On Wednesday, Venus Pipes & Tubes‘ Shares increased 5% to Rs 648.90 in intraday trade. Shares have risen 48% in the past month after the company became the first Indian company to receive approval from the Bureau of Indian Standards (BIS) for stainless steel seamless and welded pipes. In contrast, the S&P BSE Sensex fell 4.5% over the same period.

Venus Pipes & Tubes is a manufacturer and exporter of Stainless Steel (SS), Welded and Seamless Tubes. With Wednesday’s gains, the stock is up nearly 100% from its IPO price of Rs 326 per share. The company went public for the first time on May 24, 2022. Later, it touched a 52-week high of Rs 652 on October 7 and a 52-week low of Rs 316.40 on June 1.

The higher cost of importing from China and BIS certification requirements give companies with in-house hollow tube manufacturing capabilities a competitive advantage to take advantage of import substitution opportunities.

Last month, Venus Pipes approved a Rs 50 crore capacity expansion for large-diameter mills to produce stainless steel welded pipes. The new line will expand the range of existing welded pipes to a maximum diameter of 20 inches (508 mm), thicknesses up to SCH80, and a production capacity of 700 tons per month. The project will be funded through debt (term loan) and internal accruals, and commercial production is expected to begin in the first quarter of fiscal 2024.

Management said the recovery in India’s capex cycle would drive strong demand for the company’s products from end-user industries. Additionally, this capacity expansion will give the company an advantage and help capture more markets in this segment.

On October 6, CRISIL Ratings assigned a long-term rating of BBB+ to CRISIL and a short-term rating of CRISIL A2 with a ‘stable’ outlook on Venus Pipes’ Rs 62 crore bank loan facility.

“The company plans to increase its production capacity this fiscal year (FY23) while adding hollow tube manufacturing units, which will support mid-term revenue growth. However, the timely completion of capital expenditures and successful lift in CRISIL Ratings said analysts.

Meanwhile, analysts at Centrum Broking believe that with the addition of new capacity, the company will become the second-largest player in India. In addition, the company is well-positioned to take advantage of emerging opportunities in import substitution, increased exports and a significant increase in capital spending in-demand markets.

“Demand sectors such as oil refineries, petrochemicals, chemicals, and pharmaceuticals are in the major Capex cycle with an estimated investment of Rs 3.3 trillion (based on announcements made by major players) in FY 23E-25E. This translates to around Rs 330 billion of incremental opportunity for SS Pipes. Furthermore, the cancellation of export exemptions by China and use of only BIS-certified products will help Venus Pipes consolidate its market share through import substitution,” said the brokerage firm, rating ‘buy’ on the stock with a target price of Rs 764 per share.