Capitaline

Analyst Meet / AGM 15-May-21

Conference Call

Prince Pipes and Fittings

Expects capex of Rs 140 crore in FY22

Prince Pipes and Fittings held a conference call on May 13, 2021 to discuss the results for the quarter and year ended Mar21 and way forward. Mr. Parag Chheda- Joint Managing Director, Mr. Shyam Sharda- Chief Financial Officer, Mr. Anand Gupta- Deputy Chief Financial Officer and Mr. Nihar Chheda- AVP (Strategy) of the company addressed the call.
Highlights of the Concall

Sales volume increased by 26% at 41,644 tonne in Q4FY21 as compared to 33,140 tonne in Q4FY20 led by robust demand from the plumbing segment while there was growth in agri pipes too.. For FY21 sales volume increased by 4% at 138,289 tonne as compared to 132,816 tonne in FY20 as volumes in H1FY21 was impacted by country wide lockdown due to COVID

The company has outpaced industry growth in past 2-3 quarters significantly led by the Lubrizol tie-up, aggressive distribution network drive, and structural up-take in demand led by real estate rebound

The company anticipates impact on demand in Q1FY22 due to the second wave; however this time at least its plants are functioning versus completely no movement last year.

Total PVC resin consumption in India is estimated to have fallen by around 15% in FY21, while Prince's volumes grew by around 4% which highlights towards healthy market share gains for the company. The company highlights that industry consolidation is underway for plastic pipes industry as smaller players continue to face raw material procurement issues, working capital and balance sheet constraints.

EBITDA margin expanded 590 bps to 19.3% in Q4FY21 compared to 13.4% in Q4FY20. The company benefitted from product mix change (higher share of plumbing pipes including CPVC), inventory gains of Rs 30-35 crore, better pricing power due to market consolidation and operating leverage.

Net working capital days improved significantly to 36 as at Mar'21 (58 as on Mar'20) mainly due to sharp fall in inventory days to 40 (77 as on Mar'20) while debtor days increased to 62 (40 as on Mar'20). The company took a strategic call to keep channel inventory higher than normal in order to take benefit of demand uptick as Covid led restrictions abate. The company expects net working capital days of 40-50 on sustainable basis.

As on March 31, 2021, Company is net cash positive at Rs 17 crore excluding IPO proceeds

The company's seventh manufacturing facility inaugurated in Sangareddy, Telangana and commenced commercial production ahead of schedule with capacity of 4,000 tonne. The plant is expected to have total installed capacity of approximately 50,000 tonne per annum (tpa) and capacity ramp up will be implemented in a phased manner over the next 2-3 years.

The Telangana unit will serve Southern markets which would bring down the freight cost (anywhere between 4-6% and can be bought down to 2-3% by local supply). Initially this will be passed on in the market to gain market share while later it will add to EBITDA margin expansion.

The company's aggressive product penetration of prince flowguard plus across India continues which is receiving encouraging response from channel partners and plumbers at a pan-India level.

Industry growth outlook remains strong driven by Government's focus on expanding areas under irrigation and increasing urban infrastructure spending

Growing penetration of branded plumbing pipes in affordable housing project segment would further led to demand among the pipe segment

The company added around 50 distributors in Q4FY21 taking the total to more than 1500 distributors at the end of FY21. The company continues to focus on quality of distributors and not number of distributor addition

The company expects capex of around Rs 140 crore in FY22 -Rs 50 crore towards maintenance capex and balance towards Telangana plant.

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