Prince Pipes & Fittings Ltd

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Hello to all the senior and experience members of the forum, I have a question,
This is the PVC resin price PVC Resin Prices in India | To Get Free Rates Daily, Click Here Now

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So can we expect that in this quarter the sales will be down due to anticipation of price drop just like it happened in Q1? There will be inventory loss to I guess.
Is there any other source for tracking the PVC resin price. Because I don’t know whether this is correct.

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I have the distribution of pipes in another company while my brother has it for prince.

My observation is that (and my bias and also very local not pan India observation)

  1. it’s more about demand from the construction activity which is low. I guess the grassroot spending is subdued in general.
  2. prince kept the prices very low compared to competition. I can’t explain if it was by smart resin contracts or by contracting their margins. This helped them retain their market share. Infact increase it.
  3. the inventory with most distributors is low already. Because they were not purchasing in bulk. Only visible trednd has been buy what u can sell because no one knows when the markets will correct.

Any observation from the other board members is most welcome.

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So overall demand in this quarter is somewhat subdued from what you observed right? I guess it’s because of the sky rocketing price at the starting of this quarter.

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Thanks for giving insights. Can you please let us know if you are from Tier 2 or Tier 3 city. Also, can you get information from other distributors from Metro cities.

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PPFL gets a rating upgrade.

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Prince Pipes - Notes from AR 2020-21 -

  1. Total manufacturing plants - 07 @ Chennai, Dadra, Jaipur, Sangareddy, Kolhapur, Athal and Haridwar. Total installed capacity at 2,59,000 MTPA. A total of 11 warehouses across the country for efficient supply and timely service. Largest range of SKUs - 7200 plus. Among top 5 processors in the piping Industry.
  2. Technical collaborations with -

Lubrizol- world’s largest maker of CPVC compound. Lubrizol was also the inventor of CPVC.

Tooling Holland - A global leader in plastic moulds manufacturing.

  1. Sales at 2072 cr, up 27 pc
    EBITDA at 362 cr, up 58 pc
    EBITDA margin at 17.5 pc
    PAT at 222 cr, up 97 pc
    Long term debt free

These performance parameters in a pandemic year are truly commendable and shows the growth mindset of the company.

  1. New plant in Sangareddy ( Telangana ) helps the company expand distribution in South India. Prince flow guard plus ( CPVC Plumbing system ) helps the company engage with top quality distributors across the country to sell CPVC piping systems.
  2. Types of plumbing polymers and their applications -

UPVC - irrigation, cold water applications, drainage
CPVC - hot and cold water, industrial applications
HDPE - Underground drainage structured wall, WSS solid wall
PPR - Hot and cold water, industrial applications

Revenue mix by end users -

Irrigation - 33 pc
WSS and plumbing + Sewerage - 67 pc

  1. Indian pipes and fitting industry was estimated to be at 30,000 cr at the end of 2019. It is expected to reach 50,000 cr by 2025 growing at 12-14 pc CAGR on the back of various government initiatives like - Pradham mantra kris Sinchayee Yoyjna, Housing for all, Atal mission for rejuvenation and urban transformation etc. Among various types of pipes, CPVC is expected to be the fastest growing at a CAGR of 18 pc till 2025. UPVC , PPR and HDPE are expected to grow at 10, 11 and 11 pc CAGR till 2025.
  2. Industry growth drivers -

(a) Irrigation - Irrigation sector is the prime user of PVC pipes contributing 47 pc of total sales. Only 50 pc of India’s agri land is currently irrigated. Under PM kris sinchai yoyja, GoI is spending Rs 5000 cr over the next 5 yrs on micro irrigation projects. For long term, GoI has created another fund - Irrigation fund of 45000cr to finance irrigation related projects. Acc to CRISIL, investments in irrigation are expected to rise at 8-9 pc CAGR till FY 25

(b) WSS and plumbing - WSS and plumbing contribute 35-40 pc of PVC pipe mkt in India. Over the last 5 yrs, GoI has invested 41,600 cr in schemes likes her jam se nal which promises to bring piped drinking water to 14.6 cr rural households by 2024.

An amount of 60 lakh cr has been earmarked for Jal Jeevan Mission which aims to improve access to water in India’s water stressed districts.

Swatch Bharat mission Namami Ganga are further likely to boost construction of household, community and public toilets.

Other govt schemes include - AMRUT ( Atal mission for rejuvenation and transformation ) - to focus on basic infra such as water supply, storm water drains, development of green spaces and parks.

Smart city projects - core infra of smart cities include adequate water supply and sanitation facilities.

(c) Real Estate - prime consumer of plastic pipes and fittings. RERA, low rates, REITs, stamp duty cuts are all helping the sector. PM Awas Yojana is targeting housing shortage among the urban poor. RE sector in India is expected to reach $ 1 trillion by 2030 from $ 120 billion in 2017 and contribute 13 pc of country’s GDP by 2025. Other tailwinds for the sector include -

REITs led foreign investments at low interest rates
Sustaines demand from IT/ITeS, E-Comm, FMCG and healthcare players
Increased desire to own houses by residents and NRIs

MAJOR ADVANTAGES OF CPVC PIPES -

CORROSION RESISTANCE
EASE OF INSTALLATION
BETTER FLOW RATES
FLAME AND SMOKE RESISTANT

These attributes makes them ideal for home plumbing systems. They r also 4 times quieter than metallic pipes.

  1. Company Highlights - Company’s brands - Prince Piping systems and Trubore. Have expansive operations across agri, plumbing and bore well categories. Makes 7200 SKUs… is an end to end solutions provider. Extensive pan India distribution with 1500 channel partners. Has 07 manufacturing facilities …as covered earlier. Strategically located sites near RM and demand centres help reduce freight costs and improve efficiencies. Company has also appointed 05 contract manufacturers at - Guntur ( AP ), Balasore ( Odisha), 02 in Aurangabad and Hajipur ( Bihar). Company has 11 warehouses to focus on efficient and timely service.

Company makes products using all 04 polymers - UPVC, CPVC, HDPE, PPR.

Company making deeper in roads into tier-2,3 towns and rural areas.

A unique outsourcing strategy for eastern India has helped company expand there in an asset light model.

Company’s core strengths are its widespread manufacturing facilities ( both owned and third party ) and distribution networks.

Company also provides working capital channel financing to its channel partners… which is truly unique ( at least I think so ).

Disc : invested

Regards,
Ranvir Dehal

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it shows stock in ASM list, how much of a negative impact is this on the company?

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Q3FY22 Concall notes:

  1. CRISIL upgraded rating to A+ for long term and A1+ short term
  2. Challenging quater of industry: PVC price volatility caused destocking and unseasonal rainfalls. If PVC prices fall from here there will be invetory losses (But management thinks that PVC prices have bottomed out).
    1. Few days back, largest PVC european supplier has enabled Force Majure clause.
    2. But headwinds are short term
    3. Management is bullish for mid to long term as real estate demand is coming in.
  3. Only player to deliver a postive volume growth on a three year player.
    1. They have gained market share as performed better than peers
      1. Reached 6-6.5% from 5% few year ago
  4. They have pricing power in PVC pipes and trying the same in CPVC.
    1. CPVC segment is seeing robust volume: more than 30% volumne
    2. Realization for CPVC is going to improve from hear as there will be more price increase
      1. EBITDA per KG should see improvement going forward
  5. Water Tank:
    1. 2.5-3cr per month sales
  6. Management has taken decision to maintain high inventory due to supply issues in the industry.
    1. They don’t want to time the market to get the cheapest raw material rather they want to build brand and inventory availability is their focus.
      1. At the end of quater 4 they will normalize the inventory
    2. Even organised players are facing supply chain issues.
  7. Domestic price of PVC is lower than China and USA. If Anti-dumping duty is removed, management believes, even then the industry should not be affected.
  8. Coming quaters there will be Rs.30-40cr maintaince capex
  9. Bharat Shah from ASK Investment Management
    1. Q: What would the industry look like? How Prince will look going ahead? Competitive stregnths of Prince?
    2. Answer:
      1. Industry outlook:
        1. Major govt thrust (has been volume driver in past)
        2. Upturn in real estate segment
        3. Consolidation happening
      2. Prince’s position:
        1. Strong distribution network
        2. Expansion of product portfolio
        3. Commitment towards Branding: Focus on pull based system rather then push based.
      3. What competitors are doing well:
        1. Prince has to focus more on R&D for building new products
        2. Capital allocation and management: They want to be more discipline
          1. They want to use technology for the same.
        3. Do better in B2B segment as it as ripple effect in creating brand
    3. Q: Growth in volume over 5 year period? Will the profits grow higher or lower?
      1. Answer:
        1. If the real etate market takes upturn, 10-15% YoY volume growth should be possible.
  10. 1-2% is the piping requirement for any project
  11. Added 50 new distributors: quailty of partner over number (finanaically well off and growth hungry)

| Q3FY22 vs Q3FY21

(YoY Growth) Apollo Supreme Finolex (Pipes segment) Prince Astral (Pipes Segment)
Sales 9% (‐18%) (-15.3%) (-12%) (-4.45%)
Revenue 49% 5% 14.6% 21% 23.65%
EBITDA (15%) (19%) (-39.6%) (EBIT) 8% 5.64%
Net Profit (30%) (‐21%) (-31%) 1% 6.25%
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Below are the pointers for Q3 ConCall. Overall it looks like we have to wait further to see any action. Revenue growth on YoY despite decrease in volume is due to better product mix that gives confidence that management is moving in right direction.

Revenue Q3 FY22 664cr Q3 FY21 549cr. increase of 21.0%
Volume MT Q3 FY22 32,435 MT Q3 FY21 36,711 MT decrease of (11.6)%
Revenue growth led particularly by a better product mix towards VAP products
EBITDA at ₹ 111 crores as compared to ₹ 103 crores, grew by 8%, margins at 16.7% on YOY.
Despite a volume degrowth, the combination of Product Mix improvement and Operational Efficiencies have helped maintain healthy margins
Company continues to remain long term Debt Free for the period ending December 31, 2021

Key Business and Operating Highlights:
Prince Flowguard+ CPVC continues to make strong inroads in markets across India. Driven robust YoY volume growth and improved contribution to net revenues.
Positive Volume growth from pre-covid levels- 2-year Q3 FY19 vs. Q3 FY22 growth at 10%
STOREFIT Water Tank penetration continues to gain strong traction
CORFIT (Double Wall Corrugated Pipes) in the Underground drainage category continues to see strong growth.
CRISIL re-rating on long-term and short-term debt:
o Long term: CRISIL A+/Stable (Upgraded from CRISIL A/Positive)
o Short term: CRISIL A1+ (Upgraded from CRISIL A1)
Prince Pipes is now officially a Fortune India 500 company

About the Company:
Prince Pipes and Fittings Limited has 7 state-of-the–art manufacturing units located across the country
2021- begins its Commercial Production at Telangana, sooner than its prescribed time schedule.

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Today pledge was created by Management.

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Does anyone have the revenue CPVC:UPVC breakup for Prince Pipes and competitors? Maybe a high CPVC contribution to revenue is the reason why Astral commands such a premium?

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Q4FY22 concall notes.
Credit: Saket Reddy

  • PVC Prices softened in January & February, went up in March. Seen significant correction in past month. There could be some inventory loss in Q1.
  • Sales Force automation to come up by end of Q1 and Distribution Management system in next 2 quarters.
  • Launched CORFIT Manhole Chamber, will cross sell to DWC Pipe customers. Mandatory to have a chamber for every 30 meter of pipe.
  • Plan to setup HDPE product PEFit in Telangana facility, already setup in Jaipur.
  • Volumes indicate Market Share gains.
  • Inventory levels shall get normalized by end of Q1. Now at 85 days, normal level is 60-70 days.
  • EBITDA Margins guidance for FY23 at 13-15%.
  • CPVC is fastest growing market and market size is around 150KT. PRINCE is undisputed leader.
  • Seen Demand and segment revival in March led by Plumbing and SWR products.
  • Been heavily investing in branding and distribution network.
  • CPVC (on the back of a high base) and PVC grew at a similar pace.
  • CPVC raw material availability is not yet easing, but have good supply security.
  • Water tank business shaping up well. Distribution channel is same as pipes. Have strong brand equity in tanks, reached 2-3Cr sales per month runrate.
  • Most of the CAPEX is onstream, no major capacity coming up. 40-50Cr CAPEX would be maintenance and for debottlenecking.
  • Focus on ramp up from current facilities and market share gains for next 4 quarters.
  • 35-40KT capacity ramp up from Telangana and Jaipur.
  • Can hit peak utilisation of 70-75%, true picture of capacity utilisation will come by end of FY23,
  • HDPE demand coming from Infra followed by retail market.
  • Lower PVC pricing bodes well for Agri demand pickup.
  • Will continue to outpace industry volume growth by 2-3% on base case. Industry can grow comfortably in high single digits.
  • Some new products to have double gross margins than current portfolio but will be on a low base.
  • Have enough land to expand capacity further.
  • Telangana capacity ramp up delayed by 1-2 quarters
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What will be the growth expectation considering Telangana plant ramp up delays ? Haven’t mentioned in the Q4 concall.

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10% volume growth (7-8% industry growth+2-3% outperformance growth). Plus some extra due to shift towards cpvc. with some operating leverage expect 15% pat growth. rough estimation.

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@JuhiUpadhyaysquirrel Better opportunities are present. So I’m not putting any incremental capital here. Im already invested and maxed out my position.

take a look at apollo pipes too. company is also foreying into sanitaryware business. so total addressable market size is bigger. not invested in apollo though.

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Recovery in PVC prices not expected anytime soon - PVC | Finolex: Expect PVC will be dumped in India and hence a downward trend: Finolex CEO

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Prince pipes Q3 22 concall highlights -

Some tailwinds-

PM Jai Jeevan’s budgetary allocation up 27 pc

PM Awaas’s budgetary allocation up 65 pc

Budgetary allocation for infra spending up 33 pc

PVC prices corrected by unprecedented Rs 66/kg from Apr-Nov. Prices now firming up

Firming up of prices leading to positive sentiment in sales channels and eventually causing re-stocking

Prince Pipes volume growth for Q3 at 35 pc, revenues up 6 pc yoy

Rebound in margins from Q2 ( depressed ) levels. Likely to go up in Q4

Company- long term debt free

Net working capital days down at 44 days from 68 days qoq

Bathware ground work done (finalising designs, cost structures, sales teams, outsourcing teams)

To be launched by Apr 23

Plumbing and Agri restocking nearing completion by Dec end due massive 35 pc volume growth

Expect normalised volume growth going fwd

Water tanks being made in house. Good product acceptability. Expect significant contribution in 3-5 yrs

Inventory loss in Dec Qtr was around 27 cr in Dec Qtr due falling prices / holding of high cost inventory

Continuously introducing newer value added products. They ll improve brand image and margins in long term

All the high cost inventory has now been consumed

Agri supplies is 30 pc of company’s revenues. Demand now picking up here

Telangana plant’s ( new one ) capacity ramp up on track - on expected lines

66 pc of business from RE sector. 3-4 pc from infra sector

No major capex plan in foreseeable future. A lot of heavy capex in Jaipur and Telangana is behind

CPVC contribution to revenues at 20 pc. This is highest margin contributor

Bullish on growth in next 2-3 yrs due real estate up cycle

Revenue split between Retail:Projects at 75:25

CPVC volume growth in double digits in 9M FY 22

Disc: invested, biased

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Was listening to the Astral concall and even they seem to be hopeful that the prices would stabilize in the current quarter. Also, the volumes have seem to gone up for most of the PVC companies in the last quarter. I think the sector may recover this year. Astral seems to have invested a lot of capex during covid and the management was confident that most of it would come online this year. So, between Supreme, Astral and Prince, there is not a single company that gives me full confidence (because some of them are overpriced and the others may face severe competition from the capex coming online), so I am planning invest in the sector rather (basket of companies).

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A lot of factors here seem to depend on macros. Everyone expecting the “real estate” and “PM Jal Jeevan Yojana” cycle to play out for the growth while we are not even sure that whether Prince pipes(which has a smaller capacity and market presence) will be the one to benefit from it or Astral
(which has a large capacity and doing capex to increase it even more).+ Finolex CEO said that PVC prices are likely to be down for quite sometime as PVC from China will be dumped on India.
Please let me know ur views.
disc.- Invested in prince pipes since 1 year but wasn’t able to identify these points at that time :slight_smile:

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