Prince Pipes - Volume Revival Anticipated; Aquel Brand To Expand Reach: Geojit

Geojit Research Report

Prince Pipes and Fittings Ltd. is one of the leading manufacturers of plastic pipes in India, with 5.5% of the overall market share. Products are marketed under the brand names: Prince Piping Systems and Trubore.

• 9M FY24 earnings hiccups already priced in, we reiterate our positive stance given a robust 30% compound annual growth rate in earnings over FY24E-26E.

• In 9M FY24, revenue declined by 6% YoY due to a 13% YoY realisation drop, and volume grew only by a modest 7% YoY.

• The gross margin increased by 790 basis points YoY due to lower input costs, although from a lower base. However, Ebitda margin expansion was constrained to 12.2% due to higher costs and ERP implementation.

• Going ahead, healthy demand from construction and plumbing, a strong summer, better pricing actions and stable input prices will drive volumes.

• Acquisition of bathware brand ‘Aquel’ complements the existing product portfolio, will foster growth.

• We anticipate Ebitda margins to be in the range of ~12.1-13.3% over FY24E-FY26E, driven by volume and ease in input cost.

• We value Prince Pipes at a price/earning of 25 times, as we roll forward to FY26E and reiterate to Buy with a target price of Rs 659.

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