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ICICI Securities Report
Prince Pipes and Fittings (PRINCPIP) has reported Q4FY23 revenue decline of 15.2% YoY with pipe volumes declining 2.1% YoY (4-year CAGR of 2.8%) and realisation down 13.3% YoY as PVC prices corrected. EBITDA/kg improved 110.5% QoQ to Rs33.5/kg (+7.9% YoY) due to inventory gains and improved product mix. Management reported inventory gains of ~Rs250mn, adjusting for which EBITDA/kg stood at ~Rs28/kg (up ~29% QoQ on adjusted EBITDA/kg for Q3FY23). Reported EBIDTA margin increased 956bps QoQ to 19.4% (+381bps YoY) as gross margin expanded 10.7ppt QoQ (+570bps YoY) partly due to inventory gains, resulting in EBITDA/APAT growth of 113.5%/166.0% QoQ, respectively.
Management stated overall demand remains strong across plumbing, infrastructure and agri segments as PVC prices have stabilised at affordable levels (close to its 10-year average) in Q1FY24-TD. For FY24, it has guided for lower volume growth of 12-15% YoY due to the impact of ERP migration in Q1FY24. Barring the impact of ERP migration, it has guided for 15-20% volume CAGR for the next 2 years, driven by an uptick in real estate sector, increased government spending on infrastructure and pick up in agri market. It has also guided for pipe margin in the range of 13-15% in the medium term.
Management also intends to launch bathware products by end-Q1FY24 and expects a cash loss of ~Rs150mn in FY24 from this segment. We cut our PAT estimates by ~4%/1% for FY24/25E; BUY with a revised Mar’24E target price of Rs703 (earlier: Rs707).
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