Buy Astral; target of Rs 1540: ICICI Securities

ICICI Securities's research report on Astral

Astral reported a lower-than-expected Q1FY26 with pipe volume growth of 0.5% YoY (6-year CAGR of 10%). Consol. revenue fell 1.6% YoY with pipes/adhesives segments being -6.7%/+8.6% YoY. Pipes’ reported EBITDA/kg declined 14.3% YoY to INR 27.9/kg (adjusted for inventory losses of INR 250mn, it was flat YoY). Adhesives’ OPM dipped 203bps YoY to 10.3%, as India business’ margins shrank ~200 bps YoY while the UK business continued to languish. Astral announced the acquisition of Nexelon Chem, which would manufacture CPVC resin from Q2FY27; thus, enabling the company to be backward-integrated and more cost competitive. We believe, this backward integration could structurally improve the growth/margin profile of the piping business. We tweak our estimates and upgrade the stock to BUY (from Hold) with a rolled over Jun’26 TP of INR 1,540.

Outlook

We upgrade the stock to BUY, from Hold – post the recent stock price correction and given the stronger possibility in earnings resilience – with a rolled over Jun’26 TP of INR 1,540 (earlier INR 1,504); set at unchanged 55x PER one-year forward (~15% discount to 10-year average PER)