Astral Ltd. share price target

Healthy volume growth; outlook promising

In Q1FY24, Astral reported pipes volume growth of 31.1% YoY (4-year CAGR of 10.9%). Consol revenue grew 5.8% YoY with pipes/adhesives segments growing ~6%/9% YoY. Consolidated EBITDA margin improved 165bps YoY (-480bps QoQ) to 15.7%, leading to EBITDA/APAT growth of 18.2%/26.4% YoY.

Management indicated demand environment for pipes remains healthy, driven by plumbing segment, which is further supported by a peak agri season. Lower PVC prices have fuelled demand for pipe industry. Management expects pipe industry to grow at 9-10%.

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);