Buy Astral; target of Rs 1650: Motilal Oswal

Motilal Oswal's research report on Astral

We interacted with the management of Astral (ASTRA) to discuss the industry outlook, growth prospects for its business, profitability outlook, and other focus areas. Here are the key takeaways from the discussion: The company plans to start its CPVC resin plant in Sep’26, leveraging low-cost operational capacity in India, where supply is currently limited. This backward integration is expected to boost margins, create barriers to entry for new competitors, and support the doubling of CPVC volumes over the next five years. OPVC pipes are experiencing muted demand in 1HY26 due to heavy rainfall and lower government orders, but it's expected to pick up post-Diwali. Demand in the long term is expected to come from contractors and government projects. BIS certification requirements are likely to benefit organized players by keeping inferior products out of the market.

Outlook

We model a 15%/17%/22% CAGR in sales/EBITDA/Adj. PAT over FY25-28E, led by an increase in capacity, backward integration of CPVC resins, levy of ADD on PVC resins, and gradual scale-up of new businesses. We reiterate our BUY rating on the stock with an SoTP-based TP of INR1,650.