Astral - Robust Volume Outlook In Pipes For H2 FY23E With Margin Improvement: ICICI Securities

ICICI Securities Report

In our view, Astral Ltd. stock appears well positioned to gain (in absolute term) in the immediate near term as volumes are expected to pick-up in pipe segment (from Q3) and also margins are likely to normalise (in Q4 FY23E) as PVC prices have stabilised (post ~34% decline in FY23-to-date).

Additionally, with correction in adhesive input prices like vinyl acetate monomer (down ~49% in FY23-year-to-date), margin in this business should also normalise (to ~15-16% in Q4 FY23E).

Key risks:

1. significant decrease in PVC prices yet again post stabilising, resulting in inventory losses and thus operating profitability,

2. slowdown in housing market may result in lower than expected volume growth.

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