by Suhani Adilabadkar
Headquartered in Ahmedabad, Astral Poly Technik is one of the leading manufacturers of chlorinated poly vinyl chloride (CPVC) and poly vinyl chloride (PVC) plumbing systems, for both residential and industrial applications. Astral enjoys a dominant market share in domestic CPVC and PVC pipe sector and is making strong inroads in the adhesives segment and infrastructure products. The company manufactures plumbing systems, drainage systems, different types of pipes and infrastructure products through its six pipe manufacturing facilities and three adhesive units. Piping segment constitutes 74% of the total revenue basket and adhesives accounts for the remaining 26%.
Quick Takes:
- Astral enjoys a dominant market share in the domestic CPVC and PVC pipe industry.
- Revenues jumped 8% YoY reported at Rs. 678 cr and operating profit rose 26% YoY in Q2 FY20.
- Piping segment garners 74% of the total revenue basket and adhesives accounts for the remaining 26%.
- Anti-dumping duty imposed on CPCV imports by the Indian Government has helped Astra Poly Technik.
- Borewell column pipe production in the Hosur plant caters to Tamil Nadu, Karnataka, Kerala and parts of Andhra Pradesh and Telangana, which is growing at a very fast pace.
A stable September quarter FY20
Astral Poly Technik reported stable numbers in September FY20 driven by strong piping segment performance. Revenues jumped 8% YoY reported at Rs. 678 crore in Q2FY20 compared to Rs. 629 crore the same period last year. Operating profit came out at Rs. 119 cr against Rs. 94 cr corresponding September quarter FY19 rising 26% YoY with a margin of 17.5%, expanding 254 bps YoY in Q2FY20 as the company undertook price hike of 8% during the September quarter.
PAT stood at Rs. 83 crore compared to Rs. 47 crore in Q2FY19, rising 77% YoY. The stock has gained 40% over the past one year and institutional holding has risen 274 bps over the past one year.
September numbers fail to excite
Though investors were not much enthused, Astra Poly Technik reported stable September quarter numbers. The piping segment reported volume growth of 27% and volumes stood at 17% YoY excluding Rex Polyextrusion (acquired during FY18-19). Rex reported volumes of 2823 metric tons with Astra’s volumes coming out at 31,793 metric tons in Q2FY20.
Coming to segmental performance, piping division reported 15% growth YoY whereas adhesive revenue declined 9% YoY due to distribution transition that was completed during the quarter. Clarifying on adhesive subdued numbers, Mr. Hiranand Savlani, CFO, Astral Poly Technik said, “It is too early to say that we will be delivering double-digit growth on a full-year basis, but yes definitely the second half will be double-digit growth into adhesive”.
As for the piping segment, management has guided volume growth of more than 15% for FY20. The piping segment has been favourably impacted by price hike taken by the company, 3% in August and another 5% in the month of September and the 90% anti-dumping duty imposed on Chinese and Korean imports by the Government which has created 40% scarcity for CPVC pipe in the market.
The management noted that monsoon season and flooding in their sangli plant has impacted volume growth during the quarter and on the margin front, Mr Savlani, said, “We are doing a very healthy margin, it is not like a 6% kind of margin which you saw in the last year, but we are crossing the double-digit margin into Rex also”.
With respect to international business, Nairobi Kenya plant has become EBITDA positive with cash losses ceased and strong profit expected in the next 1-2 years. US operation are also EBITDA positive now and UK adhesive subsidiary has reported constant currency growth of about 5% to 6% in the June quarter with double digit EBITDA margin.
Company focus is now on expansion+automation
Astral Poly Technik also intends to focus on its valve business and has initiated its state-of-art plant to not only make a complete range of industrial and plumbing valves which would be operational by next year, but also manufacture a wide range of ball valve, butterfly valve and various other valves requiring two to three years of time to augment this wide range. The expansion plansundertaken for enhancing product capacity for Hosur plant in south India, is over and borewell column pipe production has been initiated catering to Tamil Nadu, Karnataka, Kerala and parts of Andhra Pradesh and Telangana which is growing at a very fast pace.
In Ahmedabad, modernization and automation is being undertaken at the Santej plant. Automation of fittings and packing has already been completed and currently automation of pipe packing tools is being done which is saving costs and enhancing speed. On the similar lines, at Dholka plant, the company has expanded valve manufacturing and drainage fittings capacity. A piece of land has been acquired in Odisha and by next mid fiscal or by the end of next fiscal, Odisha plant will be completely operational. Astra has robust product basket, strong brand name, wide distribution network, but investors would be looking at early recuperation of adhesive business and time frame of anti-dumping duty in the coming quarters.
Suhani Adilabadkar is a Research Analyst registered with SEBI ((INH200003240)) She has done PGDBA (Finance), MS (Finance) and a Fellowship from Insurance Institute of India.