Prince Pipes is one of India’s largest integrated piping solutions & multi polymer manufacturers has announced its Q2FY22 results on 2nd November 2021. The company has reported significant Q2 results and has reported a net profit of Rs. 76.7 Cr. The company has also reported the highest-ever quality sales. Let’s discuss more about the Q2 performance of Prince Pipes in this article.
1) Q2FY22 Result Update:
- Prince Pipes & Fittings has reported revenue of Rs. 761 Cr. in Q2FY22, which is up by 65.9% YoY and 130.2% QoQ. Revenue of the company in Q2FY21 was Rs. 459 Cr. in the Q2FY21 and Rs. 331 Cr. in Q1FY22. Revenue growth was led particularly by plumbing and SWR portfolios, which delivered robust volume growth.
- The Earnings before Interest, Taxes, and Depreciation & Amortisation (EBITDA) of the company has also grown by 52.8% YoY from Rs. 80 Cr. in Q2FY21 to Rs. 123 Cr. in Q2FY22. While Quarter-on-Quarter the EBITDA of the company has increased remarkably by 197.4% from Rs. 41 Cr. in Q1FY22.
- The EBITDA margin stood at 16.1% in the quarter ended 30th September 2021 contracted by 140 bps YoY, and expanded by 360 bps QoQ.
- The Profit Before Tax (PBT) of the company has also increased from Rs. 63 Cr. in Q2FY21 to Rs. 103.6 Cr. in Q2FY22, amounting to a growth of 64.5% YoY, whereas sequentially, the PBT has increased hugely by 317.2% from Rs. 25 Cr. in Q1FY22.
- Prince Pipes has a registered net profit of Rs. 76.7 Cr. in the quarter ended 30th September 2021 against Rs. 46.6 Cr. in the quarter ended 30th September 2020 amounting to growth of 64.7% YoY. Quarter-on-Quarter, the net profit has also increased by 332% from Rs. 18 Cr. in the quarter ended 30th June 2021.
- The Net Profit Margin stood at 10.1% in the quarter ended 30th September 2021 contracted by 10 bps YoY and expanded by 470 bps QoQ.
2) H1FY22 Result
- The Revenue from operations of the company for the half-year ended 30th September 2021 stood at Rs. 1,092 Cr. against Rs. 761 Cr. in the half-year ended 30th September 2020, up by 43.4%.
- The EBITDA of the company for the half-year ended 30th September 2021 was Rs. 164 Cr. against Rs. 112 Cr. in the same period of the last financial year, up by 46.5%. The EBITDA margin for H1FY22 is 15%.
- The Net Profit of Prince Pipes for H1FY22 is Rs. 93.8 Cr. up by 62.3% from RS. 57.8 Cr. in H1FY21.
3) Revenue, EBITDA, and Volume Trend:
4) Dividend Update:
The Board of the Directors of the Company at its meeting held on 2nd November 2021 have recommended a Dividend of Rs. 1.5 per share of the face value of ₹ 10/- each for the half-year ended 30th September 2021.
Earnings Call Highlights:
- Economic activity has started normalizing from the quarter ended September 2021 supported by pent-up demand, the ramp-up of vaccination drive, a favorable policy mix, and global revival
- Highest quarterly performance in history led by network expansion, product portfolio expansion, and supply security.
- Industry consolidation supported the growth.
- Have been able to grow in H1FY22 in challenging circumstances.
- Last year Q3 (+18% YoY) and Q4 (+25% YoY) were also strong and the base is going to be very high. So should be able to grow led by network and product portfolio expansion.
- Encouraging dealers/distributors to invest a higher share of investments in the business.
- September quarter growth led by plumbing and SWR segment. The trend will continue in Dec a well.
- The focus has been on the entire household segment which is better in margins compared to agriculture. Agri mix is usually 30-35%.
Inflation & Price Hikes:
- Expect PVC prices will continue to remain tight in the next 6 months.
- CPVC is made out of PVC so eventually, the price gap will narrow.
- The company is passing on the raw material price increase with a time lag of 2-3 weeks versus 1-2 weeks earlier.
- Tried to pass on the price hike in a phased manner so as the channel does not get any shock. This also means the inventory gains would be limited.
- With volume growth however comes operating leverage.
- Focus on volumes and sustaining margins and growing profitably.
- Pricing has been on an upwards trend. Channel was expecting this price increase as the company has been giving them price increase expectations and encouraging them to pass on information to contractors/ retailers, etc.
- The company does not expect major softening in the coming years. A certain amount of resistance is there but the company is passing on higher prices in a phased manner.
- In Telangana, currently, the company is only having fittings capacity and is in the process of adding pipes capacity with a total CAPEX of Rs. 1.8bn (Rs. 80 Cr. capitalized so far) along with substantial WIP CAPEX.
- The total spend in FY22 is likely to be Rs. 1.3-1.35 billion.
- Built a strong Pan India team and company is moving in the right direction and sept quarter also has given good results
- B2C will continue to be the core of the business
What Should Shareholders Do?
Prince Pipes has posted strong Q2 results on account of several favorable factors and hence recorded the highest quarterly sales and remarkable profitability. The sectors look quite benefited from the various available industry growth drivers and hence one should keep this stock on their radar. Do not consider this discussion as direct investment advice and follow due diligence before making investment decisions.