Target: ₹1,700

CMP: ₹1,302.25

Over the last five years, Venus Pipes and Tubes enhanced its cumulative capacity by 4.1x to 38,400 tonnes. Under the next leg of expansion, it is enhancing its presence in high-grade stainless steel/titanium-welded tubes, fittings and seamless pipes/tubes, thus taking the cumulative capacity to 46,800 tonnes.

The company’s increased installed capacity resulted in market-share gain (from 3.6 per cent to 6.2 per cent over FY20-24) and helped outpace peers, thanks to its about 28 per cent volume CAGR over FY20-24.

Further, strengthening seamless pipes’ backward integration by producing mother hollow pipes (~14,400 tonnes) de-risked merchant procurement and aided profitability; the EBITDA margin rose about 570bps over FY23-24. We expect 24/26/28 per cent revenue/EBITDA/APAT CAGRs over FY24-27 on the company’s expanded capacity, enhanced product portfolio, improved backward integration, increased domestic market share, higher exports and imposition of ADD/CVD on RM imports.

The company would continue its volume momentum; considering its focus on capacity expansion, backward integration and robust global presence, we retain our Buy rating with a TP of ₹1,700 (weighted average method).

Risks: Slowdown in domestic demand, exports; delay in capex timeline.