Recommendations From Steel Tubes & Pipes Sector

Low Priced Scrip is a hidden gem, today's underdog, a stock with future potential that is expected to fetch returns within 1 year. This is a stock picked carefully based on a fundamental analysis of the company.

HERE IS WHY

Consistently improving its financial performance

Concentrating on value added products

Having a strong order book

Man Industries is a leading manufacturer and exporter of large diameter carbon steel line pipes for various high pressure transmission applications for gas, crude oil, petrochemical products and potable water. The company has been consistently improving its performance and hope to consolidate its position further in the large diameter pipe segment. The global environment continues to remain challenging. However, there is a reasonable visibility for growth in regard to oil and gas transmission even as infrastructure projects are concerned due to persistent fall in oil prices forcing companies to reduce transportation costs and become more competitive.

Demand from conventional segments such as oil transportation, water supply, sewerage, agriculture and construction, there is now growing acceptance of HSAW pipes for high pressure applications (in onshore installations). Recently, the company has commenced the first phase of commercial production at its Pithampur plant in Madhya Pradesh. The company has recently upgraded the helically submerged arc welded (HSAW) pipe manufacturing facility at Pithampur to manufacture 135 inch diameter pipes to cater to water transport segment. Going forward, the company expects additional revenue of Rs 500 crore on basis at full capacity utilisation level.

The company’s outstanding order book is around Rs 1,200 crore which will complete between six and nine months as well as its bid position worldwide approximately is roughly Rs 9,000-10,000 crore which is under process and likely to complete in few months. MIL has a strong presence in exports market in the Middle East countries. MIL also exports to other regions like USA, Europe, Africa and South East Asia.

In Q2FY16, the company reported net profit Rs 20.29 crore, clocking over five-fold jump Y-o-Y due to high other income, and 14.56 per cent Q-o-Q growth.  Other income reported Rs 20.16 crore as against Rs 1.22 crore for the same quarter in the previous year. The operating income grew by 16.2 per cent at Rs 320.92 crore. Operating profit grew by 67.73 per cent of Rs 36.13 crore along with operating margin expanded by 346 bps at 11.25 per cent. EBITDA has improved mostly because of the high value added products had introduced by the company and most of the orders right now having a value added products.  In H1FY16, the company’s net profit jumped by six fold to Rs 38 crore and revenue grew by 43.2 per cent at Rs 726.22 crore. Second half of the year is traditionally much better than the first half. The company expects 20-25 per cent topline growth and 40-50 per cent bottomline growth for the full year. On capex front, the company does not have high capex and the requirements like plant up-gradation are done through internal resources.

On valuation front, the stock price is trading at around five times of price to earnings of Rs 14.8 per share on TTM basis. We recommend buying the scrip with expectation of 30-35 per cent from the current market price in the next one year. So it is clear BUY from us.