Astral Ltd Results Report - Firing on all cylinders! - HDFC Securities

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities and Mr. Saurabh Dugar, Institutional Research Analyst, HDFC Securities

Astral Limited (ASTRA) reported a strong 4QFY21 as both pipes and adhesives segments reported all-time high margins. In pipes, CPVC sales grew at a faster pace. Consolidated net sales/EBITDA/APAT grew 26/33/42% QoQ (79/126/242% YoY) to INR 11.3/2.6/1.7bn respectively and EBITDAM moved to 22.6%. We like ASTRA for its leadership presence in the CPVC segment, continued traction in the adhesive business along with addition of newer chemistries, and new product launches, viz., tanks and valves. We retain our ADD rating with a revised target price of INR 1,830 (34x Mar'23E consolidated EBITDA).

4QFY21 performance: ASTRA's pipes volume increased 15% QoQ (+26% YoY), led by strong demand (faster growth in CPVC segment). Thus, net sales/EBITDA grew by 31/35% QoQ (80/121% YoY) to INR 9.1/2.1bn. Adhesive's net sales/EBITDA grew by 6/16% QoQ to INR 2.3/0.4bn with OPM at 17.7%. Both segments recorded all-time high margins. This led to consolidated EBITDA growth of 33/126% QoQ/YoY to INR 2.5bn.

FY21 performance and outlook: Pipe's volume rose 3% YoY on strong momentum since 2QFY21. Robust demand and pricing power and inventory gain drove EBITDAM to 21.5% (+340bps YoY). Adhesive's revenue/EBITDA grew by 26/49% YoY with EBITDAM at 15.5% (+236bps YoY). Thus, consolidated EBITDA/APAT grew 46/63% YoY. ASTRA expects to start pipes production from three more locations: Bhubaneshwar by Sep-21 (Phase-1: ~20KT), Aurangabad (~5KT) and Sangli (~9KT). While tanks production under ASTRAL brand from Santej has started, Ghelot and Hosur will start by 2QFY22. Cash Conversion Cycle has improved to 27days vs 42days YoY. OCF grew to INR 6.6bn vs 4.1bn YoY on improved operating performance and WC efficiencies. As Capex spend was lower at INR 1.7bn vs INR 2.2bn, FCF generation accelerated to INR 4.9bn (vs 1.9bn YoY). ASTRA used excess cash to reduce gross debt to INR 0.5bn (vs 1.7bn YoY). Thus, net cash stands at INR 4.3bn (vs net debt 0.4bn YoY). Factoring in traction across both businesses, we upgrade our consolidated EBITDA estimates by 8/9% for FY22/23E.

Shares of ASTRAL LTD. was last trading in BSE at Rs.1813.9 as compared to the previous close of Rs. 1798.2. The total number of shares traded during the day was 53726 in over 5297 trades.

The stock hit an intraday high of Rs. 1971.3 and intraday low of 1774.3. The net turnover during the day was Rs. 100393225.

Source : Equity Bulls

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