Broking firm DAM Capital said that Venus Pipes is building a niche for itself in high-margin stainless steel pipes space, and is also an emerging contender in the stainless steel pipe sector with hunger for growth.
Shares of Venus Pipes & Tubes Ltd jumped over 7%, as Friday’s trade kicked off. Broking firm DAM Capital initiated coverage on the stock, with a ‘Buy’ rating and a target price of ₹1,810 per share. The analysts at the brokerage project potential gains of up to 35% on the counter going ahead.
The stock was trading 7.40% higher at ₹1,454.80 apiece on the NSE. On a yearly basis, Venus Pipes shares have zoomed 102% and gained 100% so far this year.
According to DAM Capital, Venus Pipes is building a niche for itself in high-margin stainless steel pipes space. It is also an emerging contender in the stainless steel pipe sector with hunger for growth, it noted.
The brokerage highlighted that Venus Pipes should move up the value chain and its healthy balance sheet will likely drive strong 60% earnings CAGR ahead.
DAM Capital further said that a large capacity expansion is behind, and sweating of assets will commence.
Ace investor Ashish Kacholia had added the counter to his portfolio in the June quarter, buying 400,000 shares, or 1.97% stake of the company at an average price of ₹750. Kacholia did not have any holding in Venus Pipes at the end of the December 2022 quarter according to the shareholding pattern available on exchanges.
Venus Pipes Q2 results
Benefits of the capacity expansion and backward integration showed in the company’s second-quarter results, with Venus Pipes reporting a 94% jump in its profit after tax (PAT) at ₹20.2 crore.
Backward integration is when a company purchases another company that supplies the products or services required for its production.
Venus Pipes said that its total sales in the second quarter this fiscal rose 51.3% to ₹191.3 crore. Of this, sales of stainless steel seamless pipes witnessed a growth of 153% on-year to ₹108.3 crore, while those of welded pipes grew 1.4% to ₹77.5 crore.
In a stock exchange filing, Venus Pipes said that volume for seamless pipes witnessed a growth of more than 100% and welded pipes witnessed a growth in high teens for the September quarter, compared to the same period last year.
The company also posted best-ever profit margin at 18.1% in the quarter. It said that it reported a positive net cashflow from operations of ₹6.5 crore for the first half of this fiscal.
Venus Pipes is engaged in the business of manufacturing and selling stainless steel pipes and tubes. The company operates out of its manufacturing facility at Dhaneti in Kutch, Gujarat. The pipe maker counts companies such as Amul, Asian Paints, ITC Limited, Larsen and Toubro, Torrent Power and others among its clientele.