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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:
significant decrease in PVC prices yet again post stabilising, resulting in inventory losses and thus operating profitability,
slowdown in housing market may result in lower than expected volume growth.
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