Buy Man Industries Ltd for the Target Rs. 480 by Choice Institutional Equities
Business Overview:
Man Industries (MAN) is a leading manufacturer of large diameter pipes, having over three decades of experience. It operates in LSAW, HSAW an,d ERW pipes, along with coating products. MAN has a global customer reach, exporting to over 30 nations. At present, exports account for ~75% to 80% of its consolidated revenue and 80% of the order book, which stands at INR 47Bn. We forecast Revenue/EBITDA CAGR of 22%/28% over FY25–28E, driven by its stated order book and a bid pipeline of INR 150 Bn and other capacity addition projects, which are underway.
Does MAN’s investment thesis hinge on its existing business? Is it a compelling investment idea?
Apart from the core in LSAW, HSAW and ERW pipes assets, which are MAN’s mainstay now, there are other compelling reasons which make us constructive on MAN: 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 5.5Bn), 2) Cash inflow from Navi Mumbai land parcel monetisation of ~INR 7.5Bn (~25% of current market capitalisation) spread over the next 5-6 years. Therefore, we forecast EBITDA margin expansion of 144bps over FY25–28E driven by increasing share of value-added products and operating leverage benefits of higher capacity utilisation at the existing plants.
Are capacity expansions on track to support growth and cater to higher-margin export orders?
Man Industries operates two advanced manufacturing facilities in Anjar (Gujarat) and Pithampur (Madhya Pradesh), with a combined capacity of over 1.18MnTPA. 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 11.1Bn, both plants are expected to be operational by Q3/Q4 of FY26E. 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 favourable tax regimes, expanding MAN global footprint. Meanwhile, the Jammu plant leverages state incentives and enters a high-margin business (20–25% EBITDA), catering to diverse industries, such as defence, power, marine and food processing.
Valuation:
We arrive at a 1-year forward TP of INR 480/share 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 assumptions. This valuation framework gives us the flexibility to assign a commensurate valuation multiple on the basis of an objective assessment of the quantifiable forecast financial performance of the company. We do a sanity check of our EV/CE TP on implied EV/EBITDA, P/BV and P/E multiples. On our TP of INR 480 FY27E, implied EVEBITDA/PB/PE multiples are 7.9x/1.4x/11.8x.
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 higher compliance costs.
Revenue to expand by 22% CAGR over FY25–FY28E
EBITDA anticipated to by 28% CAGR over FY25–FY28E
PAT to grow by 37% CAGR over FY25–FY28E
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SEBI Registration no.: INZ 000160131
