Buy Astral Poly Tec; target of Rs 291: Dolat Capital

Dolat Capital is bullish on Astral Poly Technik and has recommended buy rating on the stock with a target of Rs 291, in its August 14, 2012 research report.

“Astral Poly Technik APTL) Q1 FY13 revenue grew 52.4% to 1.53bn, driven by a 42.4% rise in volumes. Raw material cost rose 48.6% to 1.04 bn, mainly due to rupee depreciation. Blended realisation increased 7% YoY. Other expenditure stood higher than expected due to ongoing promotional schemes. Interest and depreciation were in line with estimates. Depreciation cost is set to rise following aggressive capex. APTL had an exceptional loss of ` 22 mn due to forex rate fluctuations. Due to rupee depreciation, APTL had a notional loss of 123.54n in Q1FY13. Of this, debt accounted for around 60 mn and imported raw material for the balance.”

“APTL started production of bendable composite pipes with technical support from Lubrizol in May 2012. APTL expects to get approval for Blaze Master in the current fiscal, a fire sprinkler product that is slated to be a ‘game changer’ for the company. The strong demand for plumbing systems from the replacement as well as new markets, coupled with ongoing capacity addition and increase in product offerings, augurs well for APTL.”

“At CMP, the stock trades at 10.6x FY13E and 8.3x FY14E earnings. Considering its growth rate, first mover advantage, launch of new products with exclusivity and focus on enhancing distribution reach with brand awareness, APTL will remain on a growth trajectory. Fluctuation in USD / INR rate would continue to impact APTL and we have built in a loss of ` 100 mn in our estimates for FY13. We reiterate our buy recommendation with a price target of ` 291 to trade at 10x FY14E earnings,” says Dolat Capital research report.

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