Buy Man Industries Ltd For Target Rs. 480 By Choice Broking Ltd
Business Overview: Man Industries (MAN) is a leading manufacturer of large diameter pipes with over three decades of experience in the pipe industry. The company operates in LSAW, HSAW an ERW pipes, along with coating products. The company has a global customer reach, exporting to over 30 nations. Exports currently account for approximately 75 to 80% of the total consolidated revenue and 80% of the current order book, which stands at INR 35Bn.
What makes MAN a strong investment opportunity in Basic Materials Sector?
We are constructive on MAN due to the following reasons: 1) Capacity addition at Jammu 20 KT Stainless Steel pipes facility at an outlay of INR 5-6Bn) and at Saudi 300 KT H-Saw Pipes facility at an outlay of INR 6Bn), 2) Revenue/EBITDA CAGR of 19%/25% over FY 25-28E driven by order book of INR 35Bn and a bid pipeline of INR 150Bn, 3) Cash inflow from Navi Mumbai land parcel monetization of ~INR 7.5Bn (~25% of current Market Capitalization) spread over the next 5-6 years, 4) EBITDA margin expansion of 123bps over FY25-28E driven by increasing share of value added products and operating leverage benefits of higher capacity utilization at the current plants. Additionally, Robust EV to CE (Enterprise Value to Capital Employed) based valuation framework which allows us a rational basis to assign a valuation multiple that captures improving fundamentals
Are capacity expansions on track to support growth and cater to higher-margin export orders?
MAN operates two advanced manufacturing facilities in Anjar (Gujarat) and Pithampur (Madhya Pradesh), with a combined capacity of over 1.18Mn TPA. The company is now setting up two new greenfield plants: a 20KTPA stainless steel seamless pipe facility in Jammu & Kashmir and a 300KTPA H-SAW pipe facility in Saudi Arabia. With a total capex of INR 11.64Bn, both plants are expected to be operational by Q3FY26. At full capacity, the Saudi plant is projected to generate INR 20Bn in annual revenue, while the Jammu plant is expected to contribute INR 10–12Bn. The Saudi facility targets regional demand in water and oil & gas sectors, benefiting from higher margins (12–14%) and favorable tax regimes, expanding MAN’s global footprint. Meanwhile, the Jammu plant leverages state incentives and enters a high-margin business (20–25% EBITDA), catering to diverse industries such as defense, power, marine, and food processing.
Valuation: We arrive at a 1 year forward TP of INR 480/share (INR 450/sh earlier) for MAN. We now value MAN on our EV/CE framework where we assign an EV/CE multiple of 1.35/ 1.35x for FY27E/28E, which we believe is conservative given strong ROCE even under reasonable operational assumptions. This valuation framework gives us the flexibility to assign a commensurate valuation multiple basis an objective assessment of the quantifiable forecast financial performance of the company. We do a sanity check of our EV/CE TP using implied EV/EBITDA, P/BV, and P/E multiples On our TP of INR 480 FY28E implied EVEBITDA/PB/PE multiples are 5.9x/1.2x/10.1x. Slow down in conversion of bid pipeline into order book and slow ramp up of upcoming capacities are risks to our BUY rating.
Key Risks:
* Order Book: High dependence on a few large orders makes the order book vulnerable to delays or cancellations.
* Capex – Large capex burden poses a risk if new plants fail to ramp up as planned.
* Regulatory Risk – Regulatory changes may disrupt operations or lead to compliance cost
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