Astral’s Q2FY22 numbers were stronger than consensus forecasts led by a 20% YoY volume uptick in pipes and 37% growth on a yearly growth in adhesives, as per brokerage house Edelweiss. Shares of Astral Ltd have been among the multibagger stocks by rising around 135% in a year.
“We believe Astral continues to be the key beneficiary of market consolidation and the shift towards CPVC pipes given high PVC prices. Further, segments like sanitaryware, tanks, infra pipes and other product launches are likely to drive higher growth,” the brokerage said in a note.
The company’s consistent market share gains and strong cash flows have been underpinning its premium valuation, it added. As per Edelweiss, Astral sustained strong growth in H1FY22: volume growth is best amongst peers: Supreme Industries suffered a volume dip, followed by Finolex and Prince Pipes. Further, Astral continues to be net cash positive, it highlighted.
“Being growth-focussed, Astral continues to gun for launches (recent entry into sanitaryware, tanks, etc), capacity additions and focus on branding and distribution addition (constant effort). It is also a key beneficiary of market consolidation, leading to market share gains in plastic pipes & fittings (visible in current quarter),” the note added.
Given strong demand, management is confident of ₹10 billion revenues in FY22 while margins are likely to improve from Q3FY22 itself as Astral has taken adequate price increase to pass on the input cost. Furthermore, looking at growth opportunities, Astral launched two new products during the quarter: BONDTITE PRO and Resiwood WPC-FIX.
Notwithstanding uncertainty, management is confident of clocking double-digit volume growth (seen in October). They also sounded extremely positive on the opportunity in infra pipes and plastic tanks segments, and plan to launch DWV pipes in December, said Edelweiss.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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