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During Q2FY24, VENUSPIP reported highest ever EBITDA of Rs347mn (vs CentrumE: Rs312mn) up 26% QoQ. Despite stainless steel pipes realisation decline by 5-10% QoQ, ramp up of piercing facility aided in higher cost saving. Further, exports sales jumped significantly to 15% of total (vs ~5% of sales mix in FY23) supporting growth of 7% QoQ in total sales. Currently, it has total order book of Rs2.1bn which is equally between among welded and seamless pipes and 25% share is export orders. As a result, operating margins reported improved by 277bps QoQ to 18.1%. We expect faster ramp up in volumes and hence increase sales volume estimate by 3-3.5% for FY24 & FY25 respectively and also lowered realisation by ~9% in FY24 and 4% in FY25. We revise our earnings estimate downwards by 14% and 4% for FY24 and FY25 respectively. Also, we roll over our valuation to 25x PE to mid-FY26E EPS of 74/sh and arrive at target price of Rs1844/sh (Earlier: Rs1809/sh). Reiterate BUY rating on the stock. Higher exports and ramp up lead to Revenue growth and margin expansion

Higher exports and ramp up lead to Revenue growth and margin expansion

Venus Pipe reported revenue of Rs11914mn, up 6.5% QoQ/ 51% YoY. The sequential increase is largely on account of higher volume and higher exports. The share of exports improved significantly to 15% (vs ~5% in FY23) of sales mix. The seamless pipes sales share stood at 57% (vs 62% in Q1) with revenue of Rs1083mn down 3% QoQ/ up 153% YoY. The blended realisation declined by ~7% QoQ. The newly commissioned capacities is ramping up faster with 80% in seamless pipes, 75% in mother hollow pipes and welded at 55%. EBITDA stood at Rs357mn up 26% QoQ and margin expanded by 277bps QoQ to 18.1%.

3x capacity expansion completed; further capacity addition in progress

Currently, total capacity stands at 33600tpa which includes 24000tpa capacity of welded pipes and 9600tpa capacity of seamless pipes. Further, also commissioned piercing mill to manufacture hollow pipe of 9600tpa which will help to 100% replace imports from china to manufacture seamless pipes. During installation of piercing mill, a few modifications were made to enhance efficiency as well as productivity. Moreover, the LSAW pipe earlier proposed to manufacture upto 48 inch diameter has been increased to 56 inch diameter. Venus pipe is in progress to add further 4800tpa capacity of seamless pipes which will be installed in next 6 months. Total capex will be ~Rs400- 450mn

Best play on SS growth story; Reiterate BUY

Venus Pipes is ramping up volumes faster and gaining market share in key export markets where margins are higher. In domestic market, VENUSPIP is gaining market share from unorganised sector as well as import substitution. The demand has remained robust in India and unaffected in Europe despite global headwinds. In future, with increasing acceptance will be able to have higher sales mix from oil and gas sector. We have high conviction on company and expect Revenue/EBITDA/PAT to grow by 31%/49%/53% CAGR over FY23-26E along with margin expansion from 12.5% in FY23 to 18.5% in FY26. We recommend BUY on Venus Pipes with target price of Rs1844.

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