SEBI Analyst Sees Execution As Key To Next Re-Rating Cycle
The analyst said upcoming quarters will test whether new investments translate into stronger margins and returns.
Shares of Venus Pipes & Tubes gained over 3% on Wednesday after the company announced that it had raised ₹71.4 crore through the conversion of 4,20,000 warrants into equity shares at ₹1,700 per share, following receipt of the final tranche of payment from the allotted participant.
In an exchange filing on Tuesday, the company said the proceeds will support its ongoing capacity expansion and growth plans.
Capex-Led Growth And Margin Pressure
According to SEBI-registered analyst Front Wave Research, Venus has executed an aggressive capacity expansion plan, scaling up by 3.2 times to around 42,000 MTPA by FY25.
Exports have surged from 12% of revenue in FY24 to 37% in the first quarter of FY26, reflecting strong global traction. The ₹1,700 warrant pricing, well above the current market level of around ₹1,300, signals insider conviction about the company’s next growth phase.
The firm said that while growth is visible, profitability has taken a hit. EBITDA margins have compressed to about 16%, and ROE has slipped from 25% to 19% due to heavy capital buildout.
The next two to three quarters, it said, will focus on absorption, converting capital expenditures into cash flow to validate promoter optimism.
Working Capital And Efficiency
Front Wave Research noted that inventory rose 51.7% year-over-year as of March 2025, significantly outpacing revenue growth of 19.5%, which pushed inventory days to approximately 196. Receivable days remained steady at 73, indicating stable execution but signaling a need for improved efficiency.
The research house said the key turning point would be asset turns as new capacity comes online in the second half of FY26. If utilization improves, Venus could lift its return on equity (ROE) above 20%, return on capital employed (ROCE) above 24%, and stabilize margins near 18%, setting the stage for a potential re-rating.
Valuation And Technical Outlook
Front Wave Research said Venus trades near a three-year low EV/EBITDA of around 16x, with the market seeking proof of execution before a re-rating toward 20x+, in line with peers.
Technically, the stock is basing near ₹1,200, which serves as major support. A clean breakout above ₹1,500 would confirm a trend reversal, likely coinciding with commissioning milestones and improving efficiency. Below ₹1,200, the stock may remain in a sideways phase.
Front Wave Research said Venus sits at a pivotal point, with insiders paying ₹1,700 per share while the market trades lower.
The firm added, “The bet: new capacity and efficiency gains will drive the next compounding cycle. We’re constructive but conditional. Execution will decide if this becomes a re-rating story.”
What Is The Retail Mood?
On Stocktwits, retail sentiment for Venus Pipes was ‘neutral’ amid ‘extremely high’ message volume.
Venus Pipes’ stock has declined 15% so far in 2025.
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