Hi-Tech Pipes Surges After Midas Research Issues "ACCUMULATE" For 51% Upside

Shares of Hi-Tech Pipes Ltd. surged over 5% on Friday, driven by strong buying interest in the metal sector. The stock opened at Rs 197.40, compared to the previous close of Rs 196.13, and climbed to an intraday high of Rs 206.50, marking a 5.29% increase. By 2 PM, the stock traded 4.60% higher at Rs 205 per share, with a volume of 19.89 lakh shares traded. Hi-Tech Pipes is now just 1.50% below its 52-week high of Rs 207.80, reflecting its upward momentum.

Midas Research, in a recent report, shared a highly optimistic view on Hi-Tech Pipes' future growth. According to the research firm, the company is poised for substantial financial expansion, with expected revenue growth at a compound annual growth rate (CAGR) of 27.9% from FY24 to FY28. This growth is driven by increasing demand in end-use sectors and projected volume growth of 27.3%.

Midas Research also forecasts a significant rise in Hi-Tech's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), projecting an EBITDA per ton of Rs 4,318 by FY28, representing a CAGR of 10.1%. The increase is attributed to the rising share of value-added products (VAP), which could reach 45-50% of total sales. By FY28, Hi-Tech is expected to report an EBITDA of Rs 443 crore.

The research note highlights an impressive EPS (Earnings Per Share) growth at a CAGR of 45.1%, from Rs 2.9 in FY24 to Rs 13.0 in FY28. However, this is slightly lower than the expected CAGR of 51.1% in PAT (Profit After Tax) due to rising interest costs linked to capacity expansion and equity dilution from warrant issuances.

Regarding stock valuation, Midas Research noted that Hi-Tech Pipes is currently trading at 12 times FY27 estimated EV/EBITDA at its current market price (CMP) of Rs 196. The firm assigns a target multiple of 15x EV/EBITDA, based on FY27 and FY28 estimates, resulting in a three-year price target (TP) of Rs 296. This implies a potential upside of 51%, prompting Midas Research to recommend an "ACCUMULATE" rating on Hi-Tech Pipes.

Hi-Tech Pipes has been gaining momentum, partly due to significant order wins. Last month, the company secured orders worth Rs 105 crore for supplying electric resistance welded (ERW) steel pipes to customers in the renewable energy sector. These orders will be fulfilled from its new manufacturing facility in Sanand, Gujarat, over the next three months. The ERW steel pipes are intended for use in renewable energy projects such as wind farms and solar installations, underscoring Hi-Tech's growing presence in green energy sectors.

In addition to strong order inflow, Hi-Tech Pipes posted remarkable financial results for the quarter ending June 2024.

Hi-Tech Pipes Ltd. is a leading player in the Indian steel industry, known for producing and distributing a wide range of steel products. The company has an extensive retail network of over 5,000 outlets and serves diverse sectors including infrastructure, construction, automotive, energy, and defense. With six state-of-the-art manufacturing facilities and a total capacity of 750,000 MTPA, Hi-Tech Pipes continues to strengthen its position in the steel market.