Q4FY19 result highlights
Key positives: ~23% pipes volume growth (incl. Rex).
Key negatives: Associate losses, higher than exp. D&A.
Impact on financials: 5%/4% cut in FY20E/21E EPS on higher dep.
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 as the infrastructure cycle begins to move upwards post the elections. Excluding REX, ASTRA’s pipes business continues to grow at a healthy pace with strong operating margins (~17% in FY19). The adhesives business is undergoing a margin correction, mainly due to the company’s bid of building the Astral/Resinova brand as a credible player in the industry. We increase our target multiple for ASTRA to 47x (vs 45x earlier) FY21E EPS (TP Rs1,334) and maintain our Outperformer rating. Given the recent run-up in the stock price, we would advise investors to wait for any near-term price dips due to general market volatility while building up positions.
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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