Building Materials Sector Check – PVC Pipe Volumes, Margins To Strongly Rebound In Q4: Systematix


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Systematix Research Report

Of all the segments within building materials, wood panel reported overall healthy Q2 FY23 (three-year revenue/Ebitda/profit after tax compound annual growth rate of 17%/18%/29%, respectively), driven by healthy volumes and margins in key categories.

Stylam Industries Ltd. continued to witness all round performance. Greenpanel Industries Ltd.’s 30% plus medium density fibre Ebitda margin, as against a fears of huge contraction, was encouraging. Management expects this level to sustain in the near future.

Within tiles and ceramics, inflated gas prices and inadequate price hikes impacted Kajaria Ceramics Ltd. and Somany Ceramics Ltd.’s Ebitda margins (by ~250 bps QoQ) despite healthy volumes/ revenues (up ~10% QoQ).

Flattish YoY and QoQ volumes in PVC pipes was encouraging, despite channel de-stocking due to huge ~50% correction in PVC prices since April 2022. However, huge inventory losses (~5% of revenue for Astral Ltd., ~8-10% for others) severely impacted margins of all players.

We expect stable and affordable PVC prices to boost demand for agri pipes, post flattish volumes over the last four years.

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