Buy Astral Ltd For Target Rs.1,684 by Prabhudas Liladhar Capital Ltd
Robust Growth Momentum Despite Polymer Volatility
Astral Ltd (ASTRA) reported a resilient Q1FY27 performance despite a challenging polymer environment, with the plastic piping industry declining ~9–10% YoY. The company reported flat plumbing volumes and 10.1% value growth, indicating continued market-share gains. Management maintained its FY27 guidance of ~10–15% volume growth in the piping segment with EBITDA margins of 16–18%. Plumbing volumes grew ~40% YoY in July and continued to track at double-digit growth in August, supported by channel restocking and improving end-user demand. The implementation of MIP on PVC is expected to reduce polymer price volatility and improve inventory visibility. For Adhesives business, management expects ~15–20% revenue growth in FY27, with EBITDA margins expected to recover towards 15–17% as raw-material costs soften and the impact of the 6–8% price hikes flows through. The UK adhesives business is expected to deliver double-digit revenue growth with EBITDA margins of 8–10% in FY27. We expect ASTRA will achieve 13.5% volume CAGR in its P&F business over FY26- 28. We estimate sales/EBITDA/PAT CAGR of 18.4%/22.1%/33.8% over FY26-28E. We tweaked our earnings estimate for FY27/28E. Maintain ‘BUY’ rating with revised DCFbased TP of Rs1,684 (Rs1,779 earlier).
Q1FY27 financial performance:
Revenues grew by 15.9% YoY to INR 15.8bn (PLe: INR15.7bn). Gross margin expanded by 120bps to 40.6%, (PLe: 39.2%). EBITDA stood at INR 2.3bn (up 25.0% YoY), (PLe: INR2.2bn). EBITDA margin expanded by 110 bps to 14.7%, (Ple: 14.0%). Plumbing EBITDA margin expanded by ~250bps to 18.9% and Paint & Adhesives at 8.7% (contracted by 540bps YoY). PAT stood at INR 1.2bn (up ~52% YoY)
Segmental performance:
ASTRAL’s plumbing business posted revenue of INR 10.5bn (up by 10.1% YoY). EBITDA per Kg (incl. OI) for Plastic pipe segment at INR 35.3 vs INR 27.9 in Q1FY26. Adhesive business revenue grew 26.8% YoY to INR4.5bn in Q1FY27, with domestic adhesive revenue up 24.9% YoY. Segment EBITDA margin declined ~20bps YoY to 10.1%, primarily due to the delayed price hikes, resulting in margin pressure from higher-cost raw material inventory. Management expects the margin pressure to normalize from Q2FY27 onwards. Paint business: Revenue grew by 48.7% YoY to INR 745mn. Astral Chemie acquired a 60% stake in DSS for INR 391mn, expanding its presence in specialty chemicals across Composites, Coatings, Adhesives and Energy. DSS contributed INR 67mn revenue and INR 9mn EBITDA in Q1FY27 and is now included in the Paints & Adhesives segment revenue
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