Prince Pipes & Fittings Ltd. share price target

Prince Pipes and Fittings (PRINCPIP) reported Q2FY24 pipe volume growth of 8.0% YoY (4-year CAGR of 4.7%) whereas revenue grew 3.1% YoY as realisation declined 4.5% YoY. Pipe EBITDA/kg grew 86% QoQ to INR 22.7/kg (vs INR -3/kg YoY) on a low base, driven by improved product mix, resulting in EBITDA/APAT growth of 108%/191% QoQ, respectively.

We visited the largest plant of Prince Pipes and Fittings (PRINCPIP) situated in Haridwar (Uttarkhand) on Sep 13-14, ‘23, and interacted with its management and its biggest pipe dealer of Haridwar. The Haridwar plant caters to markets primarily in North and East India.

Prince Pipes’s Q1FY24 numbers failed to impress with Revenue declining by 8.3% YoY at ? 554 Cr (as against ? 604 Cr Q1FY23), although, the Volumes increased by 19% YoY at 37,155 MT as compared to 31,250 MT in Q1FY23. The EBITDA was flat, improving by 200bps YoY at ? 45 crore versus ? 44 crore in Q1FY23, with enhanced margins by 80bps YoY to 8.1%.

Prince Pipes and Fittings (PRINCPIP) reported Q1FY24 pipe volume growth of 18.9% YoY (4-year CAGR of 2.3%), while revenue fell 8.4% YoY due to realisation decline of 22.9% YoY. EBITDA/kg declined 13.1% YoY to INR 12.2/kg (-63.6% QoQ) due to adverse product mix (higher agri pipe sales that have lower margins), lower fitting-to-pipe ratio due to ERP issues and inventory loss of ~INR 100mn (adj. EBITDA/kg of ~INR 15/kg).

We recently interacted with the management of Prince Pipes and Fittings (PRINCPIP) and learnt inter alia that demand in the ongoing quarter (Q1FY24) is healthy across the segments, i.e. plumbing, agriculture and infrastructure. Plumbing demand is strong as the housing market continues to do well, whereas agriculture demand has picked up due to lower PVC resin prices.

Prince Pipes reported robust numbers despite volatility in PVC prices, but still falls short to surpass yearly performance. Reporting a QoQ increase in revenue to ? 764 Cr from ? 706 Cr in Q3FY23, although registering de-growth of 15% YoY. Meanwhile, PAT jumped by a massive 168% QoQ to ? 94 Cr as compared to ? 35 Cr in the previous period, and a slight increase by 7% YoY.