Reliance Securities - Views - Astral to acquire 51% stake in Gem Paints

Mr. Arafat Saiyed, Senior Research Analyst at Reliance Securities.

As part of strategy to expand under building material segment and strengthen the brand, Astral to acquire 51% stake Gem Paints Pvt Ltd for Rs1.94bn.

Gem paints was founded in 1980, which manufactures high performance Industrial and Decorative coatings in South India. The company has with more than 3000+ dealers and 10 Depots spread across all the states of South India. Gem Paints has wide range of diverse portfolio of 28+ brands and 100+SKUs spanning across various price points. The Company is setting up a state of art plant at Nelamangala (Karnataka) admeasuring 160,000 Sq. Ft. and has Capacity of 36,000 KLPA, which is likely to increased to 60,000 KLPA post expansion of Phase II.

Gem Paints revenue clocked CAGR of 5% in last three years to of Rs2,146 mn in FY22 with EBITDA margin of ~15% in FY22.

Our View: Astral has added another product in its building material portfolio with this acquisition to get synergy of distribution network. We believe the company would continue with its growth trajectory led by: a) leadership position in CPVC market, opportunities in infra pipes segment, which are expected to pick up by next year with the governments strong emphasis on infrastructure and housing; (b) strong growth potential of adhesive business after restructuring of its distribution network; and (c) new launches. We believe ASTRAs premium valuation will sustain, going forward, led by the leading position in CPVC pipes segment, continued focus on innovative and high-margin products and restructuring of its adhesive business. We have BUY rating on the stock, with a 1-year Target Price of Rs2,840.

Shares of Astral Poly Technik Limited was last trading in BSE at Rs. 2153.05 as compared to the previous close of Rs. 2164.95. The total number of shares traded during the day was 12907 in over 2739 trades.

The stock hit an intraday high of Rs. 2177.65 and intraday low of 2119.00. The net turnover during the day was Rs. 27809070.00.

Source : Equity Bulls

Keywords

Astral INE006I01046 Acquisition GemPaints FirstCutViews RelianceSecurities