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Highest quarterly volumes!

Our view

Prince Pipes & Fittings Ltd (PP&F) reported highest quarterly volumes on account of strong demand from plumbing and SWR segment. Owing to robust demand from real‐ estate segment, rapid formalization of industry & expected pickup in rural segment, we reckon PP&F to report volume growth of 15% CAGR over FY21‐FY24E. Moreover, company is focused on enhancing contribution of value added products which will enable the company to maintain their operating margins. Hence, we reckon PP&F to report Revenue/EBITDA/PAT growth of 12%/8%/11% over FY21‐F24E.

Result Highlights

* Volumes: Company reported highest quarterly volumes of 42,845Te, a growth of 22% YoY & 132% QoQ. Sales volumes were above our estimates of 40,413Te.  

* Revenue for the quarter stood at Rs7,610Mn (5% above our expectations), reporting a growth of 66%YoY & 130% QoQ which was largely owing to robust growth in plumbing & SWR pipes. Realizations for Q2FY22 came in at Rs178/kg Vs Rs131/kg & Rs179/kg in Q2FY21 & Q1FY22 respectively.  

* EBITDA grew by 53%YoY & 197% QoQ to Rs1,227Mn. EBITDA/Kg came in at Rs28.6 as compared to Rs22.8/Rs22.3 in Q2FY21/Q1FY22 respectively.

* Net profit stood at Rs761Mn as against Rs466Mn/Rs178Mn in Q2FY21/Q1FY22 respectively. Net profit margins came in at 10% in Q2FY22 Vs 10.2%/5.4% in Q2FY21/Q1FY22 respectively.  

* WC‐Days for quarter stood at 70days, wherein debtors/inventory/creditors came in at 48/86/64 days respectively.

Valuation

At CMP, PP&F is trading at 35x/28x on FY23E/FY23E EPS of Rs22/Rs27 respectively. We continue to value the company at a P/E multiple of 30x on FY24E EPS and maintain our target price of Rs817/share, implying an upside of 8% from CMP. We change our rating from BUY to ADD.  

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