Venus Pipes order book and data-centre spooling underpin earnings growth

Investment View and Valuation

In its August 24, 2026 company update, ICICI Direct Research maintained its positive view on Venus Pipes and Tubes, a Gujarat-based manufacturer of stainless-steel pipes and tubes. The broker reiterated its BUY rating and set a target price of Rs 2,200, valuing the stock at 30 times FY28E earnings per share.

The investment case is based on volume-led earnings growth, an expanding presence in high-growth applications including data centres, a growing portfolio of niche value-added products, controlled leverage of 0.4 times debt to equity and return ratios above 15 per cent.

Q1FY27 Financial Performance

Venus Pipes reported steady Q1FY27 performance, with consolidated revenue increasing 16 per cent year on year and 6 per cent quarter on quarter to Rs 321 crore. EBITDA rose 15 per cent year on year and 5 per cent quarter on quarter to Rs 52 crore, while EBITDA margin was 16.1 per cent, down 14 basis points year on year and 22 basis points quarter on quarter. PAT increased 7 per cent year on year and 6 per cent quarter on quarter to Rs 26 crore.

Revenue from seamless and welded pipes and tubes increased 15 per cent and 21 per cent year on year, respectively. Domestic sales accounted for 71 per cent of Q1FY27 revenue and exports for 29 per cent, compared with 63 per cent and 37 per cent, respectively, in Q1FY26.

Capacity Expansion and Utilisation

The broker highlights Venus Pipes’ capacity-led growth. Total installed capacity has expanded around four times over five years, from 12,000 MTPA in FY23 to 48,000 MTPA currently.

• Seamless stainless-steel pipes and tubes capacity: 20,400 MTPA
• Welded pipes and tubes capacity: 27,600 MTPA
• Seamless capacity has increased around six times, helping the company raise its market share to around 10 per cent in FY26 from below 5 per cent in FY20.

Commissioning of a 20,400 MTPA hollow-pipe facility improves backward integration, lowers external sourcing dependence and supports margins. Venus Pipes delivered sales and PAT CAGR of around 32 per cent and 34 per cent, respectively, over FY22 to FY26.

Management said seamless-pipe utilisation was around 85-90 per cent in Q1FY27 and welded-pipe utilisation was slightly above 60 per cent. The new seamless capacity was commissioned only towards the end of May 2026, so its full contribution was not reflected in the quarter. Management expects new seamless capacity utilisation to reach 80-85 per cent during FY27-FY28 and welded utilisation to remain above 60-65 per cent.

Growth Guidance and Margin Outlook

Venus Pipes maintained its FY27 guidance for around 20 per cent revenue growth, volume growth above 15 per cent and at least 17 per cent EBITDA margin. The company aims for around 18 per cent EBITDA margin over the next two years, with longer-term margin potential of 3-4 percentage points above current levels.

Order Book and Data-Centre Opportunity

Order visibility is a central earnings driver. The core pipes and fittings order book exceeded Rs 600 crore, compared with around Rs 450 crore in Q4FY26, with more than 40 per cent of the core order book originating from exports. Incremental orders came from power engineering, chemicals, oil and gas, and engineering.

Venus Pipes also secured a Rs 185 crore letter of intent from a leading data-centre customer for stainless-steel cooling spools, to be executed by December 2026. This takes combined order visibility to around Rs 800 crore. The data-centre spooling business is expected to commence around Q3FY27, and management expects asset turnover above three times.

The fittings business commenced at the end of May 2026, with approvals and certifications ongoing. Management expects fittings to contribute around 5-7 per cent of FY27 revenue and 8-10 per cent in FY28. FY27 capex is targeted at around Rs 100-110 crore, including around Rs 70 crore for the spooling facility and associated fittings and machinery.

ICICI Direct Earnings Estimates

ICICI Direct estimates sales to increase from Rs 1,167 crore in FY26 to Rs 1,362 crore in FY27E and Rs 1,603 crore in FY28E, implying a 17 per cent CAGR over FY26-FY28E. EBITDA is estimated to rise from Rs 191 crore to Rs 277 crore, with margin improving from 16.3 per cent to 17.3 per cent. PAT is projected to grow from Rs 102 crore to Rs 151 crore, implying a 22 per cent CAGR.

Key Risks

• A slowdown in the capital-expenditure cycle of end-user industries could weaken product demand.
• Global geopolitical unrest could cause interim business volatility, given exports of around 35 per cent.