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ICICI Securities Report
We recently interacted with the management of Prince Pipes and Fittings Ltd. The management indicated that in the ongoing quarter (Q4 FY23), plumbing demand remained healthy, but agri demand has started picking up from end-March 2023 only, which will thus, result in a muted quarter YoY.
The demand for agri pipes (~30-35% of Prince Pipes revenue) has been delayed due to higher channel inventory build-up in Jan-Feb 2023 and the management is hopeful of it reviving from April 2023 and thus, resulting in higher growth in Q1 FY24.
Prince Pipes' management believes pipe volumes can sustainably grow in double-digit in the medium term, driven by demand from housing, agri segments and increasing its distribution reach in markets such as South and East India where it has comparatively lower presence.
Operating margins should normalise in Q4 FY23 as PVC prices were stable after a turbulent nine months-FY23. Management has guided for 12-15% operating margins to be sustainable in pipe business over long term.
The company indicated working capital remained under control and it targets to improve it further over the next few years (primarily through lowering debtor days).
Prince Pipes had announced its foray into bathware segment and the company plans to rollout products from this segment by mid-Q1 FY24 using outsourcing model in its stronghold markets of Northern and Western India.
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