Prince Pipes shares jump 9% after Q4 results. Analyst targets suggest further upside

Shares of Prince Pipes jumped 9 per cent in Monday's trade after March quarter results. Analysts said margin surprise was offset by volume miss. June would be will be soft quarter for Prince Pipes given its transition towards a global ERP system, analysts said while suggesting price targets for the stock anywhere between Rs 700 and Rs 900 levels, with most targets in the lower end of the target band. 

YES Securities has a target of Rs 707 on the stock. Owing to strong tailwinds from plumbing & agri segment, the brokerage reckoned demand for PP&F to remain sturdy for coming years. It expects expect volume growth of 13 per cent compounded annually over FY23-FY25E. The brokerage, however, expects June quarter to get impacted, hence the YoY volume growth in FY24 will be muted.

"With PVC prices likely to remain steady, we expect ASP to come in at Rs 172 per Kg and Ebitda per Kg to come in at Rs21/Rs22 in FY24/FY25. At CMP, the company trades at 36 times Fy24 and 26 times FY25 EPS of Rs 17 and Rs 24, respectively. We have valued the company at 30 times on FY25E EPS & arrived at a target price of Rs704. Hence, we retain our ADD rating on the stock.

ICICI Securities has a similar target of Rs 703. This brokerage said operational profitability in Q4FY23 was been better than expected. ICICI Securities sees demand tailwinds from plumbing, infra and agri industries post Q1FY24 ERP implementation hiccup, with normalised profitability.

JM Financial has tweaked its FY24-25 estimates and suggested a target of Rs 730. It continued to maintain a

positive view on the stock "as it is well placed to ride on real estate recovery, product diversification, brand building efforts improving the enterprise business (tie-up with Lubrizol) and distribution reach."

Prabhudas Lilladher said Price Pipes' performance should further improve led by focus on increasing capacity utilisation, premiumisation and better free cash flow generation.

"We estimate FY23-25E Sales/EBITDA/PAT CAGR of 12.4 per cent/41 per cent/60.1 per cent with volume CAGR of 12.2 per cent and Ebitda margin of 14.5 per cent in FY25E. We revise our target price to Rs 716 (Rs 693 earlier), based on 25 times FY25E EPS which is discount of 10 per cent to its historical average PE. Maintain ‘BUY’.

Nuvama Institutional Equities said it is sticking to its thesis of volume growth and remained positive on the stock. "Due to slight weakness in Q1FY24E, we are trimming FY24E/25E EPS by 3-5 epr cent. Rolling over to FY25E, we retain ‘BUY’ with a TP of Rs 900 (earlier Rs 886)," it said.

Nuvama said Prince Pipes reported a volume contraction of 2 per cent YoY against an estimate of 3 per cent growth, due to account of last year’s high base. However, while PVC prices fell off 33 per cent YoY, a favourable product mixed restricted Prince Pipes' realisation drop at 13 er cent.

"While Q1FY24 is likely to take a hit due to global ERP rollout, volumes should remain healthy for FY24 given stability in PVC prices and rising affordability (due to lower PVC prices). Furthermore, Prince Pipes is planning to set up 35,000 mt capacity in Bihar (East India) at an outlay of Rs 150 crore, which is likely to be commissioned by Q4FY25. This new capacity in East adds strong growth visibility beyond FY25. Furthermore, demand momentum from real estate, agriculture, and infrastructure should provide growth impetus," it said.

 

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