Polymer price tracker - PVC prices' uptrend continues unabated - ICICI Securities

PVC prices' uptrend continues with another hike of Rs2/kg, or 2.4%, w.e.f. 1st Sep'20. This is the fifth price hike in Q2-TD totalling to Rs9.5/kg or 12.4% even after a sharp spurt witnessed in May'20 and Jun'20. PVC prices, which now stand at Rs86.3/kg, have risen 31.6% since 1st May'20. The surge has largely been led by higher international PVC prices amid supply-side issues and the recent shutdown of one of the largest PVC plants of Formosa in the US. This, we believe, would provide a fillip to PVC pipe manufacturers (by way of higher channel filling) who have been grappling with Covid-led intermittent lockdowns. We prefer Prince Pipes and Fittings (PPF) and Astral Poly Technik (ASTRA) over Supreme Industries (SI).

- Shutdown of Formosa plant aids further spurt in PVC prices. With the uptick in trade activities across the globe and recovery in crude prices, PVC prices recovered fully in Q1FY21 itself. PVC prices have again started trending up with five price hikes in Q2-TD totaling to Rs9.5/kg or 12.4% (Rs1.5/kg on 16th Jul'20, Rs2/kg on 1st Aug'20, Rs2/kg on 13th Aug'20, Rs2/kg on 19th Aug'20 and Rs2/kg on 1st Sep'20). These price hikes are mainly attributed to supply-side issues and the recent plant shutdown by Formosa in the US, which has led to higher international PVC prices. Despite likely demand woes in the near term amid Covid-19 pandemic concerns, the recent increase in PVC prices is likely to drive channel restocking with the trade having reasonably lean inventory at the moment.

CPVC pipe prices remain firm. Top CPVC pipe players took 3-5% price hike in the first week of Mar'20. There was a further hike announcement of 4-5% by a few large CPVC pipe players in the first week of Jun'20. However, our channel checks suggest that the same has not yet been affected in the trade and since then there is no major price movement in CPVC pipe segment.

PVC pipe players likely to outperform CPVC pipe manufacturing companies in H1FY21. We expect PVC pipe players to outperform their CPVC counterparts in H1FY21 due to sharp spurt in PVC prices over the last three months and higher agriculture pipes sales in Q1FY21. The sharp recovery in PVC prices and the likely improvement in volumes since the second half of Q1FY21 would aid PVC pipe players report a much better performance in H1FY21 than envisaged earlier.

Source : Equity Bulls

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