Multibagger stock: Up 152% in 1 year, Emkay sees 27% further upside on this smallcap share

Smallcap stock Man Industries (India) Ltd, whose shares have rallied 152 per cent in the last one year, may not be factoring in project execution that is expected to double the group’s revenue in 3-4 years. This transition from the ‘potential’ to the ‘delivery’ phase is likely to create meaningful shareholder value, Emkay Global said while initiating coverage on the multibagger stock with a 'Buy' rating. The domestic brokerage set a target price of Rs 500 apiece, suggesting 27 per cent potential upside.

"Man’s stock price has more than doubled within one year, reflecting improved business fundamentals as well as greater visibility on execution of its announced expansion plans. Also, industry tailwind in the form of demand growth for pipes as well as capacity growth by peers have provided meaningful clarity on Man charting a similar path. We reckon the optimism around such tailwind and growth aspirations are mostly in the price," Emkay said.

Emkay Global said the management has demonstrated execution capabilities with the delivery of 100kt expansion into ERW pipes. It is now embarking on a larger and more impactful expansion into the stainless steel and ERW segments in Jammu and the line-pipes segment in Saudi Arabia.

Man plans to invest Rs 820 crore in Jammu and Rs 480 crore in Saudi, with total capex of Rs 1,300 over the next 12-18 months, adding 400kt of capacity (up 36 per cent) and potentially doubling revenue in 3-4 years.

Emkay Global expects margin to expand to 11.1 per cent in FY27 from 9.2 per cent in FY24, with entry into the high-margin stainless steel business.

"We see significant improvement in return ratios. Existing business generates mid-cycle ROE of 9-10 per cent. We estimate incremental ROE contribution from the Saudi expansion at 4.8 per cent and stainless steel at 3.9 per cent; this would take group ROE to 17.4 per cent/21 per cent in FY27E/28E," it said.

Emkay said the market prefers taking a de-risking approach to the company’s project execution, with the next leg of stock re-rating likely to be accompanied by progress on projects.

"We value the stock on a blended framework and set a target price of Rs 500 per share, which implies 27 per cent upside. The line pipes sector is trading at 12.9 times earnings, 8.2 times EV/Ebitda, and is generating average ROE of 15.8 per cent for FY25E. Though Man is trading at higher P/E of 21.1 times, we see valuation comfort at 8.3 times on FY27E earnings," it said.