Astral Ltd. share price target

Company Outlook & Guidance: The management guided 15% consolidated revenue growth for the next 5 years. Pipes volume growth to be in the range of 15%-20% ( vs. the industry growth 9%-10%) in FY24E.

Astral reported in-line Q4FY23 pipes volume growth of 15.3% YoY (4-year CAGR of 8.8%), driven by strong demand from the plumbing sector. Consolidated revenue grew 8.3% YoY with pipes segment growing 2.5% YoY and adhesives segment ~6% YoY.

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%.