Brokerage firm Sharekhan is seeing 25 per cent upside in Hi-Tech Pipes shares after 61 per cent rally in YTD for Hi-Tech Pipes share price. The company in the discussion is Hi-Tech Pipes a constituent of BSE SmallCap index. Sharekhan said that it has increased the valuation multiple considering the companys strong net earnings growth outlook over FY2024-FY2027E.

Hitech Pipes Limited (Hitech) is expected to benefit from expected bottoming out of steel prices (average NCDEX steel futures corrected by ~6% in Q2FY2025 till date versus Q1FY2025) which has nullified price spread (Rs. 3000-4000 per tonne during Q1FY2025) with secondary pipe manufacturers. Consequently secondary pipe manufacturers remain under stress whilethe company is expected to reap strong volume growth tailwinds in H2FY2025 leading to achievement of 30% y-o-y volume growth guidance for FY2025 the brokerage said.

Considering strong long-term demand outlook it is on the path to expand its capacity to 2MTPA from 1 MTPA in FY2025E in the next 3-4 years for which it has received its board’s approval to raise up to Rs. 600 crore via issue of equity shares. Incremental capacities would involve new product segments and geographies providing a fillip to sustainable healthy volume growth and improvement in operational profitability (led by increased value added product share). It also has an early mover advantage in catering to solar projects through its recently commissioned the Sanand facility as it has started with being a preferred vendor for upcoming world’s largest renewable energy park at Khavda Gujarat the brokerage said.

Meanwhile Hi-Tech Pipes during the June 2024 quarter posted an over two-fold growth in consolidated net profit at Rs 18.05 crore. It had reported a net profit of Rs 8.03 crore in the April-June period of the preceding 2023-24 financial year.

(Disclaimer: The information provided in this article is for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.)