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Dolat Capital
Astral Poly (Buy)
CMP: ₹413.10
Target: ₹483
Astral Poly Technik has made two acquisitions over the last quarters in the adhesives and construction chemical segments. We believe that these shall catapult Astral into a sizeable player in these high growth segment given its penetration and brand push.
APTL has taken a 76 per cent stake in Resinova Chemie for a consideration of ₹212.8 crore and 80 per cent stake in Seal IT Services for a consideration of ₹44 crore. Synergies will accrue to APTL as well as the acquired companies in the form of sharing product technologies, accessing manufacturing locations and usage of distribution network. Both the acquired companies have an asset light model. The margin profile will improve due to rationalisation of cost structure, raw material sourcing and pricing power due to Astral brand.
We believe this is a natural extension for Astral Poly to position itself as a significant player in the construction industry. We believe that APTL would do a 5 per cent dilution to fund the acquisition of Resinova Chemie. We are also rolling over our target valuation to FY17E earnings.
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