Prince Pipes Q1 Results Review - Operationally Weak; Healthy Volume, Soft Margin Outlook: Systematix

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Systematix Research Report.Prince Pipes and Fittings Ltd.’s weak operating results in Q1 (pipe volume up 14% YoY; Ebitda margin 9.6% and Rs 14.1/kg) was driven by a higher mix of lower margin agri products and advertising and promotion spend. Demand in April/May was healthy; Jun was impacted due to channel destocking post sharp decline in PVC prices. Capacity constraint also led to some loss of volume. Plant capacity utilization stood at ~60%, near its peak level of 65-70%. Channel destocked inventory in July owing to volatile PVC price; retail demand stayed strong though. Range-bound PVC price augurs well for demand of pipes incl. agri segment. Pan India manufacturing presence, after Bihar plant is operational in Q4 FY25, will drive volume and margins. TAM for Prince Pipes has expanded to ~Rs 600 billion spread over pipes, water tanks and bathware. After expansion in the key tier-II and III markets of West and Northern India; the company plans to launch bathware products (Q1 revenue Rs 50 million, loss Rs 40 million) in East and South market in H2 FY25. Bihar greenfield plant (45kt capacity in phase1) is on track to start production in Jan-25 will boost supply in the fast growing eastern market. It further plans to add ~40kt capacity across existing plants in two-three quarters. We cut earnings estimate by ~10%, factoring in lower margin outlook. We now estimate 18%/22%/21% CAGR in revenue/Ebitda/PAT over FY24-26E, on healthy volume (16% CAGR) and 12.5-13% Ebitda margin. On low return on capital employed (~19% in FY26E) and at ~26 times FY26E P/E on CMP, we downgrade our rating to Hold with a revised target price of Rs 679 (28 times FY26E P/E, earlier Rs 779). Strong volumes and margin expansions are keys for valuation re-rating.Click on the attachment to read the full report:.Apollo Pipes Q1 Review - Tepid Results; Robust Guidance Intact Though: Systematix.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Prince Pipes Q1 Results Review - Operationally Weak; Healthy Volume, Soft Margin Outlook: Systematix

Strong volumes and margin expansions are keys for valuation re-rating, says the brokerage.

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Prince Pipes Q1 Results Review - Operationally Weak; Healthy Volume, Soft Margin Outlook: Systematix

Strong volumes and margin expansions are keys for valuation re-rating, says the brokerage.

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