International brokerage Goldman Sachs noted that the margins and volume growth for pipe manufacturers was likely bottoming out, however, recovery is expected to be gradual.
The pipes sector is seeing an impact on volumes a result of extended monsoons and sharp fall in PVC prices, which has also led to dealer destocking. However, according to management commentary, PVC prices are stabilising and moving on an uptrend, which will likely lead to normalised channel inventory.
As a result, Goldman Sachs slashes its price target on Astral to Rs 2,170 per share, down from Rs 2,410 earlier, while maintaining its 'buy' recommendation.
For Prince Pipes & Fittings, the brokerage downgraded its rating to 'neutral', from 'buy' earlier. The target price was cut to Rs 480 apiece, down from Rs 705 per share.
The industry leader, Astral, is currently exhibiting pricing power and margin discipline, added the brokerage. However, Price Pipes is struggling to balance growth and margins. As a result, the margin pressures could persist for a few months.
At 9.15 am, shares of Astral were quoting Rs 1,782 on the NSE, higher by 1.2 percent. On the other hand, Prince Pipes shares were trading at Rs 425.8 per share, up 0.7 percent.
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As per Goldman Sachs' channel checks, inventory for the pipe players is relatively stable in November, despite end-market demand from the real estate sector showing a pick-up. China PVC prices remain subdued, which points to a more gradual margin recovery for the pipes sector.
Over the past 12 months, Astral shares have tumbled around 8 percent on the bourses, as compared to Prince Pipes' stock price, which has fallen by 38 percent.
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