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Robust growth in pipes to continue, new segments to ramp-up gradually; maintain NEUTRAL!

Result Synopsis

Astral Ltd reported decent revenue growth of 8%YoY. Plastic pipes biz volumes grew by strong 16%YoY (2-year CAGR stood at 24%), ASP contracted marginally to Rs177/Kg due to change in product-mix. Hence revenue stood at Rs9.87Bn (in-line with our est), a growth of 7%YoY. EBITDA/Kg came in at Rs33.3 which was marginally lower Vs our est. of Rs34/Kg. Adhesives and Paints revenue stood at Rs3.7Bn, a growth of 7%YoY & margins for this segment came in at 12% Vs 14% in Q1FY24. Bathware biz revenue stood at Rs262Mn for Q1FY25 Vs Rs242Mn in previous quarter. Though company registered decade-high GP margins at 40.5%, operating margins were lower due to higher employee cost and elevated promotional spends during the quarter. ASTRAL launched “ASTRAL PAINTS” in Gujarat & Karnataka in the last week of Jun’24 and will continue to grow it in phased manner; company aims to launch paints in Rajasthan and Maharashtra in coming quarters. For adhesives, India biz revenue grew by 14%YoY, but UK revenue declined by 5%YoY. In Q1FY25, company commenced operations at its Guwahati plant. Trial production has begun at Hyderabad plant and commercial production is expected to start in Q2FY25E. Management maintained their guidance of 15%+ volume growth with gross margin in the range of 36-40%. EBITDA margin guidance of 16-18% for plumbing and 14-16% margins for adhesives India operations. For UK operations, management aims to grow by 8-10%YoY with EBITDA margins of 7-8%. For bathware biz, company expects to achieve a turnover of Rs1-1.25Bn in FY25E. We continue to remain positive on ASTRALs growth owing to favorable industry tailwinds and company’s up-coming brownfield expansions which will accelerate growth in pipes segment. Hence, we expect volume growth of 20%CAGR over FY24- FY26E. For paints and bathware segment, we expect a gradual ramp-up going ahead. In Adhesives, we expect top-line growth of 15%CAGR with EBITDA margins of 14%/15% for FY25E/FY26E respectively. At CMP, the stock trades at P/E(x) of 61.3x on FY26E EPS of Rs33.1 and we believe these premium multiples will sustain for the company. Hence, we continue to value ASTRAL LTD at P/E(x) of 65x on FY26E EPS and maintain our NEUTRAL rating on the stock.

Result Highlights

* Revenue stood at Rs13.84Bn, a growth of 8%YoY (in line with our est; 7% below consensus est).

* GP margins expanded to 40.5% (decade high) Vs 37.3%/39.8% in Q1FY24/Q4FY24 respectively. But EBITDA margin expansion was restricted & the same came in at 15.5% (Vs est of 16.9%) due to higher employee cost owing to recruitment at new plant and launching new verticals in new geographies coupled with higher other cost driven by additional advertisement spend of Rs200Mn. Absolute EBITDA stood at Rs2.14Bn, a growth of 6%YoY (8.6% below our est; 14% below consensus est).

* Net profit Rs1.19Bn, remaining flattish on YoY basis (12% below our est; 21% below consensus est). Segmental Highlights for Q1FY25

* Plastic pipes volumes stood at 55,810Te, a growth of 16%YoY (2-year CAGR stood at 24%). ASP came in at Rs177 Vs Rs193/Rs180 in Q1FY24/Q4FY24 respectively. EBITDA/Kg stood at Rs33.3 (assuming Rs40Mn loss in bathware biz) as compared to Rs35/Rs38 in Q1FY24/Q4FY24 respectively.

* Bathware revenue stood at Rs262Mn, growth of 90%YoY.

* Adhesives and paints revenue stood at Rs3.70Bn, a growth of 7%YoY. EBITDA margins came in at 12% Vs 14%/13% in Q1FY24/Q4FY24 respectively.

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