Target: ₹2,666
CMP: ₹1,792.15
In the extremely volatile PVC pricing context. Astral’s performance was decent though revenue was up only 0.5 per cent to a muted ₹1,370 crore. Despite the challenging situation, the gross margin held y-o-y at a stable 38.9 per cent.
Cost front-loading in certain businesses at early stages led to the EBITDA margin coming 82bps lower y-o-y to 15.3 per cnet. PAT fell a huge 16 per cent due to other income down 34 per cent and depreciation/interest expense up 23/27 per cent respectively.
The balance sheet continues to be lean (₹270 crore cash surplus, down 50 per cent due to capex). Management expects 10-15/15 per cent volume/revenue growth in plumbing/paints and adhesives in FY25.
Adhesive margin guidance: India 15 per cent, overseas 8-10 per cent; overall capex guidance: ₹100 crore. The Hyderabad plant began operations in Sep’24; commercial production of O-PVC at the Dholka plant and PTMT plastic taps will begin by end-Q3 FY25. This will broaden its geographical reach in paints to Rajasthan, Karnataka, Gujarat and Maharashtra.
We expect strong 18/22/24 per cent revenue/EBITDA/PAT CAGRs over FY24-27; hence, upgrade the stock to a Buy with a TP of ₹2,666, 68.75x FY27e EPS (earlier a Hold, at a ₹1,793 TP, 62.5x FY25).
Risks: Keener competition, raw material availability and pricing.