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Business restructuring to be completed in 9-12 months

Astral’s (ASTRA) Board has approved the business restructuring plan to consolidate its Plumbing and Chemical businesses into separate entities. It will take 9-12 months to complete the demerger process. The large capex cycle is behind, and ASTRA aims to grow at a fast pace across both entities due to concentrated focus. While management’s intention about the demerger is positive, ramp-up in its India and overseas adhesive businesses and the newly added paint business will be the key, in our view, and will decide the overall valuation of ASTRA. After delivering a modest CAGR of 16%/11% /7% in revenue/EBITDA/APAT over FY21-26, we estimate a CAGR of 16%/20%/25% over FY26-28 with its RoE and RoCE (pre-tax) reaching ~17% and ~24%, respectively, in FY28. We believe the current valuation of ~45x FY28E P/E broadly factors in the expectation of improving financials. Following ~15% correction in the stock price from the recent high in Mar’26, we reiterate our BUY rating but reduce our TP to INR1,710, based on ~52x FY28E P/E.

Key highlights of the business update:

* The board has approved business restructuring to consolidate Plumbing and Chemical businesses into separate entities.

* It will take 9-12 months to complete the demerger process. By then, many positive developments will happen across segments.

* Large capex is behind; small capex will be met through internal accruals of individual entities. ASTRA aims to grow at a fast pace in both entities due to concentrated focus.

* A demerger will reduce related-party transactions among entities.

* Separate financials will be shared after the 1QFY27 results

Chemical business

* FY26: revenue INR18.61b, EBITDA INR1.92b

* FY27E: revenue INR23-24b, EBITDA INR2.5b

* Aims for INR50b revenue in five years, driven mainly by India adhesives

* Low margin in paint and overseas businesses restricted overall segment margin; scale up of plant utilization to fuel EBITDA margin in the future.

* Adhesive: solvent cement plant at Dahej is near the completion stage; the UK-US businesses are now seeing healthy growth and margin improvement.

* Paint: capacity in place for next 3-5 years; now, scale up is the key; plans a deco paint capacity in West India.

* DSS: bought this company for its technical capabilities; Astral will drive the commercial launch of products; aims for INR1.5b revenue in FY28

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