Astral Ltd. share price target

The management has guided for 15% consolidated revenue growth for the next 5 years. We have HOLD on the stock.

In Q4FY24, Astral reported strong pipes volume growth of 22.8% YoY (3-year CAGR of 16.3%). Consol. revenue grew 7.9% YoY with pipes/adhesives segments growing 8.1%/7.3% YoY.

Plumbing volume shines; outlook promising

EBITDA miss by 6% compared to our estimate on continued weak performance of paints and adhesives segment

The management has g The management has guided 15% consolidated revenue growth for the next 5 years.uided 15% consolidated revenue growth for the next 5 years. Recommendation: HOLD

NAM: Strong growth but upside capped cut to HOLD. APOLP: Disappointing result on all fronts. ITC: Cigarette and paperboard businesses disappoint. LT: Order inflow guidance raised; maintain BUY. NTPC: Normal quarter, aggressive expansion; maintain BUY. MRCO: Domestic business still lacklustre. UTIAM: Core earnings miss estimates. ASTRA: Mixed quarter, guidance broadly intact

Topline in line at Rs 13.7bn; miss at EBITDA level on one-off expense and MTM inventory loss

Astral reported better-than-expected Q2FY24 volumes growth of 27.8% YoY (4-yr CAGR of 10.7%) in its pipes segment owing to a low-base. Consolidated revenue grew 16.3% YoY with pipes/adhesives segments growing 15.1%/17.5% YoY. Consolidated EBITDA margin improved 386bps YoY (+44bps QoQ) to 16.1%, leading to EBITDA/APAT growth of 52.8%/72.8% YoY.

Strong volume growth in plumbing; outlook promising

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

We interacted with the management of Astral Ltd (Astral) and following are the key takeaways: a) demand trend in pipe market remains healthy in Q2FY24-TD with 20%+ volume growth YoY (partly aided by low base) driven largely by the plumbing segment; b) management indicated operating margins to improve QoQ in Q2FY24 for both pipes (due to better product mix and no inventory losses likely to recur in Q2 given that PVC resin prices have been on an uptrend) and adhesives (benign raw material prices).

Company Outlook & Guidance: The management has 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 of 9%-10%) in FY24E.

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%.