30% upside ahead? What analysts said on multibagger Venus Pipes & Tubes

Shares of Venus Pipes & Tubes, which climbed 127 per cent in 2022,  may see further upside going ahead, thanks to expansion of product offerings by the pipe maker and favourable government policies, analysts said.

Venus Pipes & Tubes, a 2022 debutant, is a manufacturer and exporter of stainless steel pipes and tubes, in two broad categories- seamless tubes and pipes; and welded tubes and pipes.

Venus Pipes reported strong financials in the September quarter, with revenues increasing 10.52 per cent QoQ and 41 per cent on YoY basis. For FY19-22, the company witnessed good growth with sales CAGR of 48 per cent and Ebitda CAGR of 61 per cent, Share India Securities said in a note. "Venus Pipes and Tubes is well placed at this time with respect to growth and expansion of product offerings. The company has managed to get customers like Amul, Asian Paints, Adani group, Bharat Petroleum, Cipla, BHEL, Godrej, ITC. The company exports its products to more than 20 countries," the brokerage said. Venus Pipes is in process of increasing capacity by 2.8 times to 33.6 kilo tonnes per annum (ktpa). The company is looking to scale up domestic customers and exports, coinciding with meaningful tailwinds for demand. This would be driven by government spending under PLI scheme, Share India Securities  said. The brokerage has a ‘Buy’ rating on the stock with a target price of Rs 850. Shares of Venus Pipes and Tubes got listed on bourses in May 2022, when the company raised a little more than Rs 165 crore via its initial stake sale by selling its shares for Rs 326 apiece. The counter was trading at Rs 730 on Wednesday. From the issue price, the shares of the company have delivered a return of 125 per cent return to investors, making it one of the best performing IPOs of 2022. The counter hit a 52-week high of Rs 775 in November 2022. The imposition of five-year anti-dumping on stainless steel seamless tubes and pipes from China up to 2027 will increase the cost of hollow pipe procured from China, but Venus has enough stock in place to meet 2‐3 months of orders, said Centrum Broking.

Costlier imports may lead to increase in prices of stainless steel seamless pipes prices by Rs 20 per kg, it said. The recent announcements‐ firstly roll back of 15 per cent export duty and now imposing import duty sets a very positive outlook for the stainless steel pipe industry, Centrum Broking said.

"Venus pipes, with 3 times capacity expansion by Q1FY24‐end, is equipped to reap benefits from opportunities like import substitution, higher exports and huge capex upswing in demand," it said.

Centrum factors in higher realisation and benefit of import duty in margins and revised its target price to Rs 940 from Rs 848 earlier, suggesting a upside potential of 30 per cent from the current prices. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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