The demand for PVC pipes was impacted in Jan'22/Feb'22 due to the Omicron scare and volatile PVC prices. However, demand picked up in Mar'22 with a healthy volume growth. Moreover, PVC prices increased gradually from ~Rs130/kg in Jan'22 to Rs140/kg in Mar'22. The PVC pipes industry witnessed a higher realization and peak prices of Rs175/kg in Oct'21, which has corrected ~20% in Mar'22, from the peak recorded in Oct'21. Pipes companies are likely to report a decent volume and sales in 4QFY22, led by the healthy uptick in Mar'22. PVC price has gradually moved from ~Rs70/kg in Mar'20 to ~Rs175/kg in Oct'21 and corrected to ~Rs140/kg in Mar'22. PVC pipe manufacturers took a price hike in Mar'22. Majority of the players reported a strong volume in Mar'22, driven by higher realization and a double-digit volume growth. The demand for agri pipes picked up after a price correction in 3QFY22 and after the all-time high PVC prices in Oct'21. Industrial, drainage and plumbing demand has also seen a healthy growth in 4QFY22, after a decline in 3QFY22. Western and Southern regions are likely to report a decent growth compared to Northern and Eastern regions. With several small unorganized players, the Eastern region continues to remain underpenetrated. PVC pipes industry is also seeing a market consolidation, with the smaller unorganized players facing supply-side constraints due to the pandemic. We expect PVC pipes companies under our coverage to report a volume growth of 5% in 4QFY22, while realization to improve by 8.4% YoY. We expect the companies under our PVC pipes coverage universe to report 16% YoY growth in revenue, while EBITDA and PAT to decline by 14% YoY and 15% YoY, respectively. EBITDA margin is expected to decline by 650bps YoY to 18.8% during the quarter. Our View We expect the demand for PVC pipes to improve QoQ in 4QFY22 mainly led by non-agri pipe segment. The demand pick-up to continue in the next few quarters led by new residential projects, demand from affordable housing and replacement demand. Further rising fitting share in total plumbing pipes likely to increase from 8%-10% currently to 25%-30% in the next couple of years. PVC prices were volatile in FY22 which impacted the margin compared to gradual increase in FY21 with inventory benefit led to peak margin. Rising market share from the unorganized players, market consolidation, and a healthy capex augur well for the PVC pipes companies under our coverage universe, thus we retain our positive stance on the sector. Our Top Picks: Finolex Industries and Supreme Industries Link to the report

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