Key Highlights of the 1QFY26 Result
Muted performance attributable to fluctuations in steel prices
Hi-Tech Pipes Ltd. during the quarter reported Revenue/EBITDA/PAT of Rs 791.4 cr/Rs 41.0 cr/Rs 20.9 cr respectively. Revenue/EBITDA declined 8.7%/3.9% YoY respectively, while PAT was up 15.9% YoY. Sales volume for 1QFY26 increased marginally by 1.5% YoY to 1.24 lakh tonnes led by healthy order inflows from the Renewable energy space.
Incremental capacities to be commissioned by 2QFY26: The Sikandrabad and Sanand Unit-2 (Phase-2) facilities are currently in advanced stages of commissioning and are expected to come onstream by 2QFY26. Once commissioned, the total production capacity of the company will reach 1 MTPA from 0.75 MTPA currently. These plants are expected to close FY26 with 50% capacity utilization, thereby contributing 30,000 tonnes of volume in 3QFY26.
Volume, EBITDA/t & % Share of Value-added products (VAP) outlook: For FY26E/FY27E, we have revised our sales volume estimates downwards to 5.6/7.0 lakh TPA from 6.0/7.5 lakh TPA respectively, on the back of slowdown in Jal Jeevan Mission spending by the government. We expect blended EBITDA/t to increase to Rs 3,395/Rs 3,724 per tonne (vs Rs 3,639/Rs 3,852 per tonne previously) in FY26E/FY27E respectively from Rs 3,297/t in FY25 on the back of an increase in % share of value-added products to 42%+ in FY26 on a blended basis.
New capex lined up: For FY27, the company aims to increase its capacity by another 25%-30%, for which the ground work at the Sri City project in Chennai and Phase-3 of the Sanand unit-2 is already in progress. HITECH’s long-term vision is to attain 2 MTPA of production capacity by FY29, which shall incorporate its plan to undertake a strategic foray into API-grade pipe manufacturing to cater to critical sectors such as Oil & Gas, Industrial pipelines and Water transmission.
Maintain BUY- Target Rs 120/-
We believe, Hi-Tech Pipes has strong growth prospects in the structural steel tubes space given its (a) Capacity expansion from 0.6 MTPA in FY23, 0.8 MTPA in FY24 to 1 MTPA in FY26E, (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. At the CMP of Rs 88.2, the stock is currently trading at a P/E of 20.4x/13.2x of its FY26E/FY27E EPS of Rs 4.3/Rs 6.7 respectively. We value the stock at P/E of 18x on FY27E EPS of Rs 6.7 to arrive at our TP of Rs 120.0, thus providing an upside potential of 36.1%.
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