Sector: Building Materials
December 17, 2023
Industry should continue to register healthy volume growth! We interacted with multiple dealers from north & west region, and regional manufacturers of plastic pipe industry to understand the on-going trends in terms of demand, polymer prices and outlook going ahead.
Following are the key highlights:
Q3 is a seasonally weak quarter, owing to festive & marriage season. However overall demand has been sturdy, both agri and plumbing segment have been witnessing healthy demand.
Spends in Jal Jeevan Mission continues to remain robust leading to strong demand for both Agri & Plumbing.
Plumbing demand is also continuing its northwards march. Barring the seasonality impact, volume off-take has been growing on m/m basis for manufacturers.
Plastic pipes are finding newer applications in infrastructure segment, leading manufacturers are launching new innovative products which should bode well for industry growth.
The quarter commenced with sharp decline in PVC resin prices, however, there has been a steady uptick in prices since then. Hence, manufacturers do not expect any major inventory losses.
New domestic capacity of PVC reins is likely to get operational by FY26. The current difference between domestic & import prices is ~Rs2/Kg. CPVC resin prices are largely steady. Domestic capacities are coming-up, however the quantum is not enough & hence industry will continue to rely on imports.
Dealers have commenced re-stocking post the sharp fall in resin prices, in anticipation of improvement in price hikes. Moreover, channel inventory is at normal level, for agri division the dealers hold inventory of ~10-12days while the same for plumbing is ~20-25days.
The consensus view from our interactions is that the demand for plastic pipes will continue to grow for next 3-5years as the spends in irrigation & uptick in new construction is likely to expand.
We continue to remain positive on plastic pipe industry on account of healthy industry tailwinds lead by strong plumbing & agri demand backed by robust spends in Jal Jeevan Mission. Incrementally, with higher demand for branded products, organized players are likely to outperform industry growth.
Investors should track Q3 FY 24 results before buying.
PVC resin prices likely to remain range-bound, manufacturer’s margins are expected to remain steady. Hence, we reckon that plastic pipe industry will continue to deliver healthy growth in next 3- 5years. We prefer Apollo Pipes Ltd & Prince Pipes & Fittings Ltd from this segment.
Comparative Performance of Apollo and Prince Pipes.
This video is for education purpose only. For investment decisions please consult your Financial Advisor.
Date 17 Dec 2023
This post is bought to you by Smart Investors - Indias Most Knowledgeable Equity Researchers.
For more informative videos
Like, Share and Comment on Vidoes.
Subscribe to our channel to get new video alerts.
Contact - intellinvestor@gmail.com or whatsapp@
Social Media Links -
Youtube Channel - https://www.youtube.com/@Smart_Investor1
Linkedin - https://www.linkedin.com/in/smartinvestor1/
Instagram - https://www.instagram.com/smrtinvestr/
Blogs - https://ingeniousinvestor.blogspot.com/
Twitter - https://twitter.com/SmartInvestor