Astral Ltd. share price target

Strong volume growth (28% YoY in pipes) pushed Q3 revenue up 17% YoY. However, higher promotion expenses and investments to augment distribution network hurt EBIDTA by ~Rs 150 mn, muting EBITDA growth to 16% YoY at Rs 737 mn.

New launches, addition of new dealers and a lower base resulted in strong volume growth of 28% YoY in the piping segment during Q2FY18. However, backward integration of raw materials resulted in lower realisation (fell ~11% YoY) as the company passed on the benefits to customers. On the other hand, the adhesive category posted a strong performance, led by domestic business growth of ~35% YoY owing to a lower base. The management has guided a strong recovery in the domestic business post implementation of...

Astral Poly Technik's (Astral) Q3FY18 result was largely in line with our expectation. Plastics division was propelled by 28.4% growth volume, partially offset by lower realization while Adhesive business saw a significant 30% YoY jump in revenue. Revenue increased 17.5% to Rs5.3 bn, EBITDA increased 16.1% YoY to Rs737 mn while adjusted net profit increased 24% to Rs428 mn. Astral is adding nearly 38KT of combined capacity at Rajasthan and Hosur which would start from Q1FY19. We are rolling forward our valuation to FY20 giving a new TP of Rs773 from earlier Rs685. We are upgrading the stock to HOLD from REDUCE....

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...