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CPVC prices tread higher on customs duty hike; preliminary findings favour anti-dumping duty
With the increase in customs duty on CPVC resin from 7.5% to 10% in the FY20 Union Budget, the landed price of imports of CPVC resin (from China and Korea in particular) have correspondingly risen. This has forced CPVC pipe players (sourcing resin/compound from China/Korea) to take a price increase of 3% in CPVC pipes last week. Major CPVC pipe players, who too have announced similar price hikes (without corresponding cost increase as their sourcing of CPVC resin/compound fall under free trade zone) last week, are thus likely to be the key beneficiaries. Further, with the government recommending provisional antidumping duty on resin/compound sourced from China/Korea, the CPVC prices are likely to tread higher in the near term. Maintain our HOLD rating on ASTRA (Astral Poly Technik) and SI (Supreme Industries).
* Top CPVC pipe players stand to gain on recent CPVC price hike. With the increase in customs duty on CPVC resin from 7.5% to 10% in the FY20 Union Budget, the landed price of CPVC resin imports into India (from China and Korea in particular) have risen 3%. This has led to majority of the domestic CPVC pipe players increasing prices by 3% last week. While the price hike for players sourcing CPVC resin from China/Korea is a direct pass-through, it is margin-accretive for players like ASTRA, Ashirvad (by Aliaxis), Supreme Industries and FNXP, which import resin/compound from the US and Japan falling under free trade zone regulations and are thus immune to the custom duty hike.
* Preliminary findings are in favour of anti-dumping duty (ADD) imposition on CPVC resin/compound imported from China/Korea. The ministry of commerce and industry, vide notification F.No.6/3/2019-DGTR dated 12th Jul’19, has imposed a provisional anti-dumping duty on imported CPVC resin/compound from producers/exporters from China and Korea. The provisional duty is the difference between landed value of the CPVC resin/compound imported and the amount notified, provided landed value is less than the recommended value. Considering the quantum of amount notified and provided the same is notified in the final findings, the ADD would make the Chinese and Korean imports (constituting 30% of the overall imports of CPVC resin/compound) non-competitive vs its major global peers (US/Japan in particular). This would pave the way for top Indian CPVC pipe players (sourcing resin/compound from US/Japan) to further consolidate their market share.
* ASTRA, Ashirvad (by Aliaxis) and SI are likely to be the key beneficiaries. With the top players like ASTRA, Ashirvad (by Aliaxis), Supreme Industries and FNXP importing CPVC resin/compound from US/Japan, they are expected to become more competitive and likely to further consolidate their market share aided by the recent hike in custom duty on CPVC resin and if the provisional ADD is finally notified in the near future. ASTRA, being the largest CPVC pipe maker, is likely to be the biggest beneficiary in the near term.
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