SBI Securities Sets Target of Rs 138 On Hi-Tech Pipes With 44% Upside Potential; Should You Buy?

SBI Securities recently came out with an update for Hi-Tech Pipes Ltd, maintaining their Buy rating after noticing the company's robust Q1 results, along with ongoing capacity expansion and increase in share value-added products VAPs. The company is projected to outperform other companies in the market, thus supporting the price increase.

The firm stated that the consolidated revenue for the last quarter of FY25 reached Rs 733.7 crores with EBITDA at Rs 34.9 crores, resulting in the firm making a profit after tax of Rs 17.6 crores. Compared with the same quarter the previous year, revenue jumped 7.7% while PAT increased by a whopping 55.8%, however, EBITDA saw a decline of 1.2%. Additionally, the sales volume reached 2.14 million tons marking an increase of 7.7% year-on-year owing to increased demand from the construction and infrastructure market.

SBI Securities observed that the company's Sikandrabad and Sanand Phase-2 units are almost completed with commissioning, with expected trial production commencement shortly. Upon commissioning, these facilities will increase the company's total manufacturing capacity from 0.75 million tonnes per annum (MTPA) to 1 MTPA. The brokerage anticipates further annual incremental capacity additions of 0.6 MTPA in FY26 and FY27, resulting in a volume CAGR of 23.9%.

The shift in the company's focus was also noted towards the strategic high margin products. Hi-Tech Pipes is diversifying its solar product mix by adding color-coated roofing sheets and solar torque tubes, and the VAPs gross margin contribution is expected to grow from 36% in FY25 to 42% in FY26, thus enhancing margins. SBI Securities predicts EBITDA per tonne to grow to Rs 3,639 in FY26 and Rs 3,852 in FY27 from Rs 3,297 in FY25.

The company is also gearing up for the subsequent growth phase. There is new capex planned for FY27 which includes further work at the Sri City project in Chennai and Sanand Phase-2. The goal set by management is to increase the total capacity to 2 MTPA by FY29, which would be an increase of more than double the current capacity.

Currently, the share is priced at a P/E ratio of 18.1x (FY26) and 12.5x (FY27) based on an anticipated EPS of Rs 5.3 and Rs 7.6 respectively. SBI Securities valued the company at 18x FY27 EPS to arrive at a target price of Rs 138.

The stock is trading just above its 52-week low of Rs 81.53 while still significantly below its 52-week high of Rs 210.75 in September 2024. After an eight-month decline, the stock has seen a modest increase of 5.6% in May, followed by nearly a 2% gain in June, showing signs of recovery.

To conclude, SBI Securities believes Hi-Tech Pipes is a long-term growth opportunity, supported by expanding capacity, increasing VAP share, and attractive valuations. The brokerage has an upbeat stance on the stock, expecting a 44.2% return from current levels.