Venus Pipes shares made their stock market debut in May this year
Venus Pipes and Tubes is in the process of increasing capacity by 2.8x to 33.6ktpa (to become 2nd largest SS producer) as well as backward integrating by Q1FY24E, which will aid margin expansion. Currently, blended EBITDA margins are around 1,000 bps lower as against Ratnamani Pipes (RMTL, market leader), said brokerage and research firm Centrum in a note.
With new capacities, Venus Pipes is set to become the 2nd largest player in India. It is well equipped to exploit emerging opportunities in the form of import substitution, higher exports and huge capex upswing in demand markets.
“Post ramp up, we estimate the gap will gradually shrink and drive EBITDA at 46% CAGR. We initiate coverage on Venus Pipes shares with BUY rating and a target price of ₹ 764 apiece," the note stated.
Venus Pipes shares made their stock market debut in May this year and the newly listed stock has rallied more than 92% in the last four months since its listing on the stock exchanges.
“Venus Pipes has the potential to generate 46% EBITDA CAGR over FY22-25E at around ₹ 15bn in FY25E based on volume expansion, improved customer mix by shifting sales from stockists to direct sales/tender based, backward integration and improving operational efficiencies. The EBITDA margins are expected to improve. Post IPO, ~25% of equity is diluted, hence return ratios are likely to moderate from superior RoE of 38% in FY22 to 23.2% in FY25E," Centrum said.
The Gujarat-based company is a growing stainless-steel pipes and tubes manufacturer and exporter in India. The company, under the brand name Venus, supplies its products for applications in diverse sectors, including chemicals, engineering, fertilizers, pharmaceuticals, power, food processing, paper and oil and gas. The capital outlay required for expansion project is around ₹ 1.6 bn funded largely through IPO proceeds.
“We expect Revenue/EBITDA/PAT to grow at CAGR of 32%/46%/48%, respectively over FY22-25E, keeping the balance sheet strong with Net Debt/EBITDA of 0.59x, high RoE of ~23% and ROCE of 20% in FY25E," the brokerage added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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