Astral Ltd. share price target

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%.