Astral Ltd. share price target

We interacted with the management of Astral Ltd (Astral) and following are the key takeaways: a) the demand trend in pipe market remains healthy in Q4FY23-TD with double-digit volume growth YoY driven by the plumbing segment; b) operating margins are expected to improve QoQ in Q4FY23 for both pipes (as inventory losses are not likely to recur in Q4 given that PVC resin prices have stabilised) and adhesives (fall in raw material prices to result in normalised margins);

Astral reported a better-than-expected pipe volume growth of 30.1% (3-year CAGR of 12.7%) on a low base in Q3FY23, driven by demand from plumbing sector. Consolidated revenue grew 15.0% YoY with plumbing segment revenue growing 10.7% YoY, while adhesive segment grew 10.7% YoY.

Company Outlook & Guidance: The strong volume growth across industry players reflects strong construction activities in Q3FY23. The Capex phase for Astral is almost peaked and is well-placed to fulfil upcoming demand as current capacity utilisation stands at 57%.

In our view, Astral (ASTRA) stock appears well positioned to gain (in absolute term) in the immediate near term as volumes are expected to pick-up in pipe segment (from Q3) and also margins are likely to normalise (in Q4FY23E) as PVC prices have stabilised (post ~34% decline in FY23-TD).

We recently interacted with the management of Astral Ltd (ASTRA) and following are the key takeaways: a) Demand trend in pipe has improved QTD and is likely to remain healthy in H2FY23.

Astral reported Q2FY23 consolidated revenue decline of 2.4% YoY (3-year CAGR of +20%) on a high base with plumbing segment revenue declining 10.6% YoY, while adhesive segment grew 9.8% YoY.

We recommend a BUY with a TP of Rs 2,225 with an upside potential of 11.2%.

Astral Ltd reported better than expected consolidated revenue growth of 73.1% YoY (3-year CAGR of 26%) on a low base with its plumbing/adhesive segments witnessing growth of 73.8%/45.2% YoY respectively.

Robust performance continues amid margin pressure

Consolidated Q1 revenue grew 73% YoY with plumbing/paints & adhesives up 74%/72%; pipe volumes increased 49%

Healthy performance continues amid margin pressure

Consolidated Q4 revenue grew 23% YoY with pipe/adhesive segments up 22%/27%; pipe volumes increased 11%