Srikalahasthi Pipes Ltd (SPL) (formerly: Lanco Industries Ltd) was incorporated in 1991 and supplies Ductile Iron (DI) pipes to various water boards, municipal corporations and turnkey contractors across the country for water infrastructure projects. SPL is amongst the top 10 players in the DI pipes industry in India and commands around 75% market share in southern and western zones which it primarily caters to. SPL is well placed in Indian DI pipes market which has historically been growing at a CAGR of 12%, and is expected to grow at a CAGR of 15-17% (as per company) in the coming years. Demand for DI pipes is expect to remain firm considering government's focus on various water infrastructure projects like AMRUT and smart cities projects. SPL has adopted fully integrated business model which saves cost and gives it a significant competitive advantage. The EBITDA margins for the company improved from 8.3% in FY12 to 23.8% in 9MFY16 on account of cost control measures adopted by the company. SPL is targeting at 10% volume growth in FY17 with margins at around 22-24%. We do not have any rating on the stock, as of now we believe that, SPL has potential to report consistent growth and stable margins over the next two years.
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