PRINCEPIPE - Prince Pipes and Fittings Limited Share Price

Management provided an optimistic outlook for the future, highlighting signs of demand recovery and operational resilience. Key forward-looking points include:

1. Volume Growth: Management aims for a double-digit volume growth for FY '27, driven by improvements in demand across segments, particularly in CPVC, which has been identified as the fastest-growing category.

2. Financial Performance: Q3 FY '26 revenue from operations stood at INR 573 crores, with a volume of 42,575 metric tons representing a 3% year-on-year growth. The EBITDA for Q3 was reported as INR 28 crores with a margin of 5%. For the first nine months of FY '26, revenue reached INR 1,748 crores with a total volume of 129,071 metric tons, reflecting 2% growth.

3. Pricing Strategy: The management noted a 6-7% cost benefit passed on to the market due to the transition to in-house CPVC production under the SmartFit Plus brand, enhancing competitiveness and market share.

4. Demand Conditions: Management indicated that demand recovery seen in January following double-digit growth trends was largely attributed to restocking and expected to continue due to stabilizing PVC prices. They noted a sharp increase of INR 11-12 per kg in PVC prices recently.

5. Operational Excellence: Efforts to lower working capital days from 90 to 66 days were discussed, aiming to further reduce receivables to approximately mid-40s within the next six months.

6. Margin Guidance: Management set an EBITDA margin target of 10-12% for FY '27, allowing for prudent expectations amidst competitive pressures.

7. Capital Expenditure: Planned capex for FY '26 of INR 120 crores is expected to support expansion and operational initiatives.

Overall, management expressed confidence in navigating market uncertainties through geographic expansion, product innovation, and continued focus on brand development strategies. They emphasized readiness to capitalize as demand conditions improve, aligning their operational capabilities accordingly.

1. Question: First is on the guidance; is there any revision downwards? How has been the January trend?

   • Yes, growth in January has been double digit. PVC prices have bottomed out, and we saw an increase of over INR11 to INR12 in just a month. This has led to significant restocking. Given our new capacities, we're well-positioned to meet the demand upswing. January's growth is encouraging, and we believe the positive sentiment among channels will continue in the coming months.

2. Question: Is the channel inventory elevated due to the increase in resin prices?

   • January's growth was primarily driven by restocking demand. Channel inventory was low in December, so it's currently normalizing rather than elevated. The increase in PVC prices supports restocking, which aligns with a strong season for plumbing and agriculture.

3. Question: How will the dynamics change with moving from Lubrizol to in-house CPVC?

   • We've transitioned to in-house compounding for CPVC and launched our SmartFit Plus brand. This shift reduced our costs, which we have passed on to the channel, resulting in significant volume growth, especially in the plumbing segment, making CPVC our fastest-growing area.

4. Question: What was the inventory loss in this quarter?

   • For this quarter, we recorded an inventory loss of approximately INR18 to INR20 crores. For the nine-month period, we can update you offline.

5. Question: What strategies led to the reduction in inventory days?

   • We focused on improving working capital as a key performance indicator, increasing sourcing from domestic suppliers to reduce lead times and using a just-in-time inventory model. Going forward, we aim to keep inventory in the 70-day range.

6. Question: Is it possible for channel inventories to revert to previous levels?

   • I expect channel inventories to normalize with stable PVC prices. Historically, larger channel partners prefer maintaining stock, which provides them a competitive edge. With lower volatility, I predict they will have more inventory moving forward.

7. Question: What is the expected volume growth for the fourth quarter?

   • We are seeing high double-digit growth but won't disclose exact figures mid-quarter. The sentiment is positive and we're optimistic about continuing this growth trend through the rest of the financial year.

8. Question: What is the volume guidance for FY '27?

   • We are targeting double-digit volume growth next year. Demand is expected to be supported by our increased capacity and new product introductions.

9. Question: How much CapEx is planned for Q4 and FY '27?

   • We have completed about INR 160 crores in CapEx over the past nine months. For Q4, we expect around INR 60-65 crores, which includes ongoing projects at Aquel. Total CapEx for FY '27 will be INR 225-230 crores.

10. Question: What is the EBITDA margin guidance for the upcoming year?

    • We are targeting a margin of 10% to 12%, adjusted for recent competitive pressures. Although we remain positive about improved product mix and decentralization benefits that could enhance margins.

11. Question: What is the current capacity utilization?

    • Our capacity utilization is currently around 50% to 52%. As demand stabilizes, we anticipate improvements as new plants ramp up and inventory levels are normalized.

12. Question: When do you expect the bathware segment to break even?

    • We're targeting breakeven by next December, slightly pushed from our previous guidance due to recent expansions into South and East markets, where we expect revenue growth to catch up.

13. Question: What has been the PVC price increase recently?

    • In the last month, we've seen a price increase of around INR 11, which we have fully passed on to our customers. This trend is expected to influence our quarterly margins positively.

14. Question: What is the impact of the Bihar government's interest subsidy?

    • We recognized INR 6.5 crores in interest subvention related to our Bihar plant, which is a government grant based on eligible expenses. This subvention will be realized in cash upon grant.

15. Question: Can you clarify the pricing spread between PVC and CPVC?

    • Currently, the pricing spread between PVC and CPVC is around 25%. The market dynamics and competition will influence this spread moving forward.