Buy Captain Pipes; target of Rs 25: Asit C Mehta

Asit C Mehta report on Captain Pipes

We initiate coverage on Captain Pipes Ltd (538817) with a ‘BUY’ rating and a target price of Rs 25 representing an upside of 22% from the current market price. We believe the company is strategically positioned to capitalize on significant opportunities within the plastic pipes sector. Planned capacity expansion, coupled with a shift in the revenue mix, is projected to propel EBITDA margins to the range of 11%-12% in next 2 years. Notably, the company has consistently reported robust revenue and EBITDA over the past five quarters. With raw material prices stabilizing and an expanding distribution network, the company’s performance is expected to further improve, leading to enhanced Free Cash Flow (FCF).

Outlook

Captain Pipes Ltd is trading at 44.3x/24.8x FY25E/FY26E earnings. Despite being a smaller player in the industry, we see potential for the stock to be re-rated due to planned expansion and a change in revenue mix. Our recommendation is to BUY with a target price of Rs. 25, suggesting a 22% upside from the current levels over the next year.