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Systematix Research Report
Astral Ltd.'s Q3 FY23 results (revenue up 15% YoY and 8% QoQ, 14.7% Ebitda margin) were broadly in line driven by pipe segment (volumes up 30% YoY and 13% QoQ, healthy margin recovery despite inventory loss (~3% of revenue) and Rs 40 million of loss in bathware.
Inventory/ forex losses suppressed margins in the adhesives business at ~12%. Net-cash stood healthy at Rs 4.8 billion on tight working capital management.
Astral also announced bonus issue (one for three held). Stable and affordable PVC prices should boost primary pipe sales on channel filling.
We expect margins in pipes and adhesives to rebound, as high-cost inventory is mostly liquidated. Aggressive store and stock keeping unit expansions should drive traction in bathware.
Astral expects new businesses to clock Rs 15 billion revenues over the next five years. With its large capex (Rs 10 billion over last five years) behind, better capacity utilisation (55-60% currently) will drive healthy free cash flow and return ratios ahead.
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