The Steel Pipe Industry Story is ripe and lot of tailwind going in for the sector. I have done a detailed analysis and am happy to share the details for the feedback of this group.
A. Top three India focussed Pipeline Manufactures : Ratnamani, Maharashtra, Goodluck – Last Eight Quarters Cumulative Results
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Revenue and NP almost doubled in last eight Quarters – indicates a strong momentum on the numbers.
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Discounted - Man, Apollo Tube, Welspun and Jindal Saw due to their Overseas exposure , balance sheet or low Margins
B. Valuation Comparison
- Goodluck Expansion is a brownfield one so will discount that
- Maharashtra Seamless is capacity acquired through NCLAT acquisition + Capex so not reflective of actual cost
- The actual replacement cost can be around 3Cr per 1000 MT looking at Ratnamani
- Ratnamani is a good company but expensive. Goodluck is available cheap but the balance sheet of MSL is better and Orderbook Scenario of MSL is far robust
- MSL looks the best bet based on the above parameters
C. Further Upside in MSL - Its Production is still at 55% @ 104 T as per Q3-19 with their current capacity so a long runway available for growth
D. MSL Immediate Future Order Book
- Orderbook has almost doubled in 7 qtrs. like the Revenue
- Q3 Orderbook at 1300 Cr and the story is evolving and Markets should reward sooner than later
- Assuming 95% Revenue Contribution from Pipes the Blended Realization are
- This shows a very decent growth in Realization per ton and the Order Book further provides some cushion
Strong Order Book , Current PE of 8.5 and EV / Ton of 3.4 Cr at Near Replacement Cost minimizes the risk in favor of Investor
Disclaimer : I am already invested and views my be biased. Pls do your own research before any action