Prince Pipes - Strong Volume Recovery In Sight: Systematix

Systematix Research Report

We hosted the management of Prince Pipes and Fittings Ltd. at our investor conference. The management sounded positive on the healthy demand scenario of PVC pipes.

For Prince Pipes, management believes in strong recovery in volumes Q3 onwards after two-three weak quarters impacted on enterprise resource planning implementation. Ebitda margins (Q2: 14.3%) should also remain healthy on stable PVC price and superior product mix.

The greenfield plant in Bihar (Rs 1.5 billion capex; 35 kilo tonne capacity) is likely to be operational by Q4 FY25 and will boost its presence in the fast-growing eastern market (15-20% revenue mix).

It eyes Bihar plant to be the largest for itself in next three years having comprehensive range of product offerings.

Its bathware foray would enhance its brand visibility and direct connect with end consumers. After distribution set up in North and West India, it plans to enter East and South India in the next two-three quarters.

We remain positive on Prince Pipes and estimate 14%/42%/59% compound annual growth rate in revenue/Ebitda/profit after tax over FY23-25E on healthy volume (16% CAGR) and margins, resulting in healthy operating cash flow and return on capital employed (25%). Maintain 'Buy' and target price of Rs 884 (32 times FY25E price/earning).

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