Recommendation From Construction & Engineering Sectors

This section gives a recommendation of a stock having stock margin padding price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon

Man Industries (India) 

POSITIVE GROWTH IN THE PIPELINE 

HERE IS WHY
Robust order book
Growth prospects in the pipe industry
Very positive quarterly financials 

Man Industries (India) Limited is a chief manufacturer and exporter of large diameter carbon steel line pipes for several high pressure transmission applications for gas, crude oil, petrochemical products and potable water. It also offers multiple options of coating system such as PE, FBE internal epoxy and coal tar enamel coating in order to protect the line pipes from corrosion. Furthermore, the company also owns modern facilities for the manufacture of aluminum extrusion products. 

Incorporated on May 19, 1988, it is a flagship company of the Man group. It has its registered office in Maharashtra. The company has two manufacturing facilities - one located in Anjar in Kutch district of Gujarat, while the other is situated in Pithampur, Madhya Pradesh, spanning an area of 150 acres. Its manufacturing facilities have a combined capacity of one million tonnes per annum (MTPA) for LSAW and HSAW pipes. Furthermore, it has 6.5 million sq. ft. mtr capacity for internal and external PE/FBE coating and an 125,000 m.cu. concrete wet coating (CWC) plant catering to the requirements of the onshore and offshore oil and gas pipelines. The company has also installed a 7 MW windmill plant in Gujarat. Moreover, the company caters to international clients in the oil and gas, petrochemicals, water, dredging and fertiliser industry. 

As on March 31, 2018, the company had an order book of Rs 1,500 crore to be executed by March 2019. Its Pithampur plant is a major growth driver. The company is consistently receiving orders from MP and the neighbouring states. Despite being identified as one of the least leveraged companies in the pipe sector, Man Industries retains its focus on deleveraging its balance sheet. 

Some of the peer companies operating in this industry include Rites, KNR Construction, Maharashtra Seamless Ltd., Techno Electric and Engineering Company Limited and Patel Engineering Ltd. A comparison with the results of its peer companies projects it as one having a better dividend yield (1.78 per cent). Man Industries reports a lower P/E multiple of 6x in comparison to its peers, except Patel Engineering which has a P/E multiple of 3.15x. 

An evaluation of the quarterly financials depicts a surge in revenue of 29.28 per cent to Rs 632.56 crore in Q1FY19 from Rs 489.29 crore in Q4FY18. The EBITDA posted an increase of 7.64 per cent to Rs 66.58 crore in Q1FY19 from Rs 61.85 crore in Q4FY18. The net profit fell to Rs 25.08 crore in Q1FY19 from Rs 26.43 crore in Q4FY18, thereby dropping 5.10 per cent.

Based on an analysis of the annual trends, the company’s total income surged 43.66 per cent to Rs 1,630.03 crore in FY18 versus Rs 1,134.63 crore in FY17. The EBITDA rose to Rs 176.76 crore in FY18 from Rs 119.76 crore in FY17, registering an increase of 47.59 per cent. The net profit increased to Rs 62.86 crore in FY18 in comparison to Rs 32.65 crore in FY17. 

Based on the sound financials, robust order book and good growth prospects of the pipe industry, we recommend our reader-investors to BUY the stock