Astral Polytechnik: Q1 muted; gradual recovery ahead - AXIS Capital

Astral Polytechnik (Bloomberg: ASTRA IN, BUY, TP - Rs 401, 1% downside from CMP of Rs 405)

Astral's Q1FY16 PAT was muted at Rs 223 mn due to tepid demand for pipes, forex loss of Rs 22 mn, and plant shutdown for 15 days. We expect pipe demand to improve as rural and housing activity pick up coupled with introduction of new variants.

Adhesive division impressed with margin improving 220 bps QoQ due to lower input cost. Astral will operationalize its adhesive plant in Gujarat in H2 which will help in significant savings in logistics cost. Moreover synergies accruing from distribution and cross selling should help improve margin in the adhesive division.

We expect 20% revenue CAGR over FY15-17 coupled with 200 bps expansion in EBITDA margin to ~14% to drive PAT growth.

We reduce our FY16E and FY17E EPS to Rs 13 and Rs 17 (Rs 14 and Rs 19 earlier) to factor in slower than expected pick-up in demand. We revise our rating to HOLD with TP of Rs 401 (Rs 419 earlier). The stock trades at 32x FY16E EPS and 24x FY17E EPS.

Shares of ASTRAL POLY TECHNIK LTD. was last trading in BSE at Rs.421 as compared to the previous close of Rs. 420.2. The total number of shares traded during the day was 1070 in over 76 trades.

The stock hit an intraday high of Rs. 423.6 and intraday low of 418. The net turnover during the day was Rs. 449519.

Source : Equity Bulls

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