Prince Pipes - Demand Trend Improving: ICICI Securities

ICICI Securities Report

We interacted with the management of Prince Pipes and Fittings Ltd. and following are the key takeaways:

• Pipe demand has improved from December as pvc prices have started stabilising post FY-to-date correction of ~35%. The company expects at least double digit volume growth in H2 FY23. It has seen re-stocking from dealers, agri demand showing green shoots (in the brief season during the ongoing quarter) and plumbing demand remaining healthy in Q3 FY23.

• The company indicated margins will normalise in Q4 FY23 as high-cost inventory will be consumed by Q3 FY23.

• Inventory days, which went up to 85 in Q4 FY22, will normalise to ~60 by the end of Q3 FY23 and the company plans to maintain these levels going ahead as availability of pvc resin has improved.

Prince Pipes targets to grow pipe volume in double-digit over medium term with sustainable margins of ~12-14%. We believe the company has near term demand and margin tailwinds (due to inventory losses subsiding in Q4) as agriculture market (30-35% of company’s revenues) is expected to witness a rebound led by a sharp correction (FY-to-date 35%) in pvc prices.

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