Venus Pipes reported in-line Q4FY25 results with revenue up
15% YoY while EBITDA/PAT fell 8%/7% YoY. Exports contribution shot up to 44%
versus 12% in Q4FY24 while domestic share was down to 56%, hurt by soft demand.
FY25 volumes expanded 18% YoY to 26,000 tonnes. Margins slipped 400bp YoY due
to weak demand, slowdown in export of welded pipes and increased competitive
intensity. Management guided for 20%-plus volume growth along with 16–18%
margins. We believe given a strong order book (INR5.74bn) and expanding
end-user categories, Venus is poised for strong growth ahead. Reiterate ‘BUY’
with a revised TP of Rs 2120 (earlier Rs 2000) as we roll forward valuation to
25x FY27E EPS.
Volume growth moderates; exports share up
FY25 revenue expanded 19% YoY (Seamless: +18%/Welded: +12%
YoY) on the back of 17% YoY volume growth in FY25. Volume growth in seamless
pipes was higher at 25% versus welded pipes at 10% YoY. Exports more than
tripled in Q4FY25, soaring 312% YoY led by strong order inflows and higher
market penetration in new geographies. Share of seamless/welded in Q4FY25 was
59%/35% (versus 55%/40% in Q4FY24). Though overall demand remains bleak, the
company is reporting a demand pickup from the power sector. Venus has received
an order worth Rs 1.9bn for a thermal power project for the supply of
stainless-steel seamless boiler tubes.
Margins wane due to domestic market and competitive
exports
EBITDA margins contracted 400bp YoY (+10bp QoQ ) to 16.1%
owing to pressure from staff costs and other expenses. Weak domestic demand and
lower share of welded pipe exports drove EBITDA margins downwards.
Consequently, EBITDA decreased 7.6% YoY versus our estimate of 4% YoY fall. PAT
contracted 5% YoY against our estimate of a 2% YoY reduction. The order book
stood at Rs 5.75bn with 40% comprising exports.
Exports climbing up; value-added capacity on stream
Venus has improved its export mix to 44% led by network
expansion in Europe, the US and Middle East. The process of obtaining approvals
to penetrate further in the export and domestic markets is under way. The
company recently commissioned operation of a new 3,600MT capacity for
value-added products; fittings are likely to be commissioned in H1FY26. During
the year, Venus received accreditation from NABL for its testing laboratory.