Plastic Pipes Sector Check - Worst Is Behind; Better Times Ahead: ICICI Securities

ICICI Securities Report

We expect plastic pipe companies to witness volume pick-up from H2 FY23E onward due to significant correction in base raw material prices (polyvinyl chloride resin) by ~43% FY23-to-date (now closer to pre-pandemic levels and 10-year average) resulting in increased demand from two of the major user-sectors: agriculture and plumbing.

Agriculture demand was subdued for the past three years and is expected to show robust growth in the upcoming busy season (February-May 2023) due to the price-elastic nature of rural demand.

Plumbing demand will likely remain strong driven by uptick in the housing market.

Operating profit too should improve sequentially for the covered companies (versus H1 FY23) as inventory losses subside (partially in Q3 and more so in Q4) and volumes increase (partly aided by seasonality as well as restocking by dealers as PVC prices stabilise).

We expect pipe companies to witness volume growth of 8.7%-19.9% YoY in H2 FY23E and register a compound annual growth rate of 11.7%-16.5% over FY22-FY25E.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.