Prince Pipes & Fittings Ltd. share price target

Prince reported strong volumes and fragile margins, while the EBITDAM and PATM saw decline in YoY and improvement in QoQ (-690 bps/-500 bps and 1,160 bps/880 bps YoY/QoQ respectively). In Q3 FY23, despite an inventory loss of ?25-30Cr, the company reported an improvement in the margins on QoQ basis on the back of 35% growth in volumes and ?13 per kg growth in price.

Prince Pipes and Fittings (PRINCPIP) reported a better than expected Q3FY23 pipe volume growth of 34.7% YoY (3-year CAGR of 12%) on a low base. Demand was driven across segments (infrastructure, plumbing and agri) and by dealer restocking, as PVC prices stabilised at the end of the quarter.

Pipe demand has improved from December as PVC prices have started stabilising post FY-TD correction of ~35%. The company expects at least double digit volume growth in H2FY23.

Prince Pipes and Fittings (PRINCPIP) reported revenue decline of 16.4% YoY (+5% QoQ; 3-year CAGR of 14%) in Q2FY23 with volumes down 10.2% YoY (3-year CAGR of 3.6%) as dealers de-stocked due to fall in PVC prices.

Prince reported fragile volumes and margins, while the EBITDA and PAT margins saw a sharp decline (410 bps/530 bps and 510 bps/730 bps YoY/QoQ respectively) in Q1FY23.

Prince Pipes and Fittings (PRINCPIP) reported an EBITDA margin decline of 522bps/833bps YoY/QoQ (gross margin contracted by 900bps/651bps YoY/QoQ) due to inventory loss of ~Rs300mn-350mn as PVC prices fell during the quarter.

Prince has been enjoying high valuations since its IPO. We believe it is well-positioned to capture incremental market share and continues to be a strong challenger brand to sector leaders. The margins were a bit shy in FY22 as PVC prices declined, but it will improve steadily in FY23-FY24.