Scoda Tubes Limited is an Indian manufacturer of stainlesssteel (SS) tubes and pipes with over 14 years of experience. Based in Gujarat, the company offers seamless and welded products under five main lines, including seamless pipes, tubes, “U” tubes, instrumentation tubes, and welded tubes. The company operates a backward-integrated manufacturing facility.
SS tubes industry stood at around 3.2Lac tn in FY24 which is growing at a CAGR of 8.0%. However domestic manufacturers are growing at a much faster rate on the back of – Reduction in imports (20% mix of in FY24 vs 40% mix in FY20) owing to (a) Mandatory BIS certification (b) Withdrawal of China’s 13% export incentive, (c) imposition of ADD on imports of Chinese SS seamless tubes.
The company will expand its capacity by 3x over FY25-27. Enhanced capacity shall lead to capitalization on backward integrated assets, entry in higher diameter products with higher margins, deeper penetration within existing customers.
Scoda primarily supplies to EPC and OEM clients in the engineering sector, with end-use across oil & gas, chemicals, fertilisers, power, pharma, auto, and railways. Key clients include L&T, Thermax, BHEL, NTPC, Triveni Turbine, HPCL, EIL, GNFC, and Indian Railways.
The company has delivered strong financial performance over FY22– FY25, marked by a 36% CAGR in revenue, gross profit margin improved from 17.0% to 30.6%, reflecting better cost management and pricing power. EBITDA surged nearly 8x, from Rs. 10 cr to Rs. 78.1 cr, translating to a 98% CAGR, with margins expanding from 5.2% to 16.1%. This performance is largely driven by cost advantages stemming from economies of scale and successful backward integration.
Scoda is approaching an inflection point with 3x capacity expansion in two phases – (1) 20k tons of Seamless Tubes commencing in Q3FY26 (2) 12k tons of Welded Tubes commencing in Q1FY27.
We expect Scoda’s Revenue/EBITDA/PAT to grow at a CAGR of 44%/40%/51% over FY25-27E. The steady state ROCE of 24% witnessed in FY24/25 is expected to dip temporarily to 16% in FY26E on the back of IPO fund raising and subsequently improve to 19%/20% in FY27E/28E. We value Scoda at P/E multiple of 24x FY27E (in line with our avg. target multiple for the midcap capital goods basket) and arrive at a TP of Rs. 290 by March 2026.
