Detailed Narrative
Q3 FY25 Performance and Industry Challenges
Prince Pipes reported a challenging Q3 FY25 with revenue declining by 6.6% YoY to ₹578 crores and volumes decreasing by 3.3% YoY to 41,267 tonnes. The company posted a net loss of ₹20 crores, with EBITDA at a mere ₹3 crores. This performance was attributed to volatile PVC prices, leading to a ₹30 crore inventory loss in Q3, and sluggish demand in infrastructure and construction sectors. Management acknowledged that performance was 'far away from expectations'.
9M FY25 Overview and Volume Growth
For the nine months of FY25, revenue stood at ₹1,804 crores, a modest 1.4% decline YoY, while volumes grew by 4% YoY. EBITDA for 9M FY25 was ₹107 crores, resulting in a profitability of ₹19 crores. The company incurred a total inventory loss of ₹50 crores for the 9M period. Despite the Q3 dip, the 9M volume growth was stated to be in line with larger players.
Inventory Management and Margin Pressure
Inventory days increased to 102 days as of December end, up from 88 days in the prior quarter, due to anticipation of strong H2 demand and duty implementation that did not materialize as expected. This, combined with aggressive competitive pricing and the need for higher channel incentives (around 3% additional discount), put significant pressure on gross and EBITDA margins. Management expects a sharp reduction in inventory days and normalization by the end of FY25.
Bathware and Water Tank Segment Performance
The Aquel By Prince Bathware vertical generated ₹9.5 crores in revenue for Q3 FY25, contributing to a segment loss of ₹5.5-6 crores. The segment is expanding its footprint across North, West, and South regions, now present in over 200 retail touch points. Water tank sales showed robust growth, reaching ₹34 crores for 9M FY25, up from ₹27 crores in 9M FY24, a 25.9% YoY increase.
Strategic Initiatives and Capacity Expansion
Prince Pipes is implementing growth strategies including investments in distributor management systems and brand reinforcement initiatives like 'Udaan 2.0'. The integrated manufacturing facility at Begusarai, Bihar, with a Phase 1 capacity of 40,000 metric tonnes, is expected to go on stream from Q1 FY26. Total CapEx for FY25 and FY26, including Bihar, is projected at ₹260-270 crores, with ₹95 crores spent in 9M FY25 and an additional ₹60 crores in Q4.
Outlook and Recovery Expectations
Management expressed confidence that PVC prices have bottomed out and expects volume improvement from the March quarter, followed by better pricing sentiment and profitability from the June quarter. The long-term EBITDA target remains at 12%, with a goal to outgrow the industry by 2-3% annually. They anticipate mid- to high single-digit volume growth for FY25 and double-digit growth for the June quarter.
Employee Costs and Promoter Remuneration
Employee expenses have seen a strong increase, attributed to aggressive manpower expansion in marketing and sales, particularly for the Bathware division. Management clarified that promoter commission is linked to profit parameters, ensuring alignment with shareholder interests. Estimated remuneration for directors for the year is around ₹9 crores, and manpower cost growth is expected to be less aggressive going forward⏳.