Plastic Sector Check - Profitability, Demand Likely To Improve From H2 FY25E: ICICI Securities

ICICI Securities Report

Pipe demand and profitability are likely to improve in H2 FY25E as PVC prices have stabilised in August 2024. Volatility in PVC prices during June-August -24 had resulted in channel de-stocking which we believe could result in subdued Q2 FY25E for pipe companies.

However, as plumbing market remains buoyant, coupled with demand from infrastructure/agri segment and now with PVC prices stabilising channel inventory too shall normalise going ahead and we thus expect demand to be healthy in pipes segment during H2 FY25E (which is seasonally busy).

Pipe profitability, too, may improve in H2 FY25E driven by better product mix (higher plumbing sales which has better margins) and operating leverage.

We upgrade Prince Pipes and Fittings Ltd. from Add to Buy (due to reasonable valuations) with an unchanged June-25E target price of Rs 716 (post 9% correction in stock price over the past 1m), maintain Hold on Astral Ltd./Finolex Industries Ltd. (due to limited upside) and Reduce on Supreme Industries (rich valuations) with unchanged target prices.

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