Astral - Demand, Margin Trend Remains Favorable: ICICI Securities

ICICI Securities Report

We interacted with the management of Astral Ltd. and following are the key takeaways:

1. demand trend in pipe market remains healthy in Q2 FY24-to-date with 20% plus volume growth YoY (partly aided by low base) driven largely by the plumbing segment;

2. management indicated operating margins to improve QoQ in Q2 FY24 for both pipes (due to better product mix and no inventory losses likely to recur in Q2 given that PVC resin prices have been on an uptrend) and adhesives (benign raw material prices);

3. ramp-up in bathware segment (sanitaryware and faucetware) is progressing well and the company has opened 500 plus showrooms/display centres as of June 2023;

4. paint segment will likely start delivering better performance from H2 FY24 post complete handover of GEM Paints by September 2023.

According to management, Astral is on track to achieve pipe volume growth and adhesive revenue growth in high double-digits YoY in FY24. We maintain our estimates and 'Hold' rating with an unchanged September-24E target price of Rs 1,909.

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