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Target: ₹2,295
CMP: ₹2,013.25
We recently interacted with the management of Astral Ltd (ASTRA). The management indicated demand for PVC pipes is expected to remain healthy in H2-FY23E as PVC resin prices, which had corrected about 38 per cent FY23-TD, have now started stabilising; also see some price increases. East plant (Orissa) has started PVC pipes production and should enable the company to have deeper penetration in this geography and thus, better volume growth.
The management indicated it is on track to achieve its guidance of high double-digit pipe volume growth in FY23. Adhesive segment demand remains healthy and the company believes it will grow revenue in high double digit in FY23.
The management also believes volume growth in the pipe segment will pick-up going forward led by sharp correction of about 38 per cent in PVC resin prices seen earlier (FY23-TD) which has now started stabilising. CPVC prices remain stable and demand is expected to be robust driven by housing segment, operating margins are expected to improve from Q4-FY23 in both pipe (as inventory losses are expected to subside in Q4 as PVC resin prices stabilise) and adhesive segments (fall in raw material prices to result in normalised margins).
The newly-entered segment of bathware (sanitaryware and faucetware) is ramping up well. We have factored revenue of ₹125 crore in FY24E from this business.
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