Astral Ltd. share price target

Astral Poly Technik (Astral) came out with a strong result, beating our estimates, led by robust volume growth of 27% YoY in plastics segment. Adhesive business also saw a healthy 15% primarily at Resinova owing to capacity expansion. Overall EBITDA margin expanded 174bps to 14.7% mainly due to 138bps expansion in Plastics division and 62bps in Adhesive business. Consequently, EBITDA grew 35% to Rs763 mn translated into 43% growth in adjusted PAT to Rs419 mn. We are raising our TP to Rs685 from Rs642. However, due to sharp movement in stock price in recent months, we downgrade to REDUCE from ACCUMULATE....

We remain positive on a long-term structural basis. At CMP, the stock trades at 52.3x FY18E and 40.3x FY19E earnings. Considering its growth rate, first mover advantage, the launch of new products with exclusivity and focus on enhancing distribution reach with brand awareness, APTL will remain on a growth trajectory. Improvement in return ratios and strong revenue growth with margin protection will enable APTL to sustain high valuations. We...

Re-stocking of inventory at the dealer's level, new launches and addition of new dealers drove APTL volume growth by 27% YoY during Q2FY18. Additionally, backward integration of raw materials resulted in lower realisation (fell ~6% YoY) as the company passed on benefits to customers. Further, under the adhesive category where domestic business recorded strong performance, the overseas business recorded muted growth of ~2% YoY as the US plant in stabilisation mode. The management has guided a strong...

De-stocking of inventory at the dealer's level had dented volumes of APTL as volume growth remained flat in Q1FY18. Additionally, backward integration of raw materials resulted in lower realisation (declined ~6% YoY) as the company passed on benefits to customers. Further, under the adhesive category where domestic business was marred by lower volume offtake by dealers, the overseas business declined in sales by 5% YoY due to adverse currency movement. However, the management has guided a strong...

Structural growth story intact: Strong demand for pipes (75% of FY17 revenue) in the agri and housing sectors coupled with ~20% growth in adhesive business, as Astral expands its product suite, will continue to drive growth.

Astral Poly Technik (APTL), a leader in CPVC piping, has 25% market share with total pipe manufacturing capacity of ~1.4 lakh tonnes. Over the years, APTL created a strong brand in Indian plumbing market registering healthy piping volume CAGR of 32% in FY09-16. We believe it will continue recording strong piping volume CAGR of 17% in FY17-19E supported by demand staying intact from various government social schemes & implementation of GST. Further, addition of adhesive business in the kitty is a step to de-risk business from concentration of one product. We expect...

Strong volume growth despite demonetization; Robust performance at Resinova Plastic revenue grew by 10.7% YoY to Rs4,675 mn led by a robust 12.5% YoY volume growth to 28.7KT. Plastic division's EBITDA margin expanded significantly 377bps YoY to 16.4% in Q4FY17 as the company started its own composite plant in association with Sekisui Chemicals. Therefore, consolidated EBITDA increased 38% YoY to Rs893 mn which translated into...

performance in FY11-16 with revenue, earning CAGR of 33% and 25%, respectively. This was largely led by strong demand in the plumbing & Amount drainage segment (resulted in capacity addition at 21% CAGR in FY11-16) 6706.0 and acquisition of adhesive business....

Despite demonetization and change in Astral's raw material (CPVC pipes) tie-up with Lubrizol, revenue increased 12% led by 12% volume growth in pipes (75% of revenue) and 11% growth in adhesive division (25% of revenue). Cost savings as Astral backward integrated to make its own CPVC compound coup..