Update On Prince Pipes and Fittings Ltd By HDFC Securities
Prince Pipes indicated demand traction remains healthy, mainly for plumbing pipes. The soaring PVC resin prices have impacted the smaller players to lose market share. Prince expects its CPVC pipes revenue to gain from the recent deal with Lubrizol to manufacture ‘Flowguard’ brand CPVC pipes. Prince will continue to focus on capturing growth in the pipes segment. It is expanding its distribution network and has recruited professionals at senior level management. It can expand its capacity in north and south at a fast pace to meet demand as and when required. We do not have a rating on the stock currently.
* Demand outlook: The company noted that demand from real estate segment is not impacted on account of rising prices. However, it expects agri segment demand to be impacted. Prince has reduced its sales exposure to ~35% currently from 45% about 4-5 years back.
* Market size: Overall pipes industry is about INR 300 bn. Of this, CPVC is at INR 50bn, HDPE INR 5bn and the rest is mostly PVC. Organised players account for ~ 65% of the PVC market in India. Amid rising raw materials cost, smaller players are not able to grow, leading to market share gains for bigger players.
* PVC resin price trends: There has been a sharp increase in resin prices to INR 120/kg (vs INR 65-70/kg run rate a year back) and it continues to rise. About 50% of the resins is imported in India.
* Deal with Lubrizol: Prince entered into a 3-year deal with Lubrizol to produce and sell its ‘Flowguard’ brand CPVC pipes. As this is a wellaccepted product, the deal will help the company’s growth.
* Tank business: Prince guided that while it has entered into the tanks business, it will not be aggressive in this segment, in line with competitors. It would rather remain focused on growth in the pipes and fittings division.
* Growth plans: Prince is expanding its distribution network across India. It has also recruited many professionals in executive roles to drive sustainable growth. It can double its pipes capacity in Jaipur to 40K MT, at a shorter duration, as per the demand. Its recently commissioned Telangana factory can also be expanded up to 50K MT in phases (vs 4K MT) currently.
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