Prince Pipes Report - Omkar Amin

PRINCE PIPES AND FITTINGS
CMP= INR 690

TGT= INR 950
Company Overview:
Prince Pipes & Fitti is involved in the business activities of the
Manufacture of plastics products. Company’s Total Operating Revenue is Rs.
2071.52 Cr. and Equity Capital is Rs. 110.03 Cr. for the Year
Q3FY22 Performance:
: Sales volume fell 12% YoY (down 24% QoQ) in Q3 on-

demand disruption, a high base, and inventory
destocking by dealers. CPVC volumes, however,
continue to grow (+30% YoY and also rose QoQ), thus
improving the product mix. This helped NSR firm up
37/15% YoY/QoQ. Improved product mix, QoQ inventory
gains (~1.5% of sales), and raw material cost pass-
through boosted unitary EBITDA by 22/20% YoY/QoQ to INR 34/kg. Robust pricing
caused revenue/EBITDA/APAT to grow 21/8/1% YoY, despite a 12% volume decline.
● Shareholding Pattern (%):
Sep-21 Dec-21
Promoters 63.25 62.94
FIs & Local MFs 11.77 13.75
FPIs 3.60 4.84
Public and Others 21.38 18.47
Pledged Shares – -
2
● Concall Key Takeaways:
❖ Demand and pricing trends:
1. Destocking, unseasonal rainfalls, higher base led to a 12% YoY volume
decline in Q3. CPVC volumes rose 30%+ YoY, owing to strong demand.
However, PVC sales declined sharply.
2. Product mix (more CPVC sales) is the largest driver of improvement in
realization. RM and FG prices have been on a rise in CPVC. Expect it to
increase further, going forward. The company also expects PVC
demand to remain buoyant. PVC resin supply is expected to remain
tight globally and, hence, resin prices are not expected to go back to
the previous low levels.
3. Project sales comprise 20% of Prince’s current revenue. It is working
hard to expand its B2B sales and aiming to increase the share to ~25%
in the next few years.
4. Storefit (water tank) revenue run-rate has increased to INR
25-30mn/month (2% of topline).
❖ Industry trends:
1. Pipes' demand will face challenges in the short term. Bullish on-
demand in the medium to long term as real estate demand is expected
to be good. Government thrust on pipe water will be the main
contributor to improved demand.
2. PVC and CPVC supply: At the industry level, PVC supply has normalized.
A large European PVC manufacturer declared force majeure a few days
back, which can push resin prices up in the near term. CPVC supply is
still lower compared to demand.
3. Competition trend: Another organized player entering the pipe
segment from the allied segment is good for the industry, as it will lead
to better pricing. Pipes dealers normally stock about 30 days of
inventory. Amid the resin price fall, this fell sharply.
3
● Key operational and financial assumptions:
FY19 FY20 FY21 FY22E FY23E FY24E
Pioes Sales Volumes 129.1 132.8 138.3 137 164.4 197.3
YoY (%) 17.8 2.9 4.1 0.9 20 20
NSR (Rs/Kg) 122 123 150 190 179 180
YoY (%) 1.5 1.2 21.6 26.8 6.0 1.0
● Key Financials:
4
SWOT ANALYSIS OF PRINCE PIPES
STRENGTHS WEAKNESS
● Strong Brand Equity and Brand ● Easily replicable Business

Awareness. Model.
● Robust Domestic Market. ● Lack of Critical talent
● A strong relationship with ● Production Management is
existing suppliers. too focused on the internal
● Strong Balance sheet and level.
Financials. ● The decline in Net Profit
● Strong Annual EPS Growth (QoQ).
● Company is in low debt. ● Lack of Workforce Diversity.
● The company has delivered
good profit growth of 49.72%
CAGR over the last 5 years
● Company with zero promoter
pledge.
● High Pitrioski Score.
OPPORTUNITY WEAKNESS
● Increase in Consumer ● Reducing Costs and

Disposable Income. Increasing efficiency can lead
● Increasing Standardization. to new market entrants.
● Changing Technological ● Credit Binge post-2008
Landscape. recession.
● Access to International Global ● Government regulation and
Market. Bureaucracy.
● E-Commerce and Social ● Increasing Bargaining power
media related Business of buyers.
Models. ● Increasing Trend in Non-Core
● Growing Market size. Income.
● Rising Delivery percentage. ● Increasing cost component for
● High Momentum score. working.
● RSI Indicates price strength.
5
PORTER FIVE FORCES ANALYSIS
Bargaining Power of High Buyers are often a demanding lot. They

Customers want to buy the best offerings available by
paying the minimum price possible. This
put pressure on Prince Pipe Company's
profitability in the long run. The smaller
and more powerful the customer base is
of Northwest Pipe Company the higher
the bargaining power of the customers
and the higher their ability to seek
increasing discounts and offers.
Bargaining Power of Moderate Suppliers in dominant positions can

Suppliers decrease the margins Prince Pipe
Company can earn in the market.
Powerful suppliers in the Basic Materials
sector use their negotiating power to
extract higher prices from the firms in
Steel & Iron fields.
Threats of New Entrants High New entrants in Steel & Iron bring
innovation, new ways of doing things, and
put pressure on Prince Pipe Company
through lower pricing strategy, reducing
costs, and providing new value
propositions to the customers. Prince Pipe
Company has to manage all these
challenges and build effective barriers to
safeguard its competitive edge.
Threats of Substitute High When a new product or service meets a

Products similar customer needs in different ways,
industry profitability suffers. For example
services like Dropbox and Google Drive are
substitutes for storage hardware drives.
The threat of a substitute product or
service is high if it offers a value
proposition that is uniquely different from
the present offerings of the industry
6
Rivalry among High It has high competition in the sector like

Competitors Ambuja Cements, Century Text, Jain
Irrigation, etc. If the rivalry among the
existing players in an industry is intense
then it will drive down prices and decrease
the overall profitability of the industry.

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PRINCE PIPES AND FITTINGS

CMP= INR 690

: Sales volume fell 12% YoY (down 24% QoQ) in Q3 on-

● Shareholding Pattern (%):

Promoters 63.25 62.94

FIs & Local MFs 11.77 13.75

FPIs 3.60 4.84

Public and Others 21.38 18.47

FY19 FY20 FY21 FY22E FY23E FY24E

Pioes Sales Volumes 129.1 132.8 138.3 137 164.4 197.3

YoY (%) 17.8 2.9 4.1 0.9 20 20

NSR (Rs/Kg) 122 123 150 190 179 180

YoY (%) 1.5 1.2 21.6 26.8 6.0 1.0

● Strong Brand Equity and Brand ● Easily replicable Business

● Increase in Consumer ● Reducing Costs and

PORTER FIVE FORCES ANALYSIS

Bargaining Power of High Buyers are often a demanding lot. They

Bargaining Power of Moderate Suppliers in dominant positions can

Threats of Substitute High When a new product or service meets a

Rivalry among High It has high competition in the sector like

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