Buy Astral Poly Technik; target of Rs 1378: Dolat Capital

Dolat Capital's research report on Astral Poly Technik

Astral Poly Technik (ASTRA) Q3FY19 numbers were in line with estimates on revenue and profitability parameters. Piping volume at 4.2% were lower than estimates, however, same was more than compensated by higher realizations. ASTRA did not budge under the price cutting strategies adopted by other large players to gain volumes. This ensured margins as well as kept receivables in check. Adhesive business was also impacted by macro slowdown and inventory losses along with high branding cost. We believe that these are investment phases and ASTRA will reap long term benefits of these strategies for prolonged periods. ASTRA has upped the ante on capacity expansion, distribution reach and branding initiatives. 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.

Outlook

With high growth trajectory and expansion in return ratios, valuations will remain expensive. We rollover valuations to FY21E earnings. Reiterate Buy with a target price of ` 1,378.

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