The market for household building materials, including plastic pipes, tiles, wood panels, sanitaryware and faucets, is estimated to touch 2.7 trillion by FY26 1.3 trillion in FY22. Brokerage firm Prabhudas Lilladher has taken policy on Plastic Pipe sector and has initiated policy on some stocks of the sector.
As per the report, the home building materials sector was hit, due to the slowdown in real estate, during the calendar year CY13-20, while the financial year 2016-21 was hit by GST implementation, demonetisation and the COVID-19 pandemic, resulting in Single digit CAGR growth of around 6 percent during the same period. However, the plastic pipe sector has grown at a CAGR of 10 percent in FY 2013-21.
The report states that the Indian real estate The sector grew at 10% CAGR from $50 billion in 2008 to $120 billion in 2017 and is expected to grow at 17.7% CAGR to $1 trillion by 2030. The plastic pipe industry has seen a sharp recovery after the pandemic.
The plastic pipe market is estimated to be around Rs 400 billion, with organized players accounting for 67% of the market. By end use, 50-55% of industry demand is accounted for by plumbing pipe used in residential and commercial real estate, 35% by agriculture, and 5-10% by infrastructure and industrial projects.
Industry to grow at 10-12% CAGR between FY15-20, while demand is expected to grow at 12-14% CAGR between FY 21-25 and is expected to reach more 600 billion by FY25E due to a sharp increase in government spending for irrigation, WSS projects (water supply and sanitation), urban infrastructure and replacement demand.
The brokerage coverage on Plastic Pipe sector with BUY ratings on Astral, Finolex Industries, Prince Pipe and Supreme Industries.
For astral, the brokerage is expected to grow at a CAGR of 14.6%, 22.4% and 31.2% over the estimated sales, EBITDA and PAT FY23-25E. Brokerage has given ‘Buy’ on K TP 2,160. “We value the stock with a target price of Rs 2,160 on DCF. Initiate ‘Buy’,” the brokerage said.
For Finolex Industries, the brokerage expects sales, EBITDA and PAT CAGR of 7.7%, 31.9% and 25.6% over FY 23-25E. The brokerage has a ‘Buy’ rating on TP 224. “We arrive at a TP of Rs224 at SOTP (valuing the business at 21x FY25 EPS). Start ‘buy’,” said Prabhudas Lilladher.
“The stock is currently trading at 27x/22x FY24E/FY25 earnings. Initiate ‘Buy’ rating and target price of 693,” said the brokerage for Prince Pipes & Fittings.
While for, Supreme Industries brokerage has given ‘Buy’ rating and target price of 3,170 values it at 34x FY25E earnings.
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