Analyst Nook: Improve Astral to ‘purchase’ with revised TP of Rs 1,663


Contemplating the strong progress outlook amid the continued second Covid wave, we enhance our income and PAT estimates by 4.4%/8.3%/8.1% and 6.7%/7.2%/7.9% for FY21E/FY22E/FY23E, respectively.

We improve ASTRA to BUY with the inventory correcting ~27% within the final one month. Apart from anticipating the corporate to proceed with its robust earnings traction publish , we anticipate its premium valuations to maintain pushed by sustained market share achieve alternative in piping section with doubtless accelerated consolidation in PVC/CPVC pipes section within the publish Covid surroundings; robust possibility worth in its adhesive enterprise (able to rising at 20-25% CAGR over the following 3-5years); robust progress alternative in tanks (prone to obtain Rs 1.5bn income by FY23) and DWC pipe (anticipated to publish 25-30% CAGR over subsequent 2-3 years) segments; growth of producing footprint (Odisha plant to begin by Oct’21) which opens up big alternative in East India (the place its scale is presently at ~1/tenth of Supreme’s income in East India); possibility worth within the type of doubtless acquisition/(s) (with ASTRA prone to shut FY23 with money on books in extra of Rs 10bn) and e) pre-tax RoCEs (ex-cash) prone to contact 50% by FY23.

Valuation and outlook. Contemplating the strong progress outlook amid the continued second Covid wave, we enhance our income and PAT estimates by 4.4%/8.3%/8.1% and 6.7%/7.2%/7.9% for FY21E/FY22E/FY23E, respectively. We anticipate ASTRA to report general income/PAT CAGR of 23.1%/39.1%, respectively, over FY20-FY23E. We improve ASTRA to BUY (from HOLD) with a revised goal worth of Rs 1,663 (earlier: Rs 1,387), implying a P/E a number of of 50x (earlier – 45x) FY23E earnings. Key dangers, sharp decline in PVC costs and decrease than anticipated pick-up in adhesive enterprise.

Want ASTRA (publish current correction) over Prince Pipes (PPF) and Supreme Industries (SI). We anticipate ASTRA’s earnings to outpace its key friends in FY22 pushed by doubtless least affect of the current strict restrictions imposed by few states amid the continued second Covid wave.

with Q1 income being a lot leaner at 17- 18% of general gross sales for ASTRA vs 24-25% for SI and 21-22% for PPF; doubtless least affect on its realisations and margins on account of anticipated steep worth fall in PVC pipes section publish Q1FY22 with anticipated uptick in CPVC pipes costs (by ~15-20%) in FY22E (ASTRA’s share in CPVC pipes section being considerably greater than friends; Q1FY22 has already seen a worth hike of 6-8% in CPVC pipes) and its least affect of muted progress in agricultural pipes section (attributable to elevated costs of agricultural PVC pipes in Q1FY22 – being a key season) the place ASTRA’s share is least at 4-5% vs SI at ~30-35% and PPF at ~30%.

RoCEs (adjusted for money) prone to contact 50% by FY23E. Robust earnings momentum, stricter working capital administration and spectacular free money era (attributable to muted capex) are anticipated to drive vital money on books (Rs10bn+) by FY23E. We thus assign a 50 PE a number of to ASTRA’s FY23 earnings in comparison with 35x for SI and 25x for PPF contemplating a) its excessive RoCE (adj. for money) profile (50.6% for ASTRA vs 28.3% for SI and 27.1% for PPF) and b) possibility worth within the type of doubtless acquisitions and its scaling up of its area of interest segments (adhesives, tanks and DWC pipes).

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