Target: ₹45

CMP: ₹35.40

Electrosteel Castings Ltd (ECL) is one of the largest manufacturer of Ductile Iron (DI) Pipes in the Indian sub-continent with a production capacity of 7,25,000 tons per annum spread across 5 manufacturing units at Khardah, Bansberia and Haldia (West Bengal), Elavur (Tamil Nadu) and Srikalahasthi (Andhra Pradesh).

ECL also has a strong export base and caters to customers across South East Asia, Middle East, Europe, USA, South America and Africa.

Jal Jeevan Mission of the Government of India is expected to push the demand for piped drinking water aimed at 150 Mn households across 0.5 Mn villages by 2024. The Government of India’s continued investments in Smart City and AMRUT projects will push the demand for pipe upwards.

Urban sewerage system is being revamped in most cities which will require more pipes. ECL has always remained the distinct choice for engineers and domain experts in Ductile Iron Pipes and Fittings.

Post-merger of the two companies, Electrosteel Castings Ltd (ECL) is trading at attractive valuations of 4.73x its FY24 EPS. Taking into view the massive infrastructure outlay by the Government of India, ECL being the largest domestic manufacturer is expected to reap the benefits of the same in the times to come.

With the upcoming capacity expansion, ECL is expected to consolidate its position in the market further.

We would value the scrip at 6x its FY24E EPS and assume a target price of ₹45 in the next 9-12 months’ time period.