Target: ₹785

CMP: ₹518.85

We initiate coverage on Hariom Pipe Industries (Hariom) with a Buy and a target price of ₹785. Hariom is poised for an exceptional growth trajectory, fueled by a ramp-up in capacity, accelerated galvanised product sales via its established dealer network, and favourable industry dynamics.

The company’s backward-integrated model stands as a testament to its strategic execution and is primed to scale effortlessly with rising capacities. The tandem mill further cements Hariom’s market edge of production of sub-2mm pipes, a true differentiator. With a turbocharged combo of improving cash conversion cycle, rising return ratios, debt-to-equity metrics, and resilient margins.

We forecast 26 per cent CAGR in sales volumes over FY24–27, driven by the ramp-up of capacities, potentially fully funded by internal accruals. Hariom is actively improving its currently adverse cash conversion cycle by negotiating favourable credit terms with suppliers. Further, we expect upside on working capital improvement as the company progresses towards its target of improving the engineering segment’s revenue share to 60-70 per cent over the next 3 years.

Hariom is set for robust growth and a deserved re-rating.