Motilal Oswal sees 31% upside in this pipe stock despite near-term headwinds

Brokerage firm Motilal Oswal is projecting a 31% upside potential for shares of Prince Pipes and Fittings Ltd. as part of its latest note on the pipe sector, released on Friday, September 19.

The brokerage has maintained its 'Buy' rating on the stock with a price target of ₹440 per share.

Prince Pipes hosted an analyst meet on September 18, where it highlighted the current demand-supply and pricing dynamics in the PVC pipes industry. The market remains under pressure due to volatile PVC prices and subdued demand.

Adding to the challenges, the delay in implementing anti-dumping duty (ADD) has created uncertainty among channel partners, further weighing on domestic PVC prices.

Given that Q2 is typically a weak quarter, the company expects a healthy recovery in demand in H2FY26, reaffirming its full-year guidance.

According to Motilal Oswal, Prince Pipes is navigating a tough operating environment and trade-channel uncertainty. However, the company's medium-term growth drivers remain intact, including new capacity in Bihar, CPVC expansion, margin accretion from higher utilisation and better product mix, and improving demand in Tier-2/3 markets.

The company expects high single-digit volume growth in FY26, while acknowledging near-term demand headwinds. Its strategy remains focused on margin expansion, supported by a richer product mix and a rising CPVC share.

Notably, the current quarter already reflects an improved margin profile compared to the previous period.

A key milestone is the commissioning of the Begusarai facility in Bihar, which has added 45-50 ktpa of capacity (including CPVC) by end-H1FY26. At full capacity of 60 ktpa, the plant is expected to reach 60-65% utilisation in FY27, strengthening Prince Pipes' position in Eastern India, a region viewed as a high-growth market.

At the same time, the company is diversifying into adjacencies. Its bathware division is on track to achieve break-even at revenue of ₹80-100 crore by FY27.

Meanwhile, the CPVC segment continues to gain traction, with Prince Pipes holding a 10-12% market share in the ₹5,000 crore CPVC pipes industry.

Motilal Oswal projects a 12% volume CAGR over FY25-28, supported by margin expansion from operating leverage and product mix gains.

Structural demand drivers, such as government housing schemes, plumbing upgrades, and GST rationalisation, are expected to provide further tailwinds in H2FY26 and beyond.

On Friday, shares of Prince Pipes and Fittings were trading lower at ₹335.30, though the stock has gained 35% over the past six months.