The stock recorded gains in six of the previous nine months, with October posting the largest gain of 27%, followed by July’s 26.7%. Zooming out, over the last three years, the stock has risen from ₹23 apiece to the current market price of ₹139.75, providing shareholders with a massive return of 507%.
Hi-Tech Pipes, incorporated in 1985, is a manufacturer of Electric Resistance Welded (ERW) steel tubes and pipes, square hollow sections, rectangular hollow sections, solar torque tubes, GI and GP pipes, cold-rolled coils and strips, galvanised plain and corrugated sheets, color-coated coils, and metal beam crash barriers, among others (currently, it has a total of 1,200+ SKUs).
The end usage of these products varies across several sectors like agriculture, automotive, infrastructure, architecture and construction, and industrials, among others.
Also Read: ₹1.20 to ₹28.25: Reliance ADAG penny stock gives 2250% return in four years
In a recent note, domestic brokerage firm Antique Stock Broking initiated coverage on the company shares with a ‘buy’ rating and set a target price of ₹200, citing growth opportunities in India’s steel tube market. This target price indicates a potential upside of 43% from the stock’s previous closing price.
The brokerage has outlined the following key factors, contributing to its bullish outlook on the company:
Steady domestic steel demand in the near and mid term
The company stands to benefit from the expected growth in India’s structural steel tube market. Currently, India’s iron and steel pipe and tube market share is at 5.5%, below the global average of 9%. However, it’s projected to increase to 8.3% by CY30, with the Indian structural steel tube market expected to grow at a CAGR of approximately 12% to nearly 17.3 mtpa by CY30.
ERW pipes, which constitute about 70% of the market, present a significant area of interest for Hi-Tech Pipes. Additionally, India’s per capita consumption of steel pipes and tubes is currently at 6 kg, much lower than the global average of 21 kg, indicating substantial growth potential.
Also Read: Steel industry grapples with price pressures as global demand wanes
The commissioning of new blast furnaces and HRC mills in the next few years will ensure a steady supply of HR coils, which is favorable for HRC-based steel pipe makers like Hi-Tech Pipes, according to the brokerage.
Import substitution initiatives
The brokerage stated that the country has limited capacity for high-temperature-resistant pipes needed in drilling and oil exploration. These are often imported by India’s oil refineries. However, with the government’s emphasis on expanding refining capacity and promoting oil exploration to reduce the country’s crude oil import bill, as well as initiatives like Make in India, which focus on bolstering MSMEs, India is emerging as a manufacturing hub, it underscored.
Also Read: This industrial metal can electrify India’s growth. But where are the ores?
This shift, as per the brokerage, is driving the demand for locally manufactured and assembled products, presenting a significant opportunity for Indian steel pipe makers like Hi-Tech Pipes to capitalise on the growing market demand.
New opportunities in solar energy
The brokerage pointed out that the company stands to benefit from the rising demand for torque tubes used in solar tracking systems for large-scale solar power projects.
It said that sun tracking technology is increasingly preferred in these projects as it maximise land utilisation and boosts electricity generation by 15%–25% compared to fixed-mounted PV systems. Companies like Arctech, a major solar tracking solutions provider, have commissioned significant solar tracker installations in India, with Arctech holding a dominant market share.
Other key players include NEXTracker from the US and Mahindra Susten from India. These tracker companies supply the entire tracker assembly to EPC contractors, with fabrication and manufacturing outsourced to empaneled vendors.
Also Read: CLSA cautious on steel companies; downgrades Tata Steel, JSW Steel
The demand for torque tubes is substantial, with approximately 40–45 tons of steel needed per MW installation of solar power.
The brokerage emphasises the company’s collaborations with leading tracker OEMs in India, as well as the establishment of dedicated production lines at its Sanand facility. These torque tubes are expected to find ready market demand in nearby solar projects in states like Gujarat and Rajasthan.
This strategic move is poised to enhance Hi-Tech Pipes’ financial performance, as torque tubes are high-margin products. The working capital for the company would also not be impacted as OEMs supply the raw material, a special grade of steel, directly to the fabricators, it noted.
Outlook
Antique Stock Broking notes the company’s structured changes, aiming to elevate its capacity to 1 mtpa by FY26. It emphasises that the revival of demand, coupled with infrastructure spending and the Make in India initiative, along with import substitution requirements, will further drive domestic sales.
Also Read: Over 15000% returns in 4 years! This multibagger stock turned ₹1 lakh into ₹1.5 crore
Regarding the company’s new plant in Sanand, Gujarat, the brokerage anticipates it to effectively address the demand for torque tubes stemming from ongoing and upcoming solar power projects in Rajasthan, Gujarat, and the export market.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!
Published: 01 Apr 2024, 12:32 PM IST
