Prince Pipes Q1 2023 Concall Highlights

• Volume and value grew 69% and 83% y-o-y respectively, led by building materials segment. Revenue grew 83% to 604cr in Q1 2023 compared to 331cr in Q1 2022. Volume grew by 69% to 31215 MT. PAT declined to 16cr in Q1 2023 from 18cr in Q1 2022
• EBITDA was 44cr indicating a growth of 6%. Margins was 7.3%, which dropped from 15-17% levels Margins to remain under pressure in Q2. Margin guidance for December quarter is around 13-15%. Margin Drop was because of inventory losses and channel destocking impacting operating leverage
• Demand for agri in Q1 was weak while for SWR and Plumbing was resilient. Softening PVC prices resulted in a muted sentiment across value chain causing destocking among channel partners. PVC prices were around 70/kg during pre covid and currently it is around 93-94/kg.
• Working capital days increased to 88 days from 68 days. Inventory days improved to 78 days from 85 days in March 2022. Prince has kept inventory levels on a higher side during the pandemic and supply disruptions to maintain supply. With falling PVC prices, Price will now work in a normal inventory levels in Q2.
• Quarter witnessed inventory loss of 30-35cr, led by constant falling PVC prices. Prince was impacted on a greater side due to higher inventory. Inventory losses is likely to impact second quarter as well due to sharp corrections in PVC prices in July month. Prices are now stabilised and it is expected that channel partners will start restocking. 
• Margins are expected to recover in December quarter as affordable PVC will create strong demand in the industry. Prince believes they are well poised to capture this growth because of a) new capacity setup in Jaipur and Telangana; b) widely expanding distribution network across the country. Prince continues its vision to aggressively grow in piping system business and diversify into complimentary verticals. 
• Prince Pipes’ Strategies in coming years will be

                  a) Digitalising value chains;

                 b) Introducing newer applications; and

                 c) Continue to enlarge product basket.

Focus remains on growing value added product segment in overall sales mix.

• PEfit aqua (HDPE) and corfit manhole chambers launched in May quarter are getting well accepted. There was a steady growth in B2b Segment but are still on lower levels. Share of CPVC Segment and fittings for the company topline has been increasing. Prince has a Market share of 6-6.5% in overall PVC piping industry.
• Prince entered Bathware segments making presence in front of the wall category which is a natural extension of business. Company’s expansion into faucets and sanitaryware to leverage strong equity on Prince in Building solutions market and will help channel partners to expand their business. Overall market size of bathware segment is about 15000 crore, of which 65% is organised and balance is unorganised. Large part of distributors are already selling this product. Being front of the wall brand helps to connect not only plumbers but also home owners. Prince is working on this segment through asset light model (Contract Manufacturing).