I reckon numbers are very soft in this qtr.
Guidance is intact.
But what’s the fundraise for, they were easily able to service the debt and CFO is hesitant in answering the reasons for fundraise.
I reckon if this qtr is soft for hariom , it may be horrible for other players.
But next few quarters don’t look good from existing shareholders perspective , due to dilution.
I noticed one thing from the video. The CFO in spite of not answering the reason for fund raising directly, he kept implying that the present and future CAPEX to come can be easily managed with present funds and accruals. I feel this fund raising could be for a new big project rather than addl fund requirements or wc
Curious to know on why these individual are not exercising their warrant. Considering current share price which is double of exercise and 25% of exercise price is already paid. Why would someone do this?
Only explanation in my mind is the investor doesn’t have the funds to invest or they simply forgot. Malabar recently converted their warrants into equity shares in Q1 of this FY.
Company has recently shared interesting data on state wise expansion:
Few Observations
Dealer Network Expansion
As per Annual Report 2024, this has come on the back of good dealer network expansion:
Based on this we can analyze dealer productivity:
The Q2FY25 result is extremely weak. The company promised sales CAGR of 50% over FY24-26 until Q4FY24 (mentioned in the result PPT). Interestingly, in their Q1FY25 PPT, they didnt mention any guidance. Now with a result disaster in Q2FY25, it shows what the management is upto.
While the results aren’t the best, the recent crash should prevent further downside. Hopefully H2 is better. It is still marginally better YoY. Nice to see that they have scheduled a con call so hope the right questions are asked. Overall I see this as flat results. The fund raise may add to existing pressure on price upwards though.
Hariom Pipe Results
Stable Set not as per Growth, but as per operation perspective
Rev Growth of 4% YoY n -9% QoQ
EBITDA Growth of 16% YoG n -7% QoQ
Margins up at 13.4% vs 11.7% YoY n 13.1% QoQ
PAT Growth of 7% YoY
OCF Strong at 53 cr vs -60.8 cr
Debt & WC Req🔻
CFO already pointed out about weak results & I feel market had already discounted it as fall more ATH is more than 30%
Good part is Strong OCF, which led to lower Debt & WC Req
With this Q about Fund Raise is a big suspense!!
Concall might give some boost or will clear many doubts
No Reco
Disc: Invested & will continue to hold
The result in the current quarter for all pipes companies will be subdued given the fall in steel prices, late budget and rainy season.
the steel prices have corrected by 30% to 40% from the highs leading to fall in realization of pipe making companies.
Hariom which is an integrated player makes pipe out of HR coil which has better realizations as compared to Patra Pipes so, the difference between Patra pipe & HR coil prices have now Shrinked down and now the difference is of 20% to 25% which is a good thing as the market gets more mature increased traction will be seen by HR coil Pipe manufactures as compared to Patra pipe Manufacturers due to better quality and strength.
This fall in price will lead to increased stocking leading to many pipe companies like Hi-tech pipes, JTL Industries and more posting record volume but the realizations will be more or less flattish.
this, is a short to mid term i expect that by Q3 or Q4 of this year we’ll also see reversal in steel prices and value growth along with volume growth for pipe companies.
Point to highlight:
Disclaimer: Invested in the company
Some highlights from Earnings Call Q2FY25
Volumes grew +11% YoY
EBITDA grew +18% YoY
WC down to 58 days in H1FY25
OCF for H2 was +50 crores and 35 crores of debt was paid down
Capital Raise
Distribution
Guidance
Promoter Bought stake on 29th Oct
Only bought 35k shares, but still shows commitment of Promoters on Biz even after weak Q2
Concall was also seems Bullish with Guidance Intact, QIP is just an enabling resolution, CFO issues solving, Operations stabilizing, focusing on Geographical Expansion & Deleveraging + Promoters Trust on future growth
Future prospects seems promising
35,000 shares amounts to 2.0 crores.
Promoters increased stake by +0.11%
It is said that insiders can sell stake for many reasons, but there is only one reason for buying.
H1FY25 revenue is 657 crores. During Q2FY25 earnings call, mgmt shared guidance to get to 1,600 crore revenue in FY25.
This implies guidance of 943 crores revenue in H2FY25.
Company has done 611 crores in H2FY24 and hence promoter buying from open market could mean that they have good confidence in achieving this 50%+ revenue growth in H2?
Company has uploaded the earnings call transcript today. Few notable points from there:
CFO is hinting towards margins to be closer to 13.5% in FY26 and hence EBITDA potential of 337 crores in FY26
(At the same time highlighting that “But our vision is much more better, much more bigger than that”)
So maybe 13.5% is a conservative guidance on margins for FY26?
We need to do some math on back calculating the implied dilution % in-built in this EPS of 40-43
a) No dilution scenario:
b) Dilution Scenario
If we apply an EPS of 41.5 (mid-point of dilution scenario), on 180 crores of PAT, this assumes total shares outstanding of 4.33 crores which means ~40% dilution on share count basis
Current Market Cap is ~1800 crores and 40% dilution means a fund raise of 1800*0.4 = 720 crores. So, basically the 40-43 EPS for dilution scenario assumes (1) QIP happens at CMP and (2) the entire 700 cr is raised and (3) No interest cost savings by debt paydown from QIP money (4) No incremental revenue or profits from incremental fund raise.
What do others think of this calculation? Please point out any mistakes that you see.
Can you please help me with this calculation.
If 3.1 cr shares become 4.33 cr shares how is it 40 percent dilution
Now that all pipe companies have reported Q2 numbers, here is compilation of valuation comparison based on EV/EBITDA.
Note: This is based on trailing reported numbers and doesn’t take into account future growth.
If we consider CFO’s guidance of 330+ crore EBITDA in FY26, then EV/EBITDA would look like 6.9x for Hariom
What about equity dilution?
@SwapanBansal , thanks for your detailed analysis earlier. You have been quite passionate and very much consistent in providing the business level update for this scrip. Also thank everyone else for adding the details.
I have a few points that i want to mention here.
