Perma-Pipe International Holdings, Inc. ($PPIH)

Disclaimer

This is my personal analysis, written to track companies I’m interested in, as of May 28, 2025. It is not financial advice, and I’m not recommending buying, selling, or holding any stock. I may or may not own shares, and readers should do their own research before investing.

Ticker: PPIH (NASDAQ)

Price: $13.00 USD (05/27/25)

Shares Outstanding: 8 million

Market Cap: $106 million

Net Debt: $17.23 million (as of January 31, 2025, per balance sheet data)

Enterprise Value: $135 million

Created with TradingView

The Company:

Perma-Pipe International Holdings, Inc., founded in 1993 and headquartered in The Woodlands, Texas, is a global leader in pre-insulated piping and leak detection systems. The company designs, engineers, and manufactures specialty piping solutions for oil and gas gathering, district heating and cooling, and industrial applications. Its products address complex challenges in the safe and efficient transportation of liquids, serving a diverse customer base across the United States, Canada, the Middle East, North Africa, and India. PPIH operates 14 facilities in six countries, leveraging its engineering expertise to deliver customized solutions for underground installations.

PPIH’s customer base includes industrial clients in energy, infrastructure, and utilities, with no single customer accounting for more than 10% of sales or accounts receivable in FY24. In FY24, net sales reached $158.4 million, up 5.1% from $150.7 million in FY23, with 46% of revenue from the Middle East, North Africa, and India, 33% from the U.S., and 20% from Canada. The company’s backlog, a key indicator of future revenue, doubled to $138.1 million by January 31, 2025, and has since grown to $167.5 million with new contract wins, reflecting robust demand.

Business Segments:

PPIH operates in a single reportable segment: Piping Systems, which encompasses the following product and service categories:

Pre-Insulated Piping Systems (92% of revenue): These include insulated and jacketed systems for district heating and cooling, used to distribute energy efficiently from central plants to multiple locations. PPIH also provides primary and secondary containment systems for transporting chemicals, hazardous fluids, and petroleum products. Its flagship XTRU-THERM® insulation system, featuring spray-applied polyurethane foam and high-density polyethylene casing, is a key differentiator, as demonstrated in a $2.4 million Qatar project announced in May 2025.

Coatings and Insulation (6% of revenue): PPIH applies liquid and powder-based anti-corrosion coatings to steel pipes, including fittings for oil and gas pipelines and potable water systems. These coatings protect against environmental degradation, extending pipeline lifespan.

Leak Detection Systems (2% of revenue): Sold alongside piping systems or standalone, these systems monitor for fluid intrusion, preventing environmental contamination, safety hazards, or equipment damage. PPIH’s proprietary sensor cables and monitoring components enhance system reliability.

The company’s focus on higher-margin products and services has driven gross margins from 28% in FY23 to 34% in FY24. With strategic presence in oil-rich regions like the Middle East, where 46% of revenue is generated, aligns with global energy infrastructure demand.

Management & Shareholders:

PPIH’s leadership team brings extensive industry experience. David J. Mansfield, CEO since 2016, has a 30+ year background in energy infrastructure, including roles as CFO at Compressor Engineering Corp. and Pipestream, Inc., and Vice President at Bredero Shaw. Saleh Sagr, appointed President in April 2025, previously led PPIH’s MENA operations and co-founded a Saudi pipeline company. Matthew E. Lewicki, CFO since October 2023, has a decade of experience in oil and gas financial management, including roles at HMT Holdings Corp. and Quanta Services, Inc.

Management holds significant ownership, aligning interests with shareholders. As of January 31, 2025, insiders own approximately 10% of shares. The free float is 90%. No related-party transactions have been reported, and executive compensation is tied to performance metrics, reinforcing accountability.

Growth Drivers:

PPIH’s growth is propelled by several strategic initiatives:

Middle East Expansion: The Middle East, particularly Saudi Arabia and Qatar, is a cornerstone of PPIH’s growth. A 60/40 joint venture in Saudi Arabia, established in 2023, has exceeded expectations, supporting Vision 2030 infrastructure goals.“The joint venture in Saudi Arabia that was formed in 2023 continues to exceed expectations,” CEO David Mansfield on FY24 PR

The August 2024 opening of a new Saudi facility enhances fabrication capacity. In Qatar, a $2.4 million contract announced in May 2025 marks PPIH’s first project there, with a permanent facility under construction to support long-term operations. These initiatives capitalize on high oil prices and regional energy investments.

Backlog Conversion: The $167.5 million backlog, up from $68.5 million a year ago, provides visibility into FY25 and FY26 revenue. Key contracts in Saudi Arabia, UAE, Qatar, and India underpin this growth. Successful execution of these projects could drive double-digit revenue growth and margin expansion.

North American Opportunities: The new Vars, Ontario facility in Canada is ramping up activity, contributing to 20% of FY24 revenue. In the U.S., demand for district heating and cooling systems is rising, driven by energy efficiency mandates. PPIH’s ability to secure large-scale projects positions it for growth in these markets.

Energy Transition Potential: PPIH’s piping systems are adaptable to emerging energy markets, such as liquefied ammonia, hydrogen, and LNG terminals. As global energy transitions accelerate, these applications could open new revenue streams.

Financials:

For FY24 (ended January 31, 2025), PPIH reported strong results:

Total Revenue: +5.1% to $158.4 million (vs. $150.7 million in FY23)

Gross Profit: +28% to $53.2 million (34% margin vs. 28% in FY23)

EBITDA: +62% to $24.3 million

EBIT: +52% to $20.3 million (12.8% margin vs. 8.9% in FY23)

Pre-Tax Income: +87% to $18.5 million (vs. $9.9 million in FY23)

Net Income: -14.2% to $9.0 million (vs. $10.5 million in FY23, impacted by $5.9 million one-time tax benefit)

Operating Cash Flow: +15% to $12.5 million

Net Debt: $17.23 million (0.7x EBITDA)

In Q4 FY24, revenue grew 12% to $45.0 million, with pre-tax income doubling to $5.3 million. The backlog surged 102% to $138.1 million, and subsequent contract wins of $29.4 million raised it to $167.5 million. Revenue growth was driven by higher sales volumes in the Middle East and Canada, while margin expansion resulted from a focus on high-value products. General and administrative expenses rose 24% to $28.0 million due to higher compensation and professional fees, but interest expense fell 16% to $1.9 million, reflecting reduced borrowings.

Oil Price Exposure:

PPIH’s demand is influenced by Brent Crude oil prices, particularly in the Middle East, which accounts for 46% of revenue, as highlighted in a recent Seeking Alpha article by Stork Research that I incorporated into my thesis for its insightful analysis. In FY24, Brent averaged $74–$85, driving a 102% backlog increase to $138.1 million, with high prices ($80+/bbl) fueling infrastructure investment, mid-range prices ($65–$80) supporting stable growth, and low prices (<$65, as seen in early 2025) risking project delays. Current prices of $60–$65 align closely with the 10-year average of $65.15 (2015–2024), indicating healthy levels for sustained demand. While OPEC+ production cuts in 2023–2024 stabilized markets, their recent unwinding could pressure spending, and PPIH’s lack of oil price hedging adds volatility exposure. However, I believe oil prices are less critical than the article suggests, as PPIH’s piping and leak detection systems are vital for ensuring safe and efficient operations in energy infrastructure, compelling clients to maintain these services for reliability and compliance regardless of price fluctuations.

Conclusion:

The real growth engine for PPIH lies in the Middle East, a region at the forefront of global energy infrastructure development and striving for excellence through ambitious initiatives like Saudi Arabia’s Vision 2030. PPIH’s Middle East revenue has soared from $23 million in 2020 to $75 million in 2024—a remarkable 226% increase over four years—and shows no signs of slowing. A recent $2.4 million Qatar contract, paired with plans for a permanent facility in Doha, underscores PPIH’s strengthening foothold in the MENA region, backed by a record $167.5 million backlog fueled by Middle Eastern contracts. As stated in the 10-K, “The Company’s backlog on January 31, 2025 was $138.1 million… most of which is expected to be completed within the year ending January 31, 2026,” confirming that these project contracts typically convert to revenue within 6–12 months. For FY24, PPIH achieved revenue growth of 5.1% to $158.4 million, though its net income declined 14.2% to $9.0 million, impacted by a one-time $5.9 million tax gain in FY23. The stock currently trades at an appealing 11.5x trailing P/E and 5x EV/EBITDA, and when adjusting for the tax gain, normalized net income surged 96% from $4.6 million to $9.0 million, demonstrating robust operational strength. Looking to FY25, I’m optimistic about continued growth, especially as the backlog could increase with new contracts in the coming months, but for now, let’s assume 100% of the current $167.5 million backlog converts to revenue. This would result in FY25 revenue of $167.5 million—a 5.7% increase over FY24’s $158.4 million—yielding an EPS of approximately $1.26 at a 6% net income margin, assuming no improvements or declines in margins. At 15x to 20x P/E, this implies a stock price range of $18.90 to $25.20. I’ll be in Houston in July and plan to contact the company to arrange a visit to their headquarters in The Woodlands, so if anyone is interested in PPIH and has questions you’d like me to ask, please let me know!