Margins Bottoming Out In Pipes Sector, Recovery To Be Slow, Says Goldman Sachs

The performance of India's top four pipe manufacturers is showing signs of stabilisation, but any significant recovery in margins and volumes is expected to be gradual, according to a recent Goldman Sachs report.

The brokerage highlights that industry leader Astral Ltd. remains resilient, while smaller players like Prince continue to face margin pressures amid volatile PVC prices.

Astral stands out as Goldman Sachs' top pick, with the firm reiterating its 'buy' rating and revising the target price to Rs 2,170, implying a 27% upside. Astral's disciplined pricing strategy and margin management capabilities even in the face of fluctuating PVC costs position it favorably, said the firm.

The company also benefits from anticipated margin improvements in the second half of the fiscal year, driven by reduced marketing expenses and the re-launch of its paints business, added the report.

In contrast, Prince Pipes And Fittings Ltd. has been downgraded to 'neutral,' with its target price lowered to Rs 480, indicating a 13% upside. Goldman Sachs cited Prince's ongoing struggle to balance growth and margins, compounded by subdued demand recovery and PVC price volatility.

Although Prince's exposure to higher-margin CPVC products and its Lubrizol partnership were expected to bolster performance, disruptions in volume growth have hindered its recovery trajectory, said Goldman Sachs.

The brokerage also noted that while demand from the real estate sector shows signs of picking up, the broader market environment remains tepid. China's subdued PVC prices further indicate that any sharp rebound in the sector is unlikely, reinforcing Goldman's outlook of a slow and steady recovery.