Buy Hariom Pipe Industries; target of Rs 403: Arihant Capital

Arihant Capital's research report on Hariom Pipe Industries

Hariom Pipe Industries Ltd (HPIL) reported strong numbers, Q1FY23 revenue grew by 63.9% YoY (+14.6% QoQ) to INR 142cr vs our estimates of INR 146cr. Gross profit stood at INR 39cr (+28.9% YoY/-2.6% QoQ) vs our estimates of INR 47cr. Margin contracted by 745 bps to 27.5% vs 34.9% in Q1FY22. The margin contraction mainly due to increase in raw material cost in terms of sales. The raw material cost in terms of sales stood at 72.5% vs 65.1% in Q1FY22. EBITDA stood at INR 16cr (+42.4% YoY/-6.7% QoQ) vs our estimates of INR 20cr. EBITDA Margin contracted by 170 bps to 11.2% vs 12.9% in Q1FY22. The employee cost and power & fuel cost reduced in terms of sales. The employee cost in terms of sales stood at 3.7% vs 5.2% in Q1FY22. The power cost in terms of sales stood at 11.5% vs 15.3% in Q1FY22. PAT stood at INR 9.6cr (+68.3% YoY/-1.5% QoQ), PAT Margin expanded by 18bps to 6.7% vs 6.5% in Q1FY22.

Outlook

We have a BUY rating at a TP of INR 403 per share; valued at EV/EBITDA multiple 4.6x and its FY24E EBITDA of INR 167cr; an upside of 75.2%.