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Precision Pipes


Precision Pipes is in the business of manufacturing PVC Profiles and Extrusions for the auto and white goods (refrigerators) industries with autos being the dominant segment (90% of revenues) by far.

The company has a prominent customer base including the likes of Maruti, Tata, GM, Toyota etc.  Its white goods customers include the likes of Voltas, Godrej, Videocon etc.  It primarily operates with a cost advantage to global peers and a technological edge to domestic competitors.  It has a technical collaboration with two Japanese companies.  The industry is set to grow at 10%+ over the next decade.

The company reported consistent growth in revenues and operating profits over the last five years – reporting over 50cr in operating profits on revenues of over 200cr in the last financial year.  It used no net debt (as at 30th September, 2011) to finance its operations.

It is primarily dependent on PVC prices, which is dependent on crude oil prices and hence, exposed to its price increases.  It is also dependent on the auto industry, which is largely dependent on the interest rate cycle impacting availability of finance for auto purchases as well as general commodity price increases and other inflationary pressures on customer wallets.  Moreover, it is exposed to INR depreciation increasing the cost of imports.  Further, it doesn’t appear to have the quality standards of international competitors, which would reduce demand from quality-conscious customers.

Apart from the above risks, the company is exposed to the risks of changing customer preferences, government regulations on safety standards, and technological developments in manufacturing.  It is also capital intensive reducing free cash flows available to investors.  
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