Astral Q2 Results Review - A Soft Quarter; Expects 10-15% Pipe Volume Growth In FY25: Systematix

Systematix Research Report

Astral Ltd.’s Q2 was soft (revenue up 1%, Ebitda/profit after tax down 5%/16% YoY) driven by 3%/1% YoY dip in pipe volume/revenue and lower margins in the newer businesses (paints, bathware).

Pipe volume drop was mainly driven by PVC pipe segment which faced channel destocking on high volatility in prices. Industry witnessed a decline because of heavy monsoon and low govt. spending. CPVC pipe continued to do well with market share gain. Inventory loss stood low at ~Rs 150 million due to low inventory levels. After clocking a low 7% YoY growth in H1, management expects 10-15% volume growth in FY25.

A series of small price hikes in November may drive restocking. ASTRA’s newly started Hyderabad plant will drive pipe volume in the southern market. For O-PVC pipe, first machine at Dholka plant is under trial production.

In Bathware, after clocking Rs 552 million revenue in H1 (Rs 289 million in Q2), management aims Rs 1.25 billion revenue (FY24: Rs 620 million) and Ebitda to breakeven in FY25 (FY24: Rs 180 million loss).

It has planned to launch own manufactured PTMT plastic tap products with 150 stock keeping units. Adhesives India business (Q2 revenue up 8% YoY with 15% Ebitda margin) is doing well; UK (Q2 revenue flattish, Ebitda margin -2%) is likely to revive soon with 12-14 new launches planned in coming quarters.

After launching paints under Astral brand in Gujarat, Karnataka and Maharashtra, entry in Rajasthan is planned shortly. After a soft Q2, we cut earnings estimates by 2-13%. We expect 13%/13%/16% CAGR in revenue/ Ebitda/PAT over FY24-27E (FY19-24: 18%/19%/23%).

At ~56 times FY27E P/E, we retain Hold, with a target price of Rs 1,760 (55 times FY27E P/E, earlier Rs 1,801).

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.