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Motilal Oswal Report
Following ~15% correction in the stock price from the recent high in Mar'26, domestic brokerage firm Motilal Oswal has reiterated its Buy rating on Astral Ltd., but has reduced the target price to Rs 1,710, based on ~52x FY28E P/E.
Astral's Board has approved the business restructuring plan to consolidate its plumbing and chemical businesses into separate entities. It will take nine-12 months to complete the demerger process. The large capex cycle is behind, and Astral aims to grow at a fast pace across both entities due to concentrated focus.
While management's intention about the demerger is positive, ramp-up in its India and overseas adhesive businesses and the newly added paint business will be the key, in the brokerage's view, and will decide the overall valuation of Astral.
After delivering a modest CAGR of 16%/11% /7% in revenue/Ebitda/APAT over FY21-26, the brokerage estimates a CAGR of 16%/20%/25% over FY26-28 with its RoE and RoCE (pre-tax) reaching ~17% and ~24%, respectively, in FY28.
Motilal Oswal believes the current valuation of ~45x FY28E P/E broadly factors in the expectation of improving financials.
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