PL First Cut – Prince Pipes & Fittings Ltd (PRINCPIP) Q1FY24

PL First Cut – Prince Pipes & Fittings Ltd (PRINCPIP) Q1FY24 – *Praveen Sahay – Research Analyst, Prabhudas Lilladher Pvt Ltd*

Prince Pipes & Fittings Ltd (PRINCPIP) Q1FY24 First Cut: Healthy volume growth despite internal issues

CMP: Rs 707 | MCap: Rs 7.8bn | Accumulate

➡️ PRINCPIP reported revenue de-growth of 8.4% YoY while EBITDA/PAT growth of 3.3%/22.4% YoY, revenue above our/cons. est. by 10.3%/9.6 and PAT below our/cons. est. by 41%/28%.

➡️ Revenue came in at Rs 5.5bn (PLe: Rs5.0bn) in Q1FY24 with volume growth of ~19% YoY, despite performance being materially disrupted, due to transitioning challenges arising from the ERP implementation (PLe:-0.8%YoY; v/s Supreme Ind./Finolex Ind./Apollo Pipes +48%/+28%/+47% YoY).

➡️ PRINCPIP witnessed decrease in realisation by ~23% YoY (v/s Supreme/Finolex/Apollo down 24.7%/20.4%/19.3% YoY) due to correction PVC resin prices by more than 40%.

➡️ Gross margin expanded by 440 bps to 25.2% YoY, while EBITDA margin expanded by 90 bps YoY to 8.2% in Q1FY24 (v/s PLe: 13.0% & cons. est. of 11.5%) due to unfavorable product mix and pipe-fitting ratio, due to ERP issues relating to dispatch of fittings. Also, increase in agri pipe contribution on account of seasonality.

➡️ PRINCPIP reported PAT of Rs 196mn (PLe: Rs 335mn & cons. est. Rs 272mn) in Q1FY24, with increase in other income and decline in interest cost.

➡️ The working capital days stood at 59 days as of Jun’23 compared to 57 days in Mar’23 due to increase in inventory days from 57 to 73 days.

➡️ At CMP of Rs 707, the stock is trading at 33x/23x on FY24E/FY25E earnings.