Astral - Pipes, Adhesives' Demand, Margin Trends Remain Healthy: ICICI Securities

ICICI Securities Report

Astral Ltd. is among the leading players in India’s CPVC/PVC plumbing pipe market. It has a wide-ranging product portfolio, robust brand and large distribution reach, which will likely enable it to benefit from the growing preference for organised players.

Its adhesives business further boosts growth prospects. Astral is expected to deliver Ebitda and profit after tax compound annual growth rates of 19.7% and 26.5%, respectively over FY23-FY26E, with strong return ratios (return on equity of 22.9% in FY26E).

Retain 'Hold' with an unchanged March 2025E target price of Rs 1,949, set at 58 times one-year forward price/earnings.

Key downside risks

• Slowdown in housing market causing lower demand.

• Sharp fall in PVC prices, which may adversely impact profitability of pipe segment due to inventory losses.

• High increase in prices of raw materials for adhesives could impact segmental profitability and demand.

• Failure to scale-up the new businesses of sanitaryware, faucetware and paints.

• Inability to properly merge the paint company acquisition.

Key upside risks

• Surge in PVC prices, which could result in better-than-expected profitability for plastic pipes.

• Better-than-expected pick-up in the demand scenario.

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