By Hi-Tech Pipes has been a remarkable success story in the stock market, with its share price experiencing an extraordinary rise over the past few years. The stock, which was trading around ₹8 per share in March 2020, has surged to ₹153, representing a staggering 1800% increase. This impressive growth has turned the small-cap stock into a multibagger, attracting the attention of both retail and institutional investors.
Strong fundamentals and strategic growth initiatives have fueled the company’s rise. Hi-Tech Pipes is one of India’s leading steel processing companies, with more than three decades of experience in the industry.
The company has a diverse product portfolio, including steel pipes, hollow sections, tubes, cold rolled coils, solar mounting structures, and a variety of other galvanized products. Its operations are supported by six state-of-the-art integrated manufacturing facilities located across India, with an installed capacity of 0.75 million tonnes per annum (MTPA) as of FY24. The company is on track to increase this capacity to 1 MTPA by FY25.
Despite the stock’s significant appreciation, analysts at SBI Securities believe there is still room for further growth. The brokerage has set a target price of ₹190 per share, implying a potential upside of around 25% from the current levels. SBI Securities has highlighted several key factors that could drive Hi-Tech Pipes’ stock higher in the near term.
One of the main growth drivers is the company’s ongoing capacity expansion. Hi-Tech Pipes has been steadily increasing its production capacity, from 0.58 MTPA in FY23 to 0.75 MTPA in FY24, with plans to reach 1 MTPA in FY25. This expansion is expected to enhance the company’s ability to meet growing demand for structural steel tubes, which are widely used in infrastructure projects and industrial applications.
Another factor contributing to the bullish outlook is the company’s shift from generic products to value-added offerings. Hi-Tech Pipes has been expanding its product portfolio with the introduction of new products such as solar torque tubes and color-coated roofing sheets. This diversification is expected to boost the company’s revenue and profitability, as value-added products typically command higher margins.
The broader industry environment also appears favorable for Hi-Tech Pipes. The Indian government’s continued focus on infrastructure development, including the Jal Jeevan Mission, which has been allocated ₹70,163 crore in the FY24-25 budget, is expected to drive demand for steel products. Additionally, the company’s strong marketing network, with a presence in over 20 states and more than 450 dealers and distributors, positions it well to capitalize on this growing demand.
SBI Securities has also pointed to the company’s strong financial performance as a reason for its positive outlook. The brokerage expects Hi-Tech Pipes to deliver robust earnings growth over the next few years.
Specifically, it forecasts that the company’s revenue, EBITDA, and net profit will grow at compound annual growth rates (CAGR) of 24.9%, 41.9%, and 78.9%, respectively, between FY24 and FY26. This growth is expected to be driven by both higher volumes and improved margins, as the company benefits from economies of scale and a more diversified product mix.
At the current market price of ₹153, Hi-Tech Pipes is trading at a price-to-earnings (P/E) multiple of 29.6x for FY25 and 18.8x for FY26, based on expected earnings per share (EPS) of ₹5.0 and ₹7.9, respectively. SBI Securities has valued the business at a 24x P/E multiple based on its FY26 earnings, arriving at a target price of ₹190. Given this valuation and the expected earnings growth, the brokerage has assigned a ‘BUY’ rating to the stock.
The ongoing rally in Hi-Tech Pipes shares is a testament to the company’s strong fundamentals and growth prospects. While the stock has already delivered substantial returns to its investors, the potential for further gains remains. For investors looking to capitalize on the structural steel industry’s growth and Hi-Tech Pipes’ strategic initiatives, the stock could represent an attractive opportunity.
