Why Captain Pipes Share Price is Falling

After several months of calm, geopolitical tensions have started to heat up.

We're already seeing words like 'war', 'blasts' and 'Israel Iran war' trending on the top of the charts.

Yesterday, we wrote about the Israel Iran war and what kind of crash you can expect from the Indian market.

This should come as no surprise that geopolitical tensions between countries always have a serious impact on the financial markets across the globe.

In case of Indian markets, benchmark indices slumped yesterday, and today's scenario looks even bleak.

Amid this selloff, share price of Captain Pipes has come under pressure.

In the past 5 trading sessions, the stock is down around 8%.

In 2024 so far, Captain Pipes share price has fallen over 20%.

Let's find out why this penny stock is under intense pressure and what lies ahead.

Broader Market Selloff

Along with benchmark indices, broader markets midcap and smallcap indices also crashed yesterday. The smallcap index fell around 1.5%.

So the current fall in Captain Pipes share price could be attributed to the overall correction in the share market in the past two trading sessions.

To be honest, the writing has been on the wall for quite some time now.

You see, whenever there's a crash in the markets, smaller companies are among the first ones to get hit, and they're even the worst hit if God forbids there's a market crash.

Penny stocks are typically more vulnerable during market corrections because they are often less liquid and more volatile than larger, more established companies.

Their lower prices can lead to larger percentage swings on smaller absolute movements.

Captain Pipes currently trades at Rs 15 per share with a very low marketcap of Rs 2.3 billion (bn).

What Next?

Note that shares of the plastic products company have suffered a huge correction from its peak, falling from Rs 36 to Rs 15 at present.

It's high time that the company makes a comeback. And for that, it's making serious efforts.

Earlier this month, the company starting construction of its 87,000 square feet factory shed at Ahmedabad site.

This facility would be twice the size of existing factory floor area at Rajkot plant.

It would also be sufficient to support the proposed addition of 20,000 MT per annum capacity as planned and additional capacity in future if required.

The company is also eligible for the Aatmanirbhar Gujarat schemes applicable to the above project.

Moreover, earlier this year, the company's board also approved Rs 500 million (m) in fundraising via a rights issue.

The company also has strong sectoral prospects in place. As the Government is taking serious steps to improve living with its Jal Jeevan Mission, Captain Pipes will be in a sweet spot as it's involved in many segments of pipe offerings.

Coming to its financials, for the first nine months of FY24, Captain Pipes posted a 12.8% dip in revenues due to reduction in PVC resin prices affecting overall realizations.

In the past five years, the company has seen a steady increase in revenues while margins have been dampened.

Financial Snapshot

Rs m, standalone	FY19	FY20	FY21	FY22	FY23
Net Sales	546	455	405	827	855
Growth (%)	25%	-17%	-11%	104%	3%
Operating Profit	29	28	27	30	43
OPM (%)	5%	6%	7%	4%	5%
Net Profit	3	4	3	51	18
Net Margin (%)	1%	1%	1%	6%	2%
ROE (%)	3.4	4.5	3.1	44.0	10.6
ROCE (%)	13.3	15.1	14.6	43.5	15.9
Dividend (Rs)	0.0	0.0	0.0	0.0	0.0
Debt to Equity (x)	0.6	0.4	0.5	0.3	0.1

Data Source: Ace Equity

The company is expected to update about its fund raise soon, which will be very critical in supporting its expansion.

How Captain Pipes Share Price has Performed Recently

In the past one month, Captain Pipes share price has fallen around 6%.

In the past three months, the stock is down 17%.

Captain Pipes has a 52-week high of Rs 36 touched on 23 May 2023 and a 52-week low of Rs 14.1 touched on 13 March 2024.

In the past one year, shares of the company have fallen 17%.

Here's a table comparing Captain Pipes with its peers -

Comparative Analysis

Company	Captain Pipes	Dolphin Rubbers	Eastern Trends	Pentagon Rubber	Somi Conveyor
ROE (%)	10.6	14.3	0.0	44.2	5.3
ROCE (%)	15.9	15.1	-17.3	22.1	7.9
Latest EPS (Rs)	0.1	4.2	-7.4	4.1	3.9
TTM PE (x)	129.1	40.1	0.0	31.3	32.2
TTM Price to book (x)	9.5	6.4	-1.5	3.9	2.2
Dividend yield (%)	0.0	0.7	0.0	0.0	0.0
Industry PE	33.8
Industry PB	3.8

Data Source: Ace Equity, Equitymaster

About Captain Pipes

Captain Pipes is a part of the Captain Group. It is a certified manufacturer and exporter of PVC pipes.

The company offers a complete range of piping solution for application in agriculture, plumbing and drainage.

Exports contribute around 10% to its revenue while the rest comes from domestic business.

In 2023, the company increased its authorized share capital by dividing its equity shares from Rs 10 to Rs 1 each.

It also issued bonus shares in the ratio of 2:1 in 2023.

To know more, check out Captain Pipes financial factsheet and its latest quarterly results.

Happy Investing

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...