#princepipes great conference call after amazing Q4 results. My key takeaways:
1. While industry degrew by 15% in FY21, prince had 4% volume growth.
In b/w lines:
Prince is consistently gaining market share for 7-8 quarters. Only 5% market share currently. Industry is fragmented.
1. While industry degrew by 15% in FY21, prince had 4% volume growth.
In b/w lines:
Prince is consistently gaining market share for 7-8 quarters. Only 5% market share currently. Industry is fragmented.
Larger players have distribution and logistics cost advantages. Can invest in brand building (Prince did ~4.5% of sales in branding in Q4 due to 1 off inventory gains, generally does 2.5-3%). Over long term, prince can compound topline faster than Industry growth of 12-14%.
2. Three drivers of high Ebitda margins in Q4: inventory gains, product mix change, superior pricing power. Long term guidance of 14% margins.
In b/w lines: CPVC pipes were 20% of topline before lubrizol tie-up. Astral has much higher (30% market share to prince's 10% of cpvc)
In b/w lines: CPVC pipes were 20% of topline before lubrizol tie-up. Astral has much higher (30% market share to prince's 10% of cpvc)
Future drivers of margin expansion: CPVC pipes (Flowguard) share going up; building materials segment (69% of topline in fy21 vs 66% in fy20) growing faster than agri segment; company introducing new high gross margin products in current FY.
3. Company seeks to be the preferred brand among brands for distributors.
In b/w lines: very interesting learning on behavioural aspects of companies. #princepipes says they need to behave as a market leader in order to be acknowledged as one.
In b/w lines: very interesting learning on behavioural aspects of companies. #princepipes says they need to behave as a market leader in order to be acknowledged as one.
They were the first to pass cpvc price hikes in Q4 and others followed suit. This helps build street cred with distributors. Have been aggressive in passing in price increase in last 7-8 quarters.
4. Company has installed capacity of ~2,59,000 T and did sales of ~1,38,000 T in FY21. capacity utilisation of 53%. Capex happening in Telangana to increase installed capacity by 50,000 T (20%). Why?
In b/w lines: the installed capacity is different from what can practically be achieved in production. This is because installed is calculated by assuming highest diameter pipes are constructed 24x365.
Practically a small diameter pipe would end up getting constructed. Production capacity is 70% of installed. So actual capacity utilisation is 76%. Now the capex makes sense. Telangana capex will ramp up to "100%" in 2 years. Capex will help co penetrate south market better
Special thanks to @soicfinance for making an amazing Astral video and encouraging me to study the industry and prince pipes. Video here:
Everyone interested in PVC pipes industry should watch it IMO.
Everyone interested in PVC pipes industry should watch it IMO.
Disclosure: have a tracking position, still studying the co. No large investment as of date.
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