If we talk specifically about price so according to management commentary they said that they are participating in Jal Jeevan Mission. In PVC they have participated in SWP not that keen but yes they participated, reason for not actively participating is extremally difficult margins and also demand is not consistent. so accordingly, it is one of the growth driver for industry but not the primary driver for growth of industry.
1 Like
Prince Pipe update Q4 FY 23
Q4 FY23 revenues at ₹ 764 crore as compared to ₹ 901 crore in Q4 FY22
o Volumes in Q4 FY23 at 44,317MT as compared to 45,287 MT in Q4 FY22
o EBITDA for Q4 FY23 improved by 6% YoY at ₹ 148 crore versus ₹ 140 crore in Q4 FY22
➢ Margins enhanced significantly by 380 bps YoY to 19.4% in Q4 FY23
o PAT improved by 7% YoY for the quarter at ₹ 94 crore as compared to ₹ 88 crore in Q4 FY22
o Company continues to remain long term debt free during the quarter
Revenues in FY23 grew by 2% YoY to ₹ 2,711 crore from ₹ 2,657 crore in FY22
o Volumes improved by 13% YoY in FY23 to 157,717 MT compared to 139,034 MT in FY22
o EBITDA at ₹ 250 crore in FY23 vs. ₹ 415 crore in FY22
o PAT in FY23 at ₹ 121 crore as compared to ₹ 249 crore in FY22
o Short term debt reduced from ₹ 150 crore in March 2022 to ₹ 58 crore in March 2023
o Working capital days – 57 days as on March 2023, (68 days as on March 2022)
➢ Inventory days ‐ 57 days vs. 85 days as on March 2022
➢ Debtor days ‐ 56 days vs. 60 days as on March 2022
➢ Creditor days ‐ 56 days vs. 77 days as on March 2022
Looks like the Inventory loss cycle is finally over. The same has been bought out by the management. There has been decent growth in volumes for the year even though it has not been that profitable.
Performance for FY23 was adversely impacted by sharp decline in PVC prices leading to destocking
and inventory losses severely impacting performance in H1 FY23.
➢ After a steep correction of ~ Rs. 66 per kg from April till November 2022, PVC prices recovered by ~ Rs. 11 per kg till March 2023.
➢ Capex of 150 cr for eastern region
➢ Implementation of ERP
➢ launched wirefit and one fit for industrial use
➢
➢Ebitda Margin is back to high doiuble digit.
➢company has gained market share in this downturn.
➢Operating leverage will kick in with growth in revenue and fresh inventory being at low price.
➢ Management talks of benefit from industry consolidation and balance sheet constraints in many small unorganized players.
The same should be visible in piping players as a group.
waiting for their concall for better understanding, though this business doesn’t have lot of moving parts.
best
Divyansh
6 Likes
Q4FY23 Con-call Updates
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Continue product expansion with launch of state of art products in piping division which brings innovation & global products in Indian market.
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planned greenfield expansion in state of Bihar. The expected capacity of piping plant would be around 35000 MT initially which is investment of Rs. 150Cr. which includes land and adequate infrastructure plan to commence production by Q4FY25.
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Bathroom Segment: Vendors and designed have been finalized & core team building including 3 state heads & services engineers have already been appointed.
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Set to launch entire bathware range in end of Q1FY24.
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Debtor days decreases from 60 in 2020 to 56 days in 2023.
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Inventory days decreases from 85 days in 2020 to 57 days in 2023.
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Overall working capital days was 68 in march 2022 to 57 days in march 2023.
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Transferring from traditional legacy system to Global ERP system this implementation face certain challenges & thus affect Q1FY24 result.
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They have done 30Cr. of net sales in FY23 and for FY24 they are planning to double there sales of water tank.
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Margin in storage tank is same as pipes & fittings which is 12 to 14%.
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FY24 capex 80-84Cr. for land & building in Bihar and 80-85Cr. maintenances capex.
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Total Advertising expenses in Q4Fy23 is Rs. 12 Cr. and for whole year is 125Cr.
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Company source 45% of Raw material (PVC resin) locally from reliance and chemplast and remaining import.
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Company has 10% market share in CPVC and 7% market share as whole.
6 Likes
Prince pipes Q4 concall -
Q4 outcomes -
Revenues at 764 vs 901 cr YoY
Volumes at 44.3k MT vs 45.3k MT
EBITDA at 148 vs 140 cr, Margins at 19.4 pc vs 15.6 pc (significant improvement)
PAT at 94 vs 88 cr
FY 23 outcomes -
Revenues at 2711 vs 2657 cr
Volumes at 157k MT vs 139k MT (up 13 pc)
EBITDA at 250 vs 415 cr
PAT at 121 vs 250 cr
Short term debt reduced from 150 to 58 cr
Inventory days at 58 vs 85 days
Working capital days at 57 vs 68 days
FY 23 performance adversely affected by steep fall in RM prices in H1 causing inventory losses
To launch One Fit and Wire Fit products in piping division to bring global technology to India
Aiming to add 35k MT capacity in Bihar(Greenfield)
Bathware launch planned in End of Q1
Company migrating to ERP from legacy systems. May have some adverse impact in Q1
Current number of production facilities - 07, Warehouses - 09, SKUs - 7200
Capex towards Bihar expansion to be around 80 cr. To commence production by Q4 of FY 25. Plus around 70 cr of maint capex
Uptick in RE industry is strong
Q1-Q3 saw significant sale losses due inventory de-stocking due RM price cuts
Q4 saw an inventory gain of apron 25 cr
Demand continues to be extremely strong in Q1 across Agri and RE sector
Channel inventory is low due strong end demand
Previously commissioned plant at Telangana operating at 40 pc
Storage water tanks sales in FY 23 @ 30 cr. Intend to double it in FY 24
CPVC is a key focus area for the company specially after the flow guard ( Lubrizol ) tie-up
Jal Se Nal is a decent revenue contributor
Company doesn’t sell directly to the Govt. Sells it through local distributors to avoid credit risk
Jal Se Nal scheme is likely to continue for foreseeable future
Ex of Q1, expect 10-12 pc volume growth in FY 24
RE (building materials) is the main focus area for the company
Agri segment helps absorb fixed costs
Advertisement expenses for FY 23 @ 42 cr
90 pc of cost for changing over to ERP system already baked in FY 23 numbers
Company procures CPVC from Lubrizol and PVC from RIL and Chemplast Sunmar in addition to imports ( in case of PVC )
Expect 14-15 pc EBITDA margins over long term
Most inventory gains/losses should even out over 4 Qtrs barring wild fluctuations in RM prices that company saw in FY 22, 23
Inventory loss in FY 23 was 125 cr
CPVC prices have also cooled off
Local players and Lubrizol increasing CPVC capacities in India - long term positive
This will make CPVC more affordable and help the top 4 players
Infra demand comprises aprox 10-12 pc of Industry today
Expecting 15-20 pc 2-3 yr CAGR volume growth going fwd
Company has early mover advantage in East India
Company’s CPVC mkt share is around 10 pc which contributes 25 pc of company’s revenues. Overall Mkt share is around 7 pc
Disc: holding
5 Likes
The company has moved into sanitary ware and had a launch meeting in Goa today.
It’s a natural horizontal expansion for the company becuae the same customers use the pipes who use new sanitry ware like sinks bathroom fittings and commodes etc.
If quality of products is decent then it will be a great fit for the company.
It’s slightly less cluttered than pipes segment. In pipes duplicate products is rampant. So i think better margins shoild come in this segment if played correctly by the company.
The project in Bihar’s begusarai is going to give a huge edge because transportation is the biggest overhead in terms of charges. Almost all big pipe companies operate from the west India only
4 Likes
My notes of Q1FY24 concall
- Q1FY24 faced operational challenges due to an ERP upgrade.
- Disruptions impacted volumes and product mix, particularly in pipe fittings.
- Unfavorable product mix and pipe fitting ratios led to significantly lower margins.
- Expectations of normalization in pipe fitting ratios in the upcoming quarter.
- Positive outlook due to affordable polymer prices and healthy economic activity in India.
- Focus on branded products, particularly in the Bathware segment.
- Expansion of in-house manufacturing for water tanks.
- Acquisition of land for the eighth manufacturing facility in Bihar to cater to the Eastern market.
Revenue:
- Q1FY24 revenue: Rs. 554 crores.
- Sales volume increased by 19% YoY to 37,155 metric tonnes.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization):
- Q1FY24 EBITDA: Rs. 45 crores, compared to Rs. 44 crores in Q1FY23.
- EBITDA margin for Q1FY24: 8.1%.
Profit After Tax (PAT):
- PAT for Q1FY24: Rs. 20 crores, a 25% YoY improvement compared to Rs. 16 crores in Q1FY23.
Working Capital:
- Net working capital days as of June '23: 59 days, compared to 57 days in March '23.
- Debtor days increased to 64 days in June '23 from 56 days in March '23, acknowledging the need for better control.
Inventory:
- Inventory days as of June '23: 73 days, up from 57 days in March '23 and 78 days in June '22.
- Company maintains optimal finished goods inventory to meet demand.
Polymer Price Stability:
- Expectations of stable polymer prices for the next few months.
Channel Finance Program:
- Steady progress in the channel finance program.
- Increased credit limits of channel partners from Rs. 70 crores to Rs. 105 crores.
- Number of channel partners engaged in the program increased from 76 to 132.
Net Cash Position:
- Maintained a net cash position of Rs. 164 crores as of June '23.
Volume Outlook and Growth Guidance:
- July volumes have been encouraging.
- Optimism about sustained demand, with real estate performing well and affordable polymer prices.
- Expectation of high double-digit growth over a 3- to 5-year period.
- Confidence in the pipe segment’s growth despite entry into water tanks and Bathware.
Competitive Intensity and Pricing:
- Increased capacity additions in the industry, but supply is not expected to outpace demand.
- No need for predatory pricing, and growth is expected to be sustainable and profitable.
CPVC Segment:
- Correction in CPVC prices across the industry, with room for further correction.
- Local capacities in India expected to make CPVC more affordable, promoting long-term growth.
Plumbing Business:
- Plumbing growth has been double-digit for Prince Pipes in recent years, largely driven by building material.
- Focus on building material and setting up capacities for plumbing and SWR segments.
Capex Plans and Capacity Expansion Overview:
- FY '24 Capex allocated primarily for debottlenecking.
- Capex estimate for FY '24: Rs. 90-100 crores focused on existing plants.
- Excludes Bihar project land acquisition and East expansion.
- Covers debottlenecking, maintenance, and potential capacity additions (e.g., water tanks or HDPE) in some facilities.
- Current capacity: 323,000 MT.
- De-bottlenecking of existing plants to contribute 20-30,000 MT by FY '24.
- Bihar plant set to begin commercial production in March '25, adding around 40,000 MT in Phase 1.
- Phase 1 expansion target: 35,000 to 40,000 MT, commencing in March '25.
- Phase 2 expansion details to be determined later.
- Potential for further capacity expansions due to new piping applications, but specifics for FY '25 are uncertain.
Brownfield Capacity Addition:
- Consideration of debottlenecking for capacity enhancement.
- Feasibility identified at several plants.
- Feasible plants: Jaipur, Telangana, Haridwar, and Agra.
- Some plants (Athal, Kolhapur, Chennai) have limited expansion potential.
- Estimated lead time for brownfield capacity: 3 to 4 months.
Capacity Utilization:
- Company-level utilization has been steady at around 50% to 55% of installed capacity.
- In Q1, utilization was slightly lower due to disruptions.
- Telangana plant has seen good utilization since its setup in late '21, estimated at around 35% to 40%.
Realization:
- Realization per ton in the quarter decreased sharply due to unfavorable pipe fitting ratios and product mix.
- Expectations of improvement in realization from the current levels.
- Pricing power has improved over the years due to branding efforts, and product mix has also improved.
Sourcing Mix for PVC:
- Sourcing mix for PVC is currently 60% import and 40% domestic.
Bathware Strategy:
- Bathware is seen as a front-of-the-wall product where brand equity is crucial.
- Investment focus on digital, visual merchandising, brand visibility, and technology.
- Investment in the right people and branding.
- Focus on building a strong distribution network across urban, semi-urban, and rural areas.
- Initially, a combination of retail and project sales with a long-term focus on retail and distribution.
- Leveraging existing relationships with real estate developers for Bathware sales.
- Initial investment in 1Q for the launch event: Approximately Rs.2 crores (one-time).
- Annual investment: Rs.5 crores to Rs.6 crores in manpower and Rs.10 crores to Rs.12 crores in brand building for the Bathware vertical.
- Expansion into faucets manufacturing within 18 months.
- Prepared for initial Bathware investment, with an expectation of it becoming non-dilutive to core profitability after 6 to 8 quarters.
- Long-term vision for Bathware is to achieve better operating margins compared to the short-term investment.
- Targeting the mass premium segment in the Bathware market.
- Aims to address the largest chunk of the market, which is just below Jaguar in terms of premium positioning.
- Will have collections across different price points (premium, mid, economical) but with a primary focus on the mass premium segment.
Participation in Infrastructure Segment:
- Participating in the infrastructure sector, but not aggressively.
- Focusing on improving debtor days to manage receivables.
- Steady growth in DWC and HDPE segments.
- HDPE capacity expansion is planned at the Jaipur facility.
- Bihar will start manufacturing HDPE from the first day of commercial production.
- DWC (Double Wall Corrugated) pipes have seen strong volume growth in the infrastructure segment.
- Infrastructure currently contributes approximately 3% to 5% of total revenue.
Margins Expectations:
- Medium-term margin estimate: 13% to 14%.
- Aspirational for better margins.
- Factors for improvement: product mix, CPVC contribution, operating leverage, and volume growth.
East and North East Expansion:
- Long-term vision for an integrated complex.
- Planned products include PVC, CPVC, DWC, HDPE, water tanks, and fittings.
- Potential for becoming one of the largest facilities within 3 years.
- Current sales in the East region approximately 15% to 20%.
- Expected freight savings and improved quality with local production.
Value-Added Products:
- Value-added products currently include CPVC, PPR systems, and PVC fittings.
- Historical contribution percentages:
- Pipe fittings: 30% to 35% of revenue.
- CPVC: 20% to 25% of revenue.
- PPR: Approximately 4% to 5% of revenue.
One-Off Expenses:
- ERP-related expenses are considered intangible and have been absorbed into the gross block.
- Operating expenses related to ERP implementation are not significant.
- The only one-off expense in the quarter is related to Bathware launches, amounting to approximately Rs.2 crores.
Inventory Loss:
- There was an inventory loss of approximately Rs.10 crores in Q1.
- The impact of PVC price movements on inventory gains in the second quarter is uncertain.
Fittings Segment Margins:
- Fittings segment margins are expected to normalize from the next quarter.
- The guidance of 13% to 14% margin range is inclusive of all expenses, including those related to Bathware.
- In Q1, the company’s margin was affected because of an unfavorable product mix.
- The margin of fittings, an essential product, is significantly higher (1.5x to 2x) than that of pipes.
- Margin should be evaluated on a blended basis for pipe fittings, considering its contribution to revenue.
- In Q1, the contribution of fittings to revenue was lower (around 25%) compared to the usual (32% to 33%).
- Operating margin is expected to return to 12% to 14% over the next 9 months.
Participation in Jal Jeevan Projects:
- The company actively participates in Jal Jeevan Mission projects through contractors.
- Participation will continue as long as the receivable cycle remains disciplined.
- Over the next 2 to 3 years, the demand from Jal Jeevan Mission projects is expected to support industry growth.
Advertising Spend Breakdown:
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Piping Vertical:
- Ad spend during the quarter: Rs. 12 crores.
- Typically invest 2% of revenue into branding.
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Bathware Business:
- Estimated ad spend for Bathware: Rs. 10 crores to Rs. 12 crores.
- Percentage of revenue not specified due to the establishment phase.
Chief Technical Officer (CTO) or Technical Head Absent
- The company does not have a Chief Technical Officer (CTO) position.
- Similarly, there is no designated technical head within the organization.
7 Likes
Does anyone have any explanation for the lack of a technical head/ CTO?
1 Like
Pipes and related products are fairly simple and don’t evolve on short time frames. I could not think why would a CTO be required if at all. What changes can prince do by getting a CTO. Also how many times in the past has technology disrupted this sector and how. I could only think of astral doing a tie up with lubriziol. And that also did not change the purpose of the products but did change the quality and usage. As such western world will be way ahead in construction related changes and Indian companies would be keeping a eye on the same. To me prince is more of a play on ancillary to real estate industry in India.
Best
Divyansh
Disc : invested from lower levels
2 Likes
Anyone tracking recent events of Prince Pipes?
Couple of resignations from KMP has happened which can be noticed as hit in stock price also…
Prince Pipes Q2 highlights -
Revenues up 3 pc to 656 vs 636 cr ( despite drop in RM prices )
Sales volumes up 8 pc @ 41.5k MT vs 38.5k M, YoY
EBITDA at 94 vs (-) 11 cr ( margins @ 14.3 pc )
PAT at 71 vs (-) 24 cr ( includes an exceptional gain of Rs 17 cr )
A&P spends for Q2 @ 15 cr
H1 volume growth at 13 pc
H1 EBITDA at 139 vs 33 cr
Prince Bathware receiving good response from channel partners and customers ( launched in Jun 23 - in North, West )
Current facilities -
Athal - 9.3 k MT
Dadra - 65.6 k MT
Haridwar - 98.9 k MT
Chennai - 43.3 k MT
Kolhapur - 16.1 k MT
Jaipur - 38.9 k MT
Telangana - 56.9 k MT
New Capex in Bihar to come online by end of FY 25
Company maintaining long term Debt free status
Fall in RM prices in Sep-Oct led to some de-stocking in Q2. Prices have improved and is causing re-stocking in Q3
Plan to launch bathware in Eastern India by Q4
RE sector sales remain buoyant - specially in Mid and Premium categories. Unsold inventory @ decadal low. Augurs really well for building materials companies !!!
Company’s volume growth for last 2-3 Qtrs has been lagging wrt peers. Company aims to reverse this trend in next 2-3 Qtrs through a mix of pricing actions and HDPE capacity expansion. HDPE is one segment where company has been a laggard
Q2 did bear branding and employee cost. Revenues from this segment will get reflected from Q3 onwards. Aim to hit Qtly sales of 8cr to begin with
PPR pipes are slowly gaining momentum ( an advanced material even vs CPVC ). Prince is a mkt leader here. PPR manufacturing requires completely separate infra vs CPVC manufacturing
Currently CPVC pipes and fittings for 20-25 pc of company’s revenues
Currently there is an anti-dumping duty on CPVC polymer. Its extension or otherwise is a key monitorable
Piping Industry is growing volumes at around 14-15 pc YoY. Company aims to be at that level of volume growth as soon as possible
HDPE pipes contribute to aprox 3 pc of company’s sales volumes. These are mostly used in Infra projects. This segment has lower margins and higher working capital cycle. HDPE business to pick up Mar 24 onwards
CPVC costs have come down because of fall in PVC prices - also led to some de-stocking in Q2
Company’s overall capacity utilisation currently at about 50 pc. Telangana facility operating @ 50 pc - Gives the company a huge Operating leverage possibility in future !!!
Capex guidance for this FY @ 150-160 cr. Out of this, 70 odd cr has been earmarked for Bihar facility
Lubrizol’s new CPVC plant coming up in FY 25 in India. Prince and Aashirvad likely to remain only 2 licences for Lubrizol in India. Local facility will make CPVC far more affordable and should be a great news for the Industry
Disc: holding, biased, not SEBI registered
2 Likes
Regarding capacity utilisation, piping industry doesn’t go as high as 85-90% like in pharma or elsewhere. It is likely to stay around 60-65% at max utilisation. This was clarified in one of the concalls a couple of years ago.
So my understanding is that 50% is as good as around 80-85% for Prince. Not much room unless further capex is done.
5 Likes
Promoter holding has decreased by two percent ,any idea what can be the reaon
My Take
Company has been in consolidation for nearly 2 years and Above, But Why?
Company deals into pipe fitting products and Raw material such as PVC price were going through Volatility and Destocking result in Collapse of margin badly At The same time housing crises in China, Europe & us led dumping in India
One thing to Notice company OPM% For last 10Y average remains above 12% and this year reported 9% which is Outlier
Recent Q2FY24 Showed up Good numbers where OPM% Touched 13%
Greenfield Expansion in Bihar of About 35000 MT will be commercialized Q4FY25 with Nearly 150 Cr Capex and Current Capacity is around 328500 MT and De Bottlenecking may increase 20-30K MT So we can expect Touching 385000 MT Q1FY26
Currently Operating at 50-55% Utilization and Now Real-estate Performance, Jal Jeevan Mission will support the Growth Story of This Segment
Telangana Also at 40% Utilization and which likely to Improve based on Demand going Forward
CPVC where Company Accounts 10% Market share and now remains to be more Focused area due to Lubrizol Tie-up
At the Same time Company entered in Bath ware, Sanitary may further strengthen the Margin of the company
Key Trigger: Product Mix, CPVC Contribution, Operating Leverage & Volume Growth would be main Driver for the Company
Dis: No Buy/Sell Pure Learning
3 Likes