Buy Bihar Tubes (BSE Code : 590059)

Couple of days ago i Develop had given a call that there could be a block deal in Bihar Tubes. Today the volume in Bihar Tubes was over 1.6 mn which includes a block deal of over 1 mn shares at around Rs.185/- each. This once agian proves that Cni is always ahead of the market.

The block deal has happened at Rs.185/- which can be treated as the bottom price and hence the stock has to cross this mark in coming days........

Business : The company produces close to 150 varieties of specialised steel tubes such as pre-galvanised pipes, galvanised sheets, ERW pipes and other related products. Recently, it expanded its product mix to include niche products in order to improve its sales realisation. This has helped it to improve its operating profit margin. In the September ’07 quarter, pre-galvanised pipes contributed around 22% to the company’s revenues.

The revenue share of galvanised pipes and the hollow segment was higher at 26% and 38%, respectively.Bihar Tubes has announced a Rs 170-crore expansion and diversification plan. The company proposes to set up a greenfield unit in Maharashtra for production of precision tubes, API pipes and related products catering to the automotive sector, which will be a step towards forward integration. The project is being implemented through a joint venture (JV) with Kusakabe Engineering Company of Japan.

Financials : The company’s net sales surged by 20.8% to Rs 62.7 crore during the second quarter of ’07, compared to the corresponding quarter last year. The growth was driven by its focus on sale of pre-galvanised pipes and fencing products. The sale from this segment grew by 22% on a year-on-year basis. As the segment has a higher sales realisation, its net profit during the quarter jumped by five times to Rs 4 crore.

Valuations: Bihar Tubes is expected to continue its momentum, driven by topline and bottomline growth in forthcoming quarters. Besides capex, growth will be aided by its focus on high-margin pre-galvanised pipes segment and pipes/tubes with higher specifications. The stock is currently trading at around eight times its trailing four quarters earnings. The company is expected to close fiscal year ’07-08 with a net profit of Rs 14-15 crore on a conservative basis. This leaves good scope for appreciation for investors who have a six-to-eight-month horizon.