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Centrum Broking Report
During Q2 FY24, Venus Pipes and Tubes Ltd. reported highest ever Ebitda of Rs 347 million (versus our estimate: Rs 312 million) up 26% QoQ. Despite stainless steel pipes realisation decline by 5-10% QoQ, ramp up of piercing facility aided in higher cost saving.
Further, exports sales jumped significantly to 15% of total (versus ~5% of sales mix in FY23) supporting growth of 7% QoQ in total sales. Currently, it has total order book of Rs 2.1 billion which is equally between among welded and seamless pipes and 25% share is export orders.
As a result, Venus Pipes' operating margins reported improved by 277 bps QoQ to 18.1%. We expect faster ramp up in volumes and hence increase sales volume estimate by 3-3.5% for FY24 and FY25 respectively and also lowered realisation by ~9% in FY24 and 4% in FY25.
We revise our earnings estimate downwards by 14% and 4% for FY24 and FY25 respectively. Also, we roll over our valuation to 25 times price-to-earning to mid-FY26E EPS of 74/share and arrive at target price of Rs 1844/share (Earlier: Rs 1809/share). Reiterate 'Buy' rating on the stock.
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