Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

Prince Pipes and Fittings - Improving governance; rerating inevitable - ICICI Securities

Posted On: 2021-01-19 22:23:34 (Time Zone: Arizona, USA)

In a major development, Prince Pipes & Fittings (PPF) has partially reversed a key related party transaction by receiving a major tranche (Rs261mn) of the advance payment (Rs400mn) made by the company to the promoter group Prince Marketing (PM). The transaction was related to purchase of a corporate office at Mumbai, which didn't materialise as the conveyance was not completed. With the steadily improving corporate governance, fast-improving balance sheet and progressing business model, we expect a material rerating of the stock going forward, which would aid narrowing of valuation discount with its immediate peers. At CMP, PPF trades at a 45% discount to Supreme Industries (SI) and 63% to Astral Poly Technik (ASTRA). Reiterate a compelling BUY at current levels.

- Valuation discount with peers to narrow with steadily improving governance. Despite transforming itself into a reputed/leading brand in the plastic piping industry over the last five years, the key rationale behind its steep valuation discount to its immediate peers (like SI and ASTRA) is the governance-related issue. Given the partial reversal of a key related party transaction and the company's bid to sharply improve its governance in the past, we reinstate a 25x P/E multiple while rolling forward our valuations to FY23 numbers. We thus retain our BUY rating with a revised target price of Rs450 (earlier: Rs400), valuing it at ~30%/45% discount to the multiples assigned to SI/ASTRA respectively. Key downside risks: sharper than expected fall in PVC prices and lower than expected demand.

- Steadily improving governance to lead to restoration of trust and confidence of its stakeholders. PPF has had its baggage of poor governance in the past namely: a) pledging of promoter shares; b) related party transactions; and c) promoter's exposure to the real estate sector. However, recently, the company in a bid to improve its governance, has taken various corrective measures. The current partial resolution of another key related party transaction is the testimony of its intent to become a strong governed company in line with immediate peers.

- Fast-improving business model. We expect PPF to be one of the major beneficiaries of the ongoing industry consolidation in PVC & CPVC pipes segment. This is largely driven by sustained progression in its business model over the last few years (considerable improvement in quality parameters, ramping up of brand building investments and brand monetisation, tightening of credit policy and investment in people and processes) and the recent steps (tie-up with US-based Lubrizol for sourcing of CPVC resin, entry into niche product segments like DWC pipes, plastic storage tanks, etc. and the upcoming Telangana plant, which would drive strong volume traction) initiated to take the brand to the next level.

- Sustained balance sheet improvement to drive higher RoCEs: Sharp curtailment in its receivables over the past few years has led to impressive FCF from operations in the past. Sustained strict working capital discipline and strong traction in profitability going forward would drive firm RoCEs of 20.7% by FY23E despite the large Telangana capex (PPF to remain a net cash-positive company in FY22E/FY23E).

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Warehousing demand expected to grow around 160% to reach 35 million sq. ft in 2021: JLL

Telecom - Spectrum auction: Prudent investment by Bharti Airtel - ICICI Securities

JB Chemicals & Pharmaceuticals - Analyst meet takeaways - ICICI Securities

IPO Review - MTAR Technologies Ltd - ICICI Direct

Auto Sector - Monthly Volume Round-up - Feb 21 - Decent YoY Growth Continues

Aditya Birla Fashion and Retail - Focus on scaling up new businesses - ICICI Securities

Automobiles (wholesale) - Wholesales push continues despite modest retail trends - ICICI Securities

Aditya Birla Capital - Thoughtful (inclusive) conglomerate business evolution commands premium - ICICI Securities

Jubilant Foodworks - Buying in-the-money options - ICICI Securities

Multi Commodity Exchange of India - Play on rising commodity prices? - ICICI Securities

Gladiator Stocks - Sudarshan Chemical - ICICI Direct

Monthly Commodities Outlook - March 2021 - ICICI Direct

ICICI Direct - Monthly Currency Outlook: Rupee to depreciate further towards 75.00 level...

ICICI Direct - Covid Recovery Pulse - E-way bill generation in February 2021 starts on strong note...

Company Update - Virtual JLR Investor Event - Tata Motors - ICICI Direct

Analyst Meet Update - Aditya Birla Fashion and Retail - ICICI Direct

MTAR Technologies Ltd. - IPO - Huge Opportunities from Clean Energy Bodes Well - Reliance Research

ICICI Direct Derivatives Weekly View (February 26): Failure to move above 14700 may extend declines towards 14300...

Bank: Sector Credit Trends - Slows, Yet again - HDFC Securities

Piramal Enterprises - Pharma day highlights - ICICI Securities

Polymer price tracker - PVC prices rise sharply again! - ICICI Securities

Greenply Industries - Growth returns, at an inflection point - ICICI Securities

Tata Motors - JLR future proofing itself with rapid electric transition - ICICI Securities

Dairy - Higher freight cost and increase in Global SMP prices - ICICI Securities

Analyst Meet Update - Nestlé India (Hold): Focus on product innovation, expanding rural reach - ICICI Direct

MTAR Technologies Ltd - A strong player in booming high precision engineering... - Geojit

Rollover Report for February - March 2021 : Angel Broking

Reaction from industry experts on Q3FY21 GDP numbers

M. Govinda Rao, Chief Economic Adviser, Brickwork ratings on Q3FY21 GDP numbers

Mr. Dhiraj Relli, MD & CEO, HDFC securities views on Q3FY21 GDP Growth Number

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on Q3FY21 GDP

Rollover Analysis - Feb 21, 2021 - YES Securities

Consumer Durables - Demand-driven recovery continues - HDFC Securities

Cement - Demand surprises; earnings upgrade to continue - ICICI Securities

Gladiator Stocks - TeamLease Services - ICICI Direct

Gladiator Stocks - Metals to outshine post multi-year breakout... - ICICI Direct

Company Update - Sundaram Finance - ICICI Direct

Indian pharmaceutical industry to meet an ambition of US$130 billion by 2030 through innovation-led growth: EY-FICCI report

4th Industrial Conclave - Bullish undertone, favourable valuation - HDFC Securities

Sanofi India - Weak quarter; sequential improvement - ICICI Securities

Sunteck Realty - All eyes on upcoming launches - ICICI Securities

Company Update - Tata Motors - ICICI Direct

Q4CY20 Company Update - Mahindra CIE Automotive - ICICI Direct

Event Update - Hindalco - ICICI Direct

EY report launch at BioAsia 2021 - Moving the needle: Healthcare industry in a post-COVID world

Initiating Coverage - Dalmia Bharat Ltd - HDFC Securities Retail Research Desk

Initiating Coverage - Mastek Ltd - HDFC Securities Retail Research Desk

Hindalco Industries - Status quo maintained - ICICI Securities

Tata Motors - India business scaling in the right direction - ICICI Securities

IPO Review - Heranba Industries Ltd

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020