Astral confident of double-digit growth, sees margin boost from new CPVC plant

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Astral remains confident of achieving its full-year guidance of double-digit growth, citing a robust pickup in demand over the last ten days driven by cooling raw material prices. In an interview with CNBC TV18, Hiranand Savlani, Executive Director and Chief Financial Officer (CFO) at Astral, outlined the company's outlook on polyvinyl chloride (PVC) pricing, demand, and its strategic backward integration into chlorinated polyvinyl chloride (CPVC) resin, which is expected to be a 'game changer' for margins.

Addressing the market concern over the lack of protectionist measures for domestic manufacturers, Savlani noted that the anticipated anti-dumping duty (ADD) on PVC has been postponed. "So still there is a hope that it will come maybe in the form of anti-dumping duty or maybe in the form of MIP, minimum import price, but it will take some time," he stated. He explained that PVC raw material prices, which had risen in anticipation of the duty, have since cooled off. Savlani believes prices are set to stabilise, as current levels are unsustainable for raw material producers. "We are of the view that this prices of raw material are not acceptable because that is the bleeding to every manufacturer. So sooner or later temporary phenomena will be there," he added, dismissing major threats from Chinese imports, which are not being offered at lower prices.

The reduction in prices has already started to positively impact demand. "Last 10 days demand is robust. So we are of the view that whatever guidance we have given that minimum double-digit growth for the full year, we are confident that we will be able to deliver that number," Savlani affirmed. He mentioned that a more specific growth forecast would be provided after the third-quarter results, highlighting that the fourth quarter is historically a strong period for the industry and Astral.

On the margin front, Astral is maintaining its guidance of 16-18% for the current financial year. However, a significant expansion is expected from the next financial year onwards, driven by the company's backward integration project. "Next year onward margin will shoot up because of the backward integration," Savlani said, pointing to the high margins of existing listed CPVC manufacturers. The new CPVC resin facility is on track, with the plant expected to be ready by September. "October, November, December, we will try to settle down and do the trial runs and all this thing. From first January, maybe little early commercial production will start," he detailed.

Savlani also clarified that Astral has no exposure to the Jal Jeevan Mission projects. He declined to provide guidance on EBITDA per kg, explaining that the company's policy is to give guidance in percentage terms due to the fluctuating product mix between quarters.