This Ashish Kacholia stock plunged 16% in a day! What Nuvama says on company prospects

Seasoned investor Ashish Kacholia's latest stock bet Venus Pipes & Tubes Ltd, which fell about 16 per cent in the previous session, recovered some lost ground, as the Tuesday's trade kicked off. Nuvama Institutional Equities, which recently met with company Chairman and Managing Director Arun Kothari and Chief Financial Officer (CFO) Kunal Babna said that the company is on track for further capacity addition beyond 33.6ktpa from internal accruals, which may drive growth beyond FY26.

Among key highlights of the interactions, the management of Venus Pipes told Nuvama said that the capacity utilisation may rise on the back of government’s ADD on imports and push for BIS-certified products, adding that new sales heads for domestic andEuropean markets to provide a growth push. Besides, Nuvama said the focus is on direct sales, backward integration and larger-diameter pipes.

"We believe aggressive capacity addition and Venus’s thrust on value addition shall translate to a PAT CAGR of 54 per cent over FY23–26E. Reiterate ‘BUY’ with target of Rs 1,686.

The stock rose 0.72 per cent to Rs 1,270.05 on BSE. The scrip fell 15.72 on Monday. Kacholia entered Venus Pipes & Tubes in the June quarter, buying 4,00,000 shares, or 1.97 per cent stake.

Saying the recent stock fall is "a clear buying opportunity", Nuvama said Venus is well-placed to drive solid earnings growth with a PAT CAGR of 54 per cent over FY23–26 led by tripling of capacity driving revenue CAGR at 32 per cent and EBitda margin expansion by 6 00 bps from 12.5 per cent in FY23 to 18.5 per cent by FY26E. A strong balance sheet

despite heavy capex and FCF (post capex) beginning FY25E are key positives for the stock," it said.

Venus has an order book of Rs 200 crore from sectors such as pharmaceuticals, chemcials, food processing and railways.

"Although there are some issues on the global side due to a brief slowdown, domestic demand continues to be promising. But with the global demand slowdown waning and bright domestic demand, Venus has decided to further expand its seamless capacity by 4,800 MT year," it said.

With backward integration in place and capacity for higher-diameter welded pipes, the company should be able to improve margins, Nuvama said.

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