Polymer price tracker - PVC prices cross a record Rs100 mark - ICICI Securities

PVC prices' uptrend continues with another price hike of Rs3/kg, or 3.1%, w.e.f. 1st Nov'20. This is the third price hike in PVC in Q3FY21 (+11%) 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 Q3FY21 as well. PVC prices, which now stand at Rs101.3/kg, have risen 54.5% since 1st May'20. The surge has been largely led by supply-side issues globally. The sustained price hike in PVC resin may 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 pushes PVC prices to Rs100+ levels for the first time ever. 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 Rs3/kg is the third price hike in Q3FY21 and an overall 11% hike in Q3FY21. These price hikes are mainly attributed to continued supply-side issues globally. 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 can outperform CPVC pipe manufacturing companies in 9MFY21. We expect PVC pipe players to outperform their CPVC counterparts in 9MFY21 due to sharp spurt in PVC prices over the past six months and higher agriculture pipes sales in Q1FY21. The sharp spurt 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 9MFY21 than envisaged earlier.

Source : Equity Bulls

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