Q1FY20 result highlights
Key positives: Better than expected pipes realisations/adhesives margins
Key negatives: Weak adhesives revenue growth.
Impact on financials: Broadly unchanged.
Valuations & view
We remain constructive on the growth prospects of ASTRA, given its leadership position in the CPVC pipes space, and proven managerial and innovation capabilities in the pipes market. The corrective measures in REX are now in the base, and this particular business segment should begin contributing meaningfully to revenue/EBITDA once the infrastructure cycle begins to move upwards. The adhesives business is undergoing a correction (on the distribution side) and benefits from this would start accruing from H2FY20E onwards and build on from there onwards. We maintain our OP rating on ASTRA with a TP of Rs1,329 (47x FY21E EPS). We expect premium valuations to sustain given strong execution and ability to stay ahead of the industry in terms of innovation.
Astral Poly Technik Limited is engaged in the production of plastic products. The Company and its subsidiaries are engaged in the business of manufacturing and trading of pipes, fittings and adhesive solutions. Its product range includes pipe category for plumbing, industrial, drainage, fire protection, agriculture, electrical conduit and ancillary, and adhesive category for construction, maintenance, wood care and automotive. The Company has its manufacturing facilities in India and abroad, and sells across the globe. Its pipe manufacturing facilities offer products, such as chlorinated polyvinyl chloride (CPVC) piping system for plumbing, industrial and fire protection; unplasticized PVC (UPVC) piping system for plumbing; manholes/chambers; PVC piping system for drainage; electrical conduit pipes; cyanoacrylates; solvent cements; tile adhesives; silicone sealant; putty; construction chemicals; polyurethane; acrylics; silicone sealants; waterproofing solutions, and silicone tapes.
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