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Result Synopsis

Prince Pipes & Fittings Ltd (PP&F) registered a decent volume growth of 13.5%YoY (2-Year CAGR stood at 16%) owing to healthy demand from plumbing and SWR segment. In June’24, sharp increase in PVC resin prices impacted volumes as channels maintained below-normal inventory. Though volume growth was in-line with our estimates, EBITDA/kg contracted sharply to Rs14.8 (expectation of Rs16.4) Vs Rs12.2/Rs17.9 in Q1FY24/Q4FY24 respectively on account of adverse product-mix and higher branding cost. Notably, working capital improved to 80-days Vs 95-days as of March’24, largely owing to normalization of debtor days to 61 as against 83 in March’24. The Bihar expansion is on schedule & will cater to the growing demand in East India. PP&F commenced sales under Aquel brand in North & West India and will expand presence in Pan-India over coming quarters. Management maintained their volume growth guidance of ~15% and margins are likely to be ~12-13% for long-term.

We reckon volumes to grow by 16%CAGR over FY24-FY26E owing to strong demand from plumbing and infra segment. Moreover, commencement of Bihar facility will boost volumes going ahead. Incrementally, company is planning to add 35-40,000Te via debottlenecking at existing facilities which will be ready in coming 3-quarters. Pipes revenue is expected to grow by 16%CAGR over FY24-FY26E, we have factored in no major expansion in ASP as we believe PP&F will focus more on volume-push. We have revised our EBITDA/Kg estimate downwards to Rs17.5 for FY25E owing to abysmally low margins in Q1FY25 and to Rs20 for FY26E. Hence our EPS estimates have been cut by 6% to 25.7 for FY26E. At CMP, PP&F trades at P/E(x) of 42x/25x on FY25E/FY26E EPS respectively. We continue to value the company at P/E(x) of 30x on FY26E EPS, arriving at a target price of Rs771 (previous target of Rs819), Hence we maintain our BUY rating on the stock.

Result Highlights

* Pipes volumes grew by 13.5%YoY (led by growth in plumbing & SWR segments) & declined by 18%QoQ to 42,180Te. Realizations came in at Rs143 Vs Rs149/Rs144 in Q1FY24/Q4FY24 respectively. Revenue stood at Rs6.05Bn (marginally below est), an increase of 9%YoY & a decline of 18%QoQ.

* EBITDA margins came in at 9.6% (Vs est of 11%) Vs 8.2%/12.5% in Q1FY24/Q4FY24, respectively. Absolute EBITDA stood at Rs583Mn, a growth of 29%YoY & degrowth of 37%QoQ. EBITDA/Kg stood at Rs14.8 Vs Rs12.2/Rs17.9 in Q1FY24/Q4FY24 respectively.

* Net profit for the quarter stood at Rs247Mn, up by 26%YoY & a decrease of 55%QoQ.

* The company commenced sales of ‘Aquel by Prince’ in North & West India.

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