Prakash Pipes Limited (INE050001010) : A value pick at cmp Rs 28

 

Prakash Pipes limited is in the business of manufacturing PVC Pipes and Fittings since 1981. Over the years, Prakash has emerged as a trusted brand for PVC Pipes and Fittings in the markets. It manufactures wide range of products such as Agri Pipes, Column plumbing Pipes, Casing Pipes, SWR Pipes, Garden Pipes and their related Fittings.  Products find application in irrigation, drainage, housing, and sanitation.


Prakash pipes limited recently got demerged from Prakash industries and now is a separately listed on stock exchange.


Considering the Industry trends and to further strengthen its PVC and plastic division, Prakash Pipes have forayed into Flexible Packaging to provide complete packaging solutions to its customers. A Flexible Packaging Unit has been commissioned at Kashipur, Uttarakhand for manufacturing laminates and pouches used for packaging consumer products like snacks, soaps, shampoos, etc. There is huge opportunity for packaging products in the vicinity which has some of the biggest manufacturing units of local and global players of FMCG such as, Parle, Britannia, Dabur, Nestle ,Reckit Benckiser, Perfetti. Flexible packaging business is experiencing excellent growth and contributing overall top line growth of the company. Thus de risking the business overall business model



Financials

Key positive factors

1.       A popular Old and established premium PVC pipe brand name “Prakash “  in North India.

2.       High ROE >15

3.       Mkt cap only  57 crores against turnover of Rs 375 crores

4.       Dividend paying company Last year dividend 12%

5.       Almost Debt Free company

6.       New Flexible division is experiencing growth of approx 500% over last year.

Risk Factors:

1.             Recession in industrial output and increase in raw material cost could affect the profitability

2.               Extended locked down due to COVID could effect the production and  financials.

3.      Low demand of pipes and accessories due to slower housing /infrastructure  activity may affect the demand of products.             

              



Investment Rational:

1.       Very cheap valuation available at PE multiple of just 2 at expected EPS of Rs12 (FY19-20)

2.       Market cap before the correction was approx 180 crores against current market cap of 57.Thus stock has potential to give multiple returns over longer term investing.

       It  is difficult to give price target but a PE of 5 can take the stock to Rs 60 in a year's time.

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