Cracks in earnings of tile and plastic pipe makers may widen in Q1
Investors in shares of plastic pipe manufacturers and ceramic tile makers should keep expectations low for the ongoing June quarter (Q1FY26).
The demand for plumbing pipes is likely to be weak, while slower government spending on construction projects is seen hurting demand for infrastructure pipes. Plus, early monsoon arrival could adversely impact demand for agricultural pipes.
Moreover, the average realisation for major pipe companies is likely to remain under pressure sequentially in Q1FY26.
'Dealers indicated that pipe companies have taken a price hike of 2.5-5.0% in Q1FY26 (quarter-to-date) to pass on the impact of recent increase in poly vinyl chloride (PVC) resin prices.
However, average pipe realization is likely to be almost at a similar level compared to March '25 end as PVC resin prices went up by ₹3.5/kg over the past one month versus correction of ₹4/kg seen in April '25," said BoB Capital Markets report dated 18 June. For this channel check, BoB interacted with 17 plastic pipe dealers across various regions.
In the case of tile makers, domestic demand is moderate and oversupply in the industry is causing significant pricing pressure.
'With issues in the export market in FY25, 5–10% of export volumes from Morbi have shifted to the domestic market. This diversion has resulted in dumping of excess inventory in the domestic market, leading to intense competition and additional stress on pricing," said a PL Capital report dated 14 June.
Widespread expectations are that tile exports may remain weak in the near future due to the trade tariff impact, in the form of lower exports to the US market and a slowdown in global demand. While demand could get a push in H2FY26 from the anticipated recovery in the individual home building segment, the cracks on margin may not be repaired unless exports pick up.
The March quarter (Q4FY25) was dull for companies in both these sectors. Volume growth for plastic pipe makers was muted; slipping PVC prices and channel destocking led to year-on-year margin contraction. For pipe companies, restocking/destocking decisions of dealers is highly influenced by movement in PVC prices.
Listed tile makers grappled with margin pressure from weak retail demand and increased competition from tile companies in Gujarat's Morbi, India's ceramic hub.
Also Read: Tile stocks are cracking as companies brace for a muted FY25 finish
On an aggregate basis, pipe companies under the coverage of Nuvama Research saw Ebitda and PAT contract 10% and 7%, hurt by destocking and lower government spending.
'Tile players—hurt by weak demand— posted top-line growth of mere 2% year-on-year while Ebitda/PAT decreased 20%/52% year-on-year due to operating deleverage and one-offs in non-tiles," added Nuvama.
PAT is profit after tax. Ebitda is earnings before interest, tax, depreciation and amortization.
No wonder, stock performances of companies in these sectors have been quite disappointing. In the last one year, shares of Kajaria Ceramics Ltd and Somany Ceramics Ltd have declined by 24% each. Supreme Industries Ltd, Prince Pipes and Fittings Ltd, Finolex Industries Ltd and Astral Industries Ltd have shed around 30-50%.
Apart from dismal earnings, the broader volatility in equity markets, where midcaps and small caps tend to see a steeper correction than large caps, may have also exacerbated the pain for these stocks.
For more analyses, read Mark to Market
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