Why multibagger Venus Pipes’ target price has been raised despite weak market

The Directorate general of trade remedies recommended imposition of import duty on stainless steel seamless tubes and pipes from China during September 2022. On 20th December, 2022, the government imposed anti dumping duty for 5 years up to 2027.

“The imposition of import duty will increases cost of hollow pipe procured from China. But, Venus has enough stock in place to meet 2‐3 months of orders. Besides, on account of duty, imports will be costier and hence, we see room for Venus to increase stainless steel seamless pipes prices by ~Rs20/kg (CMP: Rs420‐450/kg),” said domestic brokerage and research firm Centrum.

The recent announcements ‐ firstly roll back of 15% export duty and now imposing import duty sets very positive outlook for stainless steel pipe industry, as per the brokerage. From April 2023 onwards, fully backward integration of 9600/t hollow pipe manufacturing capacity is expected to commission and hence, no need to be depend over hollow pipe imports, it added.

“Venus pipes with 3x capacity expansion by Q1FY24‐end, it is well equipped to reap benefit from evolving opportunities like import substitution, higher exports and huge capex upswing in demand markets. We factor in higher realisation and benefit of import duty in margins resulting in increase of 32%/11%/10% in earnings estimate for FY23/FY24/FY25,” said Centrum while maintaining Buy rating on the multibagger stock and increased its target price to ₹940 per share (earlier: ₹848).

Venus Pipes shares made their stock market debut in May this year and the newly listed stock has given multibagger return by rallying more than 124% in the last seven months since its listing on the stock exchanges, from its initial public offering (IPO) issue price of ₹326 per share to currently hovering over ₹745 apiece.

The Gujarat-based company is a growing stainless-steel pipes and tubes manufacturer and exporter in India. The company, under the brand name Venus, supplies its products for applications in diverse sectors, including chemicals, engineering, fertilizers, pharmaceuticals, power, food processing, paper and oil and gas.

Equity benchmarks Sensex and Nifty continued to extend previous session's decline, amid firm global market trends while fears about rising Covid cases in China weighed on sentiment.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.