Steel pipes industry - big growth expected?

Investing Strategies
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636909253534220795_iea-jindalsaw-management-meet-15-04-2019.pdf (739.7 KB)

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ONGC to invest Rs.83,000 crores in 25 projects. This is going to be a big boost for the steel pipe industry.

So there are three triggers now - GAIL pipeline expansion (About Rs.100,000 crores), Jal Jeevan (About 335,000 crores) and ONGC expansion (Rs.80,000 crores).

This is a report from CRISIL about the steel pipe industry which says that the demand for steel pipes is expected to increase at 7-8% CAGR. It mentions that profitability will increase. It is a 15 page report. Worth reading.

It is best to avoid steel pipe companies which are struggling with debt. Instead opt for those with a sound financial position. Donā€™t look for debt free companies because this is a capital intensive industry and it is common to avail working capital to finance orders.

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@manishak. APL Apollo is a decent buy even at present levels (corrected quite significantly from the top) but i agree that most of the run up in the stock has already happened. The alpha that one would have got by investing a few years back wont happen again (thatā€™s my view).

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Pankaj Tibrewal, Equity Portfolio Manager- Senior Vice President, Kotak Mutal Fund says, ā€œcompanies relating to pipes ā€“ both on the plastic and the ERW side ā€“ where a lot of work is happening and the industry has consolidated among a few players, may probably see a strong runway for growth in the coming quartersā€. His interview:

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A 69 page report by Ventura about the expected increase in demand for steel pipes in India due to GAILā€™s expansion.

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Profit margins of steel pipe manufacturers are likely to surge in the second half of the current financial year. This is because of a sharp decline in steel prices and a surge in orders, following the Centreā€™s increased focus on infrastructure development for the transportation of water, oil, and gas.
Read the news story here:

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With Gail announcing 45-50K investment in laying pipelines, it seems the stocks of steel pipe industry will start performing againā€¦ Man Industries/ JSW Saw, SriKalahasthi Pipes all are already up more than 20% in the last 2 monthsā€¦
Kalahasthi seems to be the biggest with comparatively larger MF holdingā€¦
Maybe one can buy post some profit booking in these countersā€¦

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Pipe_companies
Pipe_companies752Ɨ624 151 KB

Itā€™s been almost five years since I made this post. Hereā€™s an update of the market cap of the pipe companies since then.

  1. RMG Alloy Steel has been renamed as Welspun Specialty Solutions Ltd.

  2. Rs.5000 invested in each of these stocks would be an investment of Rs.1,00,000. This would be worth at least Rs.7,50,000. Iā€™ve ignored the merged and de-listed stocks for calculation although the merged stocks would have value. This is an over 40% annualized return pre-tax. The S&P BSE 250 SmallCap Index was 2038.98 on February 22, 2019. It is 5,498.97 today and Rs.100,000 invested in it would have been worth close to Rs.270,000 today. It seems that if one expects an industry to do well, itā€™s good to buy a basket of stocks from the industry and hold for long term.

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A detailed study on the Steel pipes industry and its players by SOIC.
https://soic.in/blog-description/steel-pipes-industry-overview