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AnandRathi
Astral Poly Technik (Buy)
CMP: ₹1,109
Target: ₹1,301
Key takeaways: a) Astral Poly Technik’s Q2 Revenue/EBITDA/PBT/PAT grew 8 per cent/26 per cent/33 per cent/83 per cent y-o-y, driven by the strong performance of the pipes division, though partially offset by weak adhesives and a low tax rate (the new rate adopted). EBITDA margin expanded 246 bps y-o-y to 17.5 per cent, driven by the gross margin (up 498 bps). Pipes revenue swelled 15 per cent y-o-y on a 27 per cent rise in volumes, suggesting an inferior mix toward PVC. Yet, EBIT margin expanded 380 bps y-o-y to 14.6 per cent on the use of low-costinventory and price hikes in CPVC in the quarter. In adhesives, revenuesslipped 9 per cent y-o-y, with the EBIT margin shrinking 379 bps to 12.4 per cent.
b) After a strong around 33 per cent y-o-y jump in pipes volume in H1, management expects strong growth to continue in H2 as well. Plants across regions by FY21 will help in savings on logistics costs.
c) Low adhesives utilisation means capex would not be required in the next two years. Structural changes in Resinova (channel management by eliminating stockists) were completed in Q2 as planned. Its performance would be back on track from H2, per management.
Valuation: We dig Astral for its consistent focus on growth and profitability,supported by innovative-product launches, vigorous brand-building and successful product diversification.
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