/Rs.141 cr respectively. At a CMP of Rs.149, the stock is trading at 29.6x/18.8x P/E multiple based on expected EPS of Rs. 5.0/7.9 for FY25E/FY26E respectively. We have valued the business at 24x P/E multiple based on its FY26E earnings and arrive at a target price of Rs.190 thus providing an upside potential of 27.0% and assign a BUY rating for the stock.
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