Polymer price tracker - PVC price hike extends into Q3FY21 as well - ICICI Securities

PVC prices' uptrend continues with another hike of Rs3/kg or 3.3%, w.e.f. 1st Oct'20. This is the first price hike in PVC in Q3FY21 after witnessing an increase of Rs14.5/kg or 18.9% in Q2FY21. The rally, which started with a sharp spurt in May'20 and Jun'20, has now extended into Oct'20 as well. PVC prices, which now stand at Rs94.3/kg, have risen 43.8% since 1st May'20. The surge has been largely led by continued higher international PVC prices amid supply-side issues. The sustained price hike in PVC resin may provide a fillip to PVC pipe manufacturers by way of higher channel filling and inventory gains in near term. We prefer Prince Pipes and Fittings (PPF) and Supreme Industries (SI) over Astral Poly Technik (ASTRA).

- Supply shortage globally 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. Post that, PVC prices again started trending higher with price hike of Rs14.5/kg or 18.9% in Q2FY21. The current price hike of Rs3/kg is the first hike of Q3FY21. These price hikes are mainly attributed to continued supply-side issues and the recent plant shutdown by Formosa in the US has led to further spurt in international PVC prices. While pipe distributors continue to have leaner channel inventory post Covid-19 outbreak, these sustained price hikes might tempt PVC pipe distributors to resort to higher channel filling to benefit them from the increasing trend in PVC pipe prices.

- 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, which never got implemented in the trade. We are, however, hearing fresh round of price increase in CPVC pipes with Prince Pipes and Fittings likely to increase prices by 3% starting 1st Oct.

- 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 pipe 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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