Astral Poly Technik - Target Price of Rs. 648 - Dolat Capital

New Product Launches: APTL has been expanding on its product range in both CPVC and PVC segment, and hence been successful to sustain growth rates. Amongst the new products, Bendable composite pipes and Column pipes are expected to gain traction in FY14. The upcoming product Blaze Master (fire sprinkler) would further add to growth. It is waiting from approval from local authorities.

- Robust Growth: APTL product range is witnessing strong growth due to product characteristics, which makes the product superior to competitive products, as well as strong distribution network. APTL has license for 4 products from Lubrizol which puts APTL at a competitive advantage. APTL revenue has been growing at a CAGR of 43% for the last six years.

- Network Expansion and Brand Enhancement: APTL is aggressively expanding its dealer network to increase its presence across the country. The brand enhancement program would improve the product perception by new users.

- Capacity Addition: The continuous capacity addition at low incremental cost would enable APTL to cater the strong growth rate as well as improve the return ratios. New plant at Hosur is expected to be ready by September 2013.

Valuation: At CMP, the stock trades at 16.9x FY14E and 12.3x FY15E earnings. Valuations are on the higher side and cap any significant outperformance in the short term. However, considering the growth trajectory and ability to protect return ratios (ROE @ 27%); we maintain that the story is structurally attractive. We have a target price of Rs. 648 to trade at 15x FY15E earnings.

Source : Equity Bulls

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