PVC prices rise sharply again! Keep an eye on these stocks

Organised pipe manufacturers are in the news due to record-high prices in PVC resins. There are expectations that the PVC pipe manufacturers may see consolidation as unorganised players may face challenges with respect to polymer sourcing and higher working capital requirements.

Of late, PVC price increased steeply with a hike of Rs 6 per kg, or 4.9% with effect from March 21. This was the third PVC price hike in Q4FY21 (totalling to over Rs 12 kg or 10.2%) after an increase of Rs 26 kg, or 28.5%, in Q3FY21.

ICICIdirect said, “The longest rally in PVC prices continues to extend even into Q4FY21. PVC prices, which are now at Rs 129.3 per kg, have almost doubled since May 1 last year. The surge has been largely led by sustained supply-side issues globally with US cold wave leading to the recent shutdown of plants.”

It further added that the record high prices in PVC resin may provide a major fillip to organised PVC pipe manufacturers. This may boost the volume growth of top organised players in the near-to-medium term by virtue of strong market share gains. However, with these unprecedented price hikes, it may become difficult
for branded players to pass on price increases particularly in the agricultural pipe segment.

There are also expectations that the government’s initiative for the irrigation sector, rural water management and focus on affordable housing will remain as one of the major drivers for the growth of PVC pipe industry in the country.

ICICIdirect prefers players like Prince Pipes and Fittings (PPF) over Astral Poly Technik (ASTRA) and Supreme Industries (SI). Shares of PPF have advanced 46% to Rs 436.25 on March 3 from Rs 298.40 on December 31 last year. Astral Poly Technik and Supreme Industries have gained 23% and 28%, respectively, during the same period. On the other hand, the benchmark BSE Sensex has gained 5% on YTD.

Ashika Stock Broking is positive on Supreme Industries with a price target of Rs 2,350. Supreme Industries is a plastic product manufacturer and the largest plastic processor in India, processing over 0.37 million MT annually. The company has four business verticals which includes Plastic Piping (55%), Packaging Products (21%), Industrial Products (16%) and Consumer Products (7%).