This Small Cap Stock Grew 261.2% In Less Than 3 Years, Brokerage Assigns Buy For 40% Gains

IDBI Capital assigns "Buy" on Prince Pipes and Fittings Ltd., (Prince Pipes) for a target price of Rs 842 per share. The brokerage claims a potential upside of 40% in the share price of Prince Pipes if the stock is purchased at the current market price. Prince Pipes is a small-cap company having a market capitalization of Rs 52,457.71 crores.

Prince Pipes is one of the fastest-growing companies in the domestic pipes and fittings market. It offers pipes and fitting for plumbing, irrigation, and sewage disposal. The company has evolved over the last 3 decades with new product launches, higher SKUs, timely capacity addition and pan India presence through extensive distribution reach.

Stock Outlook

The current market price (CMP) of Prince Pipes' stock is Rs 602.85 per share on NSE, down 1.88% from its previous close. The 52-Week low of the stock is Rs 510 & its 52 week high is Rs 743.80, respectively. 
 
The stock in the last 1 week has fallen 2.8%. It grew 6% in the last 1 month and 2.64% in the last 3 months, respectively. However, in past 1 year, it gave 12.35% negative returns. Since its listing on 30 December 2019, it has given 261.2% multibagger returns.

In a sweet spot to benefit from industry consolidation

IDBI Capital said, "We believe Prince Pipes would be one of the key beneficiaries of industry consolidation as the company embarked upon capacity expansion (through organic and inorganic route). It boasts of having compressive over 7,200+ SKUs and an extensive distribution reach of over 1,500+ channel partners. Prince Pipes is focused on creating a strong brand recall through aggressive marketing and advertising exercise."

Multiple growth levers at play, attractive valuation

Prince Pipes' timely capacity expansion bodes well to capitalize on healthy demand outlook. Further, focus on increasing share of value added products (fittings, CPVC) in total sales, strengthening distribution reach and efforts on working capital cycle bodes well for sustainable earnings growth in future.

Buy for a target price of Rs 842/share

IDBI Capital said, "We are structurally positive on pipes segment of building material products given its 1)multiple demand drivers viz agricultural, plumbing, SWR, industrial infrastructure 2) industry consolidation driving market share gain by organized players 3)robust demand outlook of the industry. After a challenging H1FY23 (on account of inventory loss and destocking by channel partners), we believe things should normalize eventually on PVC pricing front as well as inventory restocking."

It added, "We like Prince Pipes & Fittings Ltd. (Prince Pipes) amongst the organized players owing to its 1) legacy of over 3 decades in the business, 2) comprehensive product portfolio across 4 key polymers, 3) strategically located manufacturing plants, 4) extensive distribution reach, and 5) consistent efforts on creating strong brand equity. We initiate coverage on Prince Pipes with a BUY rating and TP of Rs842, assigning 35x PER on FY25E."

Disclaimer

The stock has been picked from the brokerage report of IDBI Capital. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.