Accumulate Astral Poly Technik; target of Rs 907: Dolat Capital

Dolat Capital's research report on Astral Poly Technik

Astral Poly Technik (ASTRA) Q4FY20 numbers below estimates on revenue front as last 12-14 days of March was lost due to lockdown, there was a pile up of inventory at depots and sales was lost due to logistics constraints and weakness in adhesives business and in line with estimates on operating profitability parameters. Adhesive segment 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. 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 on recovery track.

Outlook

With high growth trajectory and expansion activities in place, valuations will remain expensive. Maintain Accumulate with a target price of Rs 907. (49x FY22E).

Astral Poly Technik 27052020