Company is a manufacturer of steel tubes, ERW pipes, galvanized pipes, and allied products.
Their products are used in industries like infrastructure, agriculture, water transport, solar power, heavy vehicles, engineering etc. Some of their clients are Tata Power, Avaada, IGL, Ashok Leyland, Essar, Mahanagar Gas, HPCL, Suzlon, Siemens, Elecon, Thyssenkrupp etc.
Since March 2021, the company’s fixed assets base has tripled and so has its sales showing aggressive ramp up. The company has announced a mega 1300 crore capacity expansion plan in which the promoters themselves will be infusing 500 crore and rest will come from public and QIP. This is a very big deal given their last year sales were approximately 1500 crores and current fixed asset base is 90 crores.
The company has minimal debt on its books and is planning to increase share of value-added products to over 50% in next couple of years. It will use DFT technology for these higher value products.
The company’s ROCE, ROE metrics have been consistently good.
The promoter has over 3 decades of experience in the industry and second generation is also actively involved.
Company’s working capital cycle and cash conversion cycle is moderate.
They have 1000+ SKUs and over 800+ distributors and retailers.
Risks:
Main competitor is APL Apollo, a formidable leader in the structural steel tubes space.
The steel industry is volatile and fragmented with many unorganized players.
At a PE of 36, company is over valued. The price may correct or consolidate for some time before rising further. It’s 3 Year and 5 Year Median PE is 23.8 and 27.9.
Market is assuming successful and timely execution of mega expansion. If there is any delay or changes to the plan, then stock will correct accordingly.
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