Accumulate Astral Poly Technik; target of Rs 1303: Dolat Capital Market

Dolat Capital Market's research report on Astral Poly Technik

Astral Poly Technik (ASTRA) Q2FY21 numbers were above our estimates on revenue front and profitability front. Volume growth of 2.2% YoY and 62.4% QoQ in pipe segment as end markets opened up and company had inventory ready and robust distribution network. Pipes business showed a positive growth YoY from Sep'20 onwards. Adhesive segment from the month of July showed a positive growth after a subdued previous quarter. Margins on a full year showed growth as structural changes of eliminating stockists was undertaken. Stockist margins of 6-8% was removed which directly benefited the Company. Growth was seen in adhesives business as structural changes were completed which led to higher margins. ASTRA has plans for expansion and have acquired adjacent land at most of their plants for expansion purposes. To have a pan India presence they acquired a land in East India. In FY21, they will not be heavily spending on branding activities. We believe that these are investment phases and ASTRA will reap long term benefits of these strategies for prolonged periods atleast for the next 5 years. With new product addition in the Adhesive segment as well as pipe segment, we feel that revenue growth along with margin profile should get better once the economy is fully recovered.

Outlook

With high growth trajectory and expansion activities in place, valuations will remain expensive. Maintain Accumulate with a target price of Rs 1,303. (54x FY23E).

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