How Russia-Ukraine war helped this Thane-based company become a multibagger
- Maharashtra Seamless is the manufacturer of pipes and tubes and has more than doubled its investor’s investment in the last one year.
- One aspect of rising interest in the company’s stocks is because of increasing promoter, FII and DII holdings.
- The company is the market leader in the domestic seamless pipes segment with 55% market share.
AdvertisementPipe and tube manufacturer Maharashtra Seamless has doubled investors' money in the last one year because of increasing promoter interest and crude oil prices and Russia Ukraine war.
Based in Thane, Maharashtra, Maharashtra Seamless is in the business of manufacturing pipes and tubes and also diversified into renewable power generation through solar and wind power across Maharashtra and Rajasthan.
But it isn’t the renewables but high crude oil prices that improved its prospects. It exports seamless pipes for crude transportation and the March and June quarters were particularly good for the company, as crude oil prices soared to over $100 a barrel.
“Increase in crude oil prices typically accelerates exploration and production activities in the USA, Canada, Middle East. The Russia-Ukraine crisis provides opportunities for domestic pipe manufacturers, especially for supplies to Europe. The management expects strong demand from the export segment will continue as it has received higher enquiries in the recent period,” said analysts at HDFC Securities as they initiated coverage.
The company, which is a part of DP Jindal Group, caters primarily to the oil & gas sector but also supplies power plants, boilers, fertilizers, chemical, pharmaceutical and automobile engineering.
|Particulars||Q1 FY23||Q1 FY22||% change|
|Total revenue||₹1,352 crore||₹721 crore||87%|
|Net profit||₹153 crore||₹96 crore||59%|
Disruption means new
Analysts believe that the Russia-Ukraine war has disrupted the global supply chain. As Europe is trying to cut out gas imports from Russia and find new sources — it would culminate into new sources of gas and crude – which means more business for the company – as new infrastructure is built.
“It has new products like subsea pipes and premium connection pipes domestically and engages stockists in freight-friendly markets overseas to capture a larger share of the export market. The outlook is bright considering its potential to tap the export market and the growing demand for its product,” says Manoj Dalmia, founder and director at Proficient Equities.
It also has large domestic clients like Indian Oil Corporation, BHEL, Reliance Industries, ISGEC, NTPC, Larsen & Toubro, Adani, DLF, Indrapastha Gas and Unitech. And this business is growing too.
“Company business model looks great in both the domestic as well as overseas market. In the domestic market, the government has focused on LPG supply via gas pipelines,” Ravi Singhal, CEO at GCL Securities, told Business Insider India.
|Particulars||FY20||FY21||FY22||FY22 estimate||FY23 estimate|
|Revenue||₹2,644 crore||₹2,308 crore||₹4,200 crore||₹4,588 crore||₹5,120 crore|
|Net profit||₹392 crore||₹324 crore||₹433 crore||₹514 crore||₹594 crore|
Analysts expect strong orders for the pipe manufacturer in the coming times for oil, water and gas pipelines from countries like the Middle East and Europe.
Advertisement“MSL products have a strong export demand given its capabilities to make API certified pipes. Going forward, around 30-40% volumes would cater to export demand. Higher export revenue share coupled with a relatively better margin profile would help in improving its EBITDA margins,” said HDFC Securities.
The brokerages also expect crude prices to remain at elevated levels in the medium term which would translate into healthy volumes for seamless pipes manufacturers.
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