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Stock Ideas Multi Bagger Stock Ideas Update Man Industries (MANIN) Report by ICICI Direct
Stock Ideas Multi Bagger Stock Ideas Update Man Industries (MANIN) Report by ICICI Direct 
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| I think NRPR could move just the same percent wise and it won't take as long due to it's small float. Now if NRPR test highs it made earlier this year that would result in gains of 162% from it's current levels!!! | |
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| Update Man Industries (MANIN) Report by ICICI Direct |
| Saturday, 15 September 2007 | ||||||||
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Man Industries (MIL) is among the country’s leading manufacturers of large diameter SAW pipes and coating systems for high pressure applications. The company is sitting on a slew of orders that gives visibility to its earnings. The capacity additions in LSAW and HSAW pipes, will help it ride the demand boom emanating from energy and water segment. We expect the topline to grow at a CAGR over 35% and bottom line at around 67% during FY07- 09E.
Valuations Man IndustriesMan Industries’ diversified business model de-risks it from product specific risks. Its good presence in Middle East and US increases the revenue visibility, although at lower margins (because of higher transportation cost). Domestically, HSAW pipes demand is likely to be high and sensing this, the company is setting up HSAW unit. We believe the stock is available at an attractive valuation of 4.42x FY09E EPS. We rate the stock an OutperformerCompany Background Man IndustriesMan Industries (India) Ltd, the flagship company of the Man Group, UK, manufactures steel line pipes for high and medium pressure applications such as oil & gas, petrochemical and water transportation, anti-corrosion coating systems. The company started operations in 1989 as an aluminium extrusion company with an installed capacity of 4,000 tonne per annum (TPA).In 1994, it diversified into SAW pipes, by setting up a plant in Pithampur, Madhya Pradesh. Later in 1998, it forward integrated to become an integrated SAW pipe manufacturer with its own polyethylene-coating facility. It also set up a spiral pipe-making mill. In FY05, the company expanded capacity by setting up another plant in Anjar, Gujarat. In order to focus more on pipes sector, the company hived off and sold its aluminium extrusion business. Currently, the company has the capacity to manufacture 500,000 tonne of LSAW. Looking at the increasing demand of HSAW pipes, the company is in the process of expanding capacity in HSAW pipes. Post expansion, Man Industries will have capacity to manufacture 1 million tonne per annum wherein the LSAW and HSAW capacity would 500000 lakh tonne each. Resilient business modelWe like the de-risked & robust business model of the company and expansion initiatives taken by the company to capture growth in the sector. The company is expanding its HSAW capacity from 1.5 lakh tonne to 5 lakh tonne by December 2007.Post expansion, it will have total pipe manufacturing capacity of 1 million tonne, equally split between LSAW and HSAW, making the business more resilient going forward. Demand for HSAW pipes would be higher in the short- to mediumterm as they are preferred in the US and domestic markets for on-shore pipeline due to the large price differential between them and LSAW pipes.
On the other hand, LSAW pipes offer higher margins and are preferred due to lower manufacturing cost and better strength. Migration to offshore exploration would boost demand of LSAW pipe. Man Industries is also planning a 3 lakh tonne HSAW pipe capacity in the US. Order book twice the FY07 revenue gives higher visibilityMan Industries has an order book position of Rs 2,400 crore against FY07 revenue of Rs 1,196 crore. These orders are to be executed in next 12-15 months. With execution of these orders, we expect top line growth at a CAGR of 35% over FY07-09E to Rs 2,183 and bottom at a CAGR of 67% to Rs 154 crore.Timely capex to help company ride demand boomNorth America and India would see huge investments of US$30 billion in pipelines over the next five years. Our interaction with industry participants suggests that the demand of HSAW pipes could be 65% of the total demand.In order to take advantage of the opportunity, the company is expanding its HSAW capacity. It has already expanded LSAW capacity. In July 2007, its 2 lakh tonne HSAW capacity went onstream and another 2 lakh tonne capacity is going onstream by December 2007. These expansions are well timed to capture the entire demand growth phase. Valuations Man IndustriesMan Industries’ diversified business model de-risks it from product specific risks. Its good presence in Middle East and US increases the revenue visibility, albeit at lower margins (higher transportation cost). As in India, HSAW pipes demand is likely to be higher and sensing this, the company is setting up HSAW unit. We believe the risk-reward is favorable and the stock is available at an attractive valuation of 4.42x FY09E EPS. We rate the stock an OUTPERFORMER with a price target of Rs 306 in 12-15 months. Source : ICICI Direct
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