Polymer price tracker - Price hike in PVC continues unabated - ICICI Securities

PVC prices' uptrend continues with another hike of Rs4/kg, or 4.2%, w.e.f. 14th Oct'20. This is the second price hike in PVC in Q3FY21 after witnessing an increase of Rs14.5/kg or 18.9% in Q2FY21. The rally, which started with a sharp spurt in May'20 and Jun'20, has now extended into Oct'20 as well. PVC prices, which now stand at Rs98.3/kg, have risen 49.9% since 1st May'20. The surge has been largely led by supply-side issues globally. The sustained price hike in PVC resin is likely to provide a fillip to PVC pipe manufacturers by way of higher channel filling and inventory gains in near term. We prefer Prince Pipes and Fittings (PPF) and Supreme Industries (SI) over Astral Poly Technik (ASTRA).

- Supply shortage globally aids further spurt in PVC prices. With uptick in trade activities across the globe and recovery in crude prices, PVC prices recovered fully in Q1FY21 itself. Post that, PVC prices started trending higher again with price hike of Rs14.5/kg or 18.9% in Q2FY21. The current price hike of Rs4/kg is the second price hike in Q3FY21 and the biggest since May'20. These price hikes are mainly attributed to continued supply-side issues globally and the recent plant shutdown by Formosa in the US. While pipe distributors continue to have leaner channel inventory post Covid-19 outbreak, these sustained price hikes might tempt PVC pipe distributors to resort to higher channel filling to benefit them from the increasing trend in PVC pipe prices.

- CPVC pipe prices remain firm. Top CPVC pipe players took 3-5% price hike in the first week of Mar'20. There was a further hike announcement of 4-5% by a few large CPVC pipe players in the first week of Jun'20, which never got implemented in the trade. We are, however, witnessing a fresh round of price increase in CPVC pipes with Prince Pipes and Fittings initiating a price increase of 3% on 1st Oct.

- PVC pipe players are likely to outperform CPVC pipe manufacturing companies in H1FY21. We expect PVC pipe players to outperform their CPVC counterparts in H1FY21 due to sharp spurt in PVC prices over the last three months and higher agriculture pipes sales in Q1FY21. The sharp recovery in PVC prices and the likely improvement in volumes since the second half of Q1FY21 would aid PVC pipe players report a much better performance in H1FY21 than envisaged earlier.

Source : Equity Bulls

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