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Robust volume growth, Retain ADD!

Result Synopsis

Prince Pipes & Fitting Ltd (PP&F), registered a strong quarter wherein revenue grew by 6%YoY & 11%QoQ. Volume in Q3 showed robust growth of 35%YoY &14%QoQ to 43,693Te, driven by strong volume growth on account of restocking at dealers?end and robust demand from both plumbing & agri?segment. ASP declined from Rs205/Rs165 in Q3FY22/Q2FY23 respectively to Rs162/kg, owing to fall in PVC prices during Oct?Dec’22 (inventory loss was ~Rs250Mn), while CPVC prices remained stable during the quarter. Consequently, margins remained subdued at 10% during Q3FY23. CPVC constitutes 20% of overall biz and registered double digit volume growth in 9MFY23.   Company introduced two new world class plumbing solutions: Skolan Safe ? Premium Polypropylene Silent Drainage System & Prince Hauraton ? Modern Range of Surface Drainage solutions. Better affordability has improved demand across housing and agriculture sector & management is confident of outperforming industry growth rate of 6?7% in volume terms. With stability in PVC prices, management expects the margins to remain at 13?15%,   We reckon, with healthy demand from plumbing segment & rural demand expected to bounce back in up?coming season, company’s volumes should grow by 12.5%CAGR over FY22?FY24E & revues are expected to report a 8%CAGR over similar period. Additionally, operational margins should come in at 14% from FY24E. We continue to value the company at P/E(x) of 30x on FY24E EPS of Rs22.8 (revised upwards by 7%). Hence we retain our ADD rating on the stock.

Result Highlights

* Volumes stood at 43,693Te (12% above est), reporting a growth of 35%YoY & 14%QoQ.

* Revenue for the quarter stood at Rs7.06Bn (est Rs6.23Bn), registering a growth of 6%YoY & 11%QoQ on account of healthy volume growth.

* ASP came in at Rs162/Kg during the quarter Vs Rs205/Rs165 in Q3FY22/Q2FY23 respectively.

* EBITDA margin came in at 9.8% (est.6.5%) as compared to 16.7% in Q3FY22 and negative operating margin of 1.8% in Q2FY23. Absolute EBITDA stood at Rs695Mn, declined by 37.5%YoY.

* Net profit stood at Rs 354Mn, declined 47%YoY (Vs our estimate of Rs139Mn)

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