Astral Polytechnik Ltd - Volume growth continues, Profitability subdued.. - Networth

Q3FY12 Operational Highlights

Revenues more than expected, margins play a spoilsport

Astral's Q3FY12 top line grew by 63% yoy at Rs. 161 Cr, more than our estimate on account of robust volume growth. The operating margin however, compressed by 450bps yoy at 10.2%, mainly on account of promotional expenses. The decline was also partially due to increase in raw material prices on account of rupee depreciation.

The depreciation rose 24% whereas the interest cost was almost doubled at Rs. 2 Cr on account of debt raised for Dholka plant. Net Profit was also impacted due to forex loss of Rs. 5.8 Cr in Q3FY12. Hence, PAT decreased by 43% yoy at Rs. 4.7 Cr.

Another facility in Ahmedabad commissioned in Q3FY12

The company has successfully commissioned its new facility in Ahmedabad in the current quarter taking the capacity to 70,000 tpa. It has also started selling its manufactured solvent cement for PVC. However CPVC solvent cement is still imported from IPS and will commission production from FY13E.

Change in estimates on account of non recurring expenses

We have revised our sales estimate on account of robust volume growth in 9MFY12. However we have also revised our bottom line estimates on account of one time promotional expenses in this quarter as well as impact of forex loss in FY12E.

Since Astral is having a dominating market position in the CPVC segment, we expect the company to be able to partially pass on the higher input cost in FY13E and expect the realizations to be higher by 3%.

Valuations:

We are bullish on the long term prospects of Astral Polytechnic, though we remain concerned about the company's ability to maintain margins on the wake of adverse INR/USD movement. Our one year forward target price for the company stands at Rs. 186 (7.5 times FY13EPS). We recommend our clients to Hold the stock.

Source : Equity Bulls

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