ICICI Direct recommended hold rating on Astral Poly Technik with a target price of Rs 1295 in its research report dated August 05, 2019.
ICICI Direct's research report on Astral Poly Technik
Astral’s Q1FY20 consolidated revenue came in at ~Rs 607 crore, growth of 27% YoY ahead of our estimate of ~Rs 566 crore. While the adhesive segment revenue growth remained subdued (at 2% YoY), the piping segment revenue grew 38% YoY led by volume growth of 41% YoY (excluding Rex piping segment volume, value growth at 28%, 26% YoY). Lower EBITDA margin at 15.3% (down ~100 bps YoY in line with our estimate) was largely hit by a change in product mix and higher fixed cost (employee cost up by 41% YoY). PAT increased 27% YoY at Rs 48 crore. The management guided for strong volume growth in the piping segment (I-direct estimate: volume CAGR of 22%) for FY19-21E led by higher plant utilisation of Rex business and sustained demand of plumbing pipes. With EBITDA margin in the range of 15-16%, we believe Astral will record strong PAT CAGR of ~31% in FY19-21E.
We model revenue, earning CAGR of ~24%, ~31%, respectively, in FY19-21E led by volume growth, recovery in EBITDA margin. Though we believe in strong fundamentals of APTL coupled with intact demand outlook (led by government push on housing & infra sectors), current price discounts all near term positives. We maintain HOLD rating on the stock.
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