2 Pipe stocks in which JP Morgan sees strong potential and market share gains

Synopsis – JPMorgan maintains an “overweight” stance on Astral and Supreme Industries, trimming target prices due to PVC price volatility, but sees long-term potential from strong market share gains, pricing power, and recovering demand in India’s pipe sector.

JPMorgan maintains an “overweight” stance on India’s leading pipe stocks, Astral and Supreme Industries, trimming target prices due to PVC price volatility, while highlighting long-term potential from market share gains, pricing power, and recovering demand.

With market capitalization of Rs. 38,673 cr, the shares of Astral Ltd are closed at Rs. 1,439 per share, from its previous close of Rs. 1,468 per share. The stock delivered a negative return of 20% over the past year.

With market capitalization of Rs. 43,073 cr, the shares of Supreme Industries are closed at Rs. 3,390 per share, from its previous close of Rs. 3,416 per share. The stock delivered a negative return of 25% over the past year.

JP Morgan on Indian Pipes

JPMorgan’s latest views on the Indian pipe sector reflect ongoing challenges and emerging opportunities. The brokerage has maintained its “overweight” stance on both Astral and Supreme Industries, two major listed players in the sector. 

It has revised downward its target prices (TP). Astral’s TP has been reduced to Rs. 1,700 from Rs. 1,800, 18% upside from current levels and Supreme Industries’ to Rs. 4,200 from Rs. 4,760, 24% upside. This adjustment signals near-term caution amid sector-specific and macro risks, despite constructive long-term outlooks.

A key concern highlighted is the risk posed by PVC price volatility. PVC (Polyvinyl Chloride) is a significant raw material for these pipe manufacturers. Price fluctuations can directly squeeze margins and destabilize earnings performance, leading to further stock corrections. This risk is currently weighing on investor sentiment and share prices within the sector, which explains the trimmed target prices.

Despite the near-term pressures, JPMorgan believes the sector’s risk/reward setup has turned favorable after the recent correction. Valuations are more attractive, offering upside potential for investors willing to look beyond the immediate uncertainty.

The brokerage expects ongoing market share gains for the leading companies, supported by positive industry trends. Demand is anticipated to recover in the second half of the year as infrastructure projects pick up pace and rural housing sees improved activity. Further, there appears to be some pricing support developing, which may help stabilize margins.

One notable positive, according to JPMorgan, is that market share gains for Astral and Supreme Industries have been unexpectedly strong. Both companies are consolidating their positions in the organized market and leveraging distribution strength and brand value. This positive surprise could reflect a shift away from smaller, unorganized players, strengthening the medium-term investment case.

In summary, JPMorgan’s view is cautiously optimistic for India’s leading pipe companies. While PVC price risk and recent stock corrections warrant lower target prices, the sector retains strong fundamental appeal due to sustained market share growth, pricing power, and recovering industry demand. 

Investors should monitor raw material price trends and demand trajectories closely, while considering the attractive long-term risk/reward profile of industry leaders.

Written by Manideep Appana

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