Prince Pipes

Prince Pipes reported a challenging Q2 FY25, with revenue declining 5.18% YoY to ₹622 crores and PAT falling 78.87% YoY to ₹15 crores. This was largely attributed to a 16% drop in PVC prices, leading to channel destocking and inventory losses of ₹12-15 crores. H1 FY25 saw a modest 1% YoY revenue improvement to ₹1,222.1 crores, with EBITDA at ₹104 crores, down 25.18% YoY. The Q2 FY24 PAT included an exceptional gain^📎 of ₹18 crores, which distorted the YoY comparison.

Despite the headwinds, the company achieved a 4% Y-o-Y volume growth in Q2 and a robust 9% Y-o-Y volume growth in H1 FY25, primarily driven by strong performance in the Plumbing and SWR segments. Management noted that destocking continued into October, but with the announcement of anti-dumping duties (ADD) on PVC, prices are reversing, and channel inventory is expected to normalize. The company is optimistic about demand in H2, projecting an 8% to 10% volume growth for the full FY25, indicating confidence in market recovery.

Prince Pipes is aggressively expanding its manufacturing footprint, with the Begusarai plant in Bihar now targeted to have a total capacity of approximately 55 KMT by Q4 FY25, a slight delay from the initial January target due to monsoons. This plant is crucial for serving the fast-growing East India market more efficiently. The company also continues debottlenecking efforts at existing facilities in Jaipur and Telangana, with a total capex of ₹330-350 crores planned for FY25, including ₹170 crores for Bihar and ₹30-35 crores for debottlenecking.

The Bathware segment, Aquel by Prince, generated ₹7 crores in revenue in Q2 and ₹11.5 crores in H1 FY25. The segment currently incurs an EBIT loss of approximately ₹4 crores per quarter, which is within the guided annual loss of ₹16-18 crores. Management aims to achieve over ₹25 crores in revenue for Aquel in FY25 and expects the segment to break even by Q3 of the next fiscal year (FY26). Expansion into South and East India for Bathware is underway, with manpower costs expected to rise in H2, preceding revenue recognition.

Overall working capital stood at 93 days in September 2024, an increase from 80 days in June 2024, primarily due to an increase in inventory days from 62 to 88 days. However, receivable days showed significant improvement, reducing from 83 days in March 2024 to 55 days in September 2024. Management targets bringing both working capital days and DSO (Days Sales Outstanding) below 50 by the end of FY25, indicating a focus on improving cash conversion cycles.

Management acknowledged the competitive intensity in the industry, particularly in the water tank segment, but emphasized a focus on profitable growth rather than predatory pricing. They confirmed passing on special trade incentives in Q2 to maintain volume growth amidst weak sentiment, noting these are temporary. EBITDA margins were impacted by inventory losses and trade incentives in Q2, but the company expects to return to 12% EBITDA margins (excluding inventory gains/losses) in a normal environment, driven by pricing power, product mix, and operating leverage.

Prince Pipes highlighted its certification as a 'Great Place to Work' and continued investments in branding, including visibility campaigns in metro trains and apron buses. The company also detailed its 'Parivartan Plumber Upskilling Programme,' training 1,848 plumbers and providing health benefits. For the long term, despite short-term impacts from aggressive capex, management reiterated its commitment to delivering a 15% to 20% return on capital, underscoring confidence in the industry's growth potential and the company's leadership position.