Accumulate Prince Pipes and Fittings Ltd For Target Rs. 635 - Geojit Financial Services Ltd
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Strong volumes growth...
Prince Pipes & Fittings Ltd. (PPFL) 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
* 9MFY23, revenue grew by 11% YoY, led by 21% YoY volume growth.
* The volume growth was fueled by agriculture and stable plumbing demand as well as channel re-stocking.
* EBITDA declined by 63% YoY, largely due to inventory loss and a higher base.
* But on a sequential basis, Q3FY23 reported EBITDA margin was at 9.8%, exceeding the 5.1% average for the previous two quarters.
* Overall demand environment to remain steady, driven by benign input costs, and healthy demand from the agri. & housing segments.
* With the exhaustion of high cost inventory, the worst impacts on margins are behind us. We expect margins will gradually improve from hereon.
* We value PPL at a P/E of 24x on FY25E and maintain Accumulate rating with a target price of Rs. 635.
Volumes growth strong...
Revenue for Q3FY23 increased by 6% YoY, which was above our expectations, driven by a 35% YoY increase in volume. 9MFY23, volume grew by 21%. As per management, strong demand from the housing and agriculture sectors, as well as channel restocking, drove volume increase. During the quarter, PVC prices decreased by 36% YoY, leading to a 13% YoY decline in total realization. Going ahead, strong agri. and steady demand from the real estate sector will drive volumes for the company. We expect revenue to grow at a CAGR of 12% over FY23E– FY25E.
Input cost eases….
margins to normalise gradually In Q3FY23, reported EBITDA declined by 38% YoY, largely due to inventory loss and a high base, while EBITDA margin declined by 690bps YoY. On a sequential basis, however, the reported EBITDA margin was at 9.8%, exceeding the 5.1% average for the previous two quarters. The inventory loss for the quarter amounted to Rs.25-30cr. PAT fell by 47% YoY. We believe that the worst impact on margins has passed, and we anticipate continued margin improvement in the future, owing to higher volumes and stable raw material prices. We lower our EBITDA margin estimates by 150bps for FY23E & 80bps & 70bps for FY24E & FY25E, respectively, due to the short-term impact on margins.
Valuations
We expect volume growth to pick up, driven by the improvement in demand from the agriculture and construction sectors, and the softness in raw material prices. We value PPL at a P/E of 24x on FY25E and maintain Accumulate, with a target price of Rs. 635.
To Read Complete Report & Disclaimer Click Here
For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer
SEBI Registration Number: INH200000345
Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaime
