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Analyst Meet / AGM
17-Nov-20
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Conference Call
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Prince Pipes and Fittings
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Aims to commence commercial production from Telangana facility by Q2FY22
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Prince Pipes and Fittings held a conference call on November 04,2020 to discuss the results for the quarter ended Sep20 and way forward. Mr. Sameer Gupta – Managing Director and Mr. Ajay Jain – CFO of the company addressed the call.
Highlights of the Concall
- Demand growth was driven by healthy growth across PVC plumbing, SWR and CPVC pipes
- The company registered 7% YoY revenue growth led by 3% YoY volume growth despite uncertainty around covid-19 and key urban markets such as Delhi and Mumbai being tepidled by healthy growth in Tier2 and Tier 3 cities and as it is garnering market share owing to market consolidation.
- Margin improvement during the quarter was led by gross margin improvement as the company benefited from inventory gain of Rs 8-12 crore and pricing leverage consolidation and by finding markets where it can can enjoy premium. The company's endeavour is to find more such markets and application where they can gain premium in the market which will aid margin expansion.
- In Q2FY21, the company decided to collaborate with Lubrizol and launch flow guard product. The company was able to successfully commence production in mid-Oct. First few batches have been rolled out and it has received positive response and has also started getting repeat orders
- The company does not expects sales to shoot up overnight because of Lubrizol tie-up, but with Lubrizol brand getting attached and its strong association helping, sales should move up at healthy pace.
- The first phase of training has also been completed by Lubrizol. This tie-up will also help the company in upscaling and premiumising across its product range which is the key for long term sustainable ecosystem.
- There was almost no branding expense in Q1FY21 due to lockdown. In Q2FY21, the company has scaled down its brand spends to Rs 7 crore versus Rs10-11 crore in Q2FY20.
- The company plans to regularly spend 2-3% of its spend over branding and treat as a investment which yields result rather than just a expense.
- During the quarter, the company was able to expand tanks manufacturing and they have also identified outsourcing partners to manufacture in East, West and South. Rationale of entering tanks was to have no time or mind share to expand since the company has same dealer/distributor base who sells tanks.
- The company has installed solar power across facilities and was officially able to commence solar power adoption across the plants.
- The cost of debt has also come down to 8.4% in Q2FY21 against 10.1% in Q2FY20.
- The company aims to commence commercial production from Telangana facility by Q2FY22 which will require capex of Rs 184 crore. Initially the plant is to start with 30-35k tonnes of fresh capacity which will be later scaled to 50k tonnes. The asset turnover typically is at 2.5-3 times in the industry.
- Post FY22, the company may look for brownfield capacity expansion at Jaipur.
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