quarterly update q3fy21bsmedia.business-standard.com/_media/bs/data/...plastic pipes – strong...
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Edelweiss Wealth Research
Quarterly Update Q3FY21 Astral Poly Technik Ltd.
Strong performance to continue…
1
Praveen Sahay Research Analyst [email protected]
CMP: INR 1,944
Rating: BUY
Target Price: INR 2,090
Upside: 8%
Bloomberg: ASTRA:IN
52-week
range (INR): 1,268 / 746
Share in issue (cr): 15
M cap (INR cr): 29,303
Promoter
Holding (%) 55.74
Date: February 4, 2021
Astral Poly Technik’s (ASTRAL) Q3FY21 consolidated revenue/EBITDA/PAT grew 35.1%/62.4%/83.4% YoY to INR898cr/INR192cr/INR125cr. While revenue was ~8% above est. due to superior performance in both pipes and adhesive segments, reported PAT was ~9% below est. Sales recovery in pipes and adhesives, which started in Q2FY21, accelerated further in Q3FY21 on the back of gradual re-opening and pickup in construction activities. Gross profit was up 30% YoY to INR341cr; however, margin contracted by ~150bps YoY to 38% on account of higher raw materials prices. Consolidated EBITDA margin expanded by 360bps YoY to 21.4%, mainly due to controlled expanses despite the contraction in gross margin. We remain positive on ASTRAL due to its (a) strong brand, (b) new product launches, which should continuously increase its addressable market size, and (c) pickup in its core business of plastic piping backed by revival in the urban real estate market and GOI’s Jal Jeevan Mission program. Maintain ‘BUY’.
Plastic Pipes – strong growth on pent-up demand and pickup in construction activities Pipes segment sales grew 33% YoY, led by ~15% increase in volumes and 15.5% rise in
realisation. Sales volume growth in pipes segment was on account of pent-up demand
and opening of lockdowns in metro/tier-I cities. CPVC has started picking up
meaningfully and registered healthy growth. EBITDA margin for the pipes business
improved by 386bps YoY to 23.5%. EBITDA grew 59.5% to INR163cr, primarily led by
better product mix, increase in contribution from value-added products and inventory
gain on PVC resin prices.
Adhesives – robust pickup in growth and margins Adhesives business, which constitutes ~25% of ASTRAL’s sales, grew ~41% YoY to INR220cr (record high sales in a quarter). The company’s distribution network underwent a major overhaul, which resulted in good numbers. Management has guided for 20-25% growth in the adhesive business in the coming years. The international business, especially in the UK, saw strong pickup in sales and margin expansion. The company has planned for backward integration at its adhesive plant in Dahej. EBITDA grew 91.4% YoY in the adhesive business and EBITDA margin expanded by 430bps YoY to 16.3% for the quarter.
Valuation and outlook – Maintain ‘BUY’ rating ASTRAL reported healthy numbers in both pipes and adhesive segments, and the company expects this momentum to continue in the coming quarters. ASTRAL has reported better numbers v/s peers in volume terms in the pipes and fittings business (ASTRAL – ~15% v/s FIL – 5%, SIL – 9%, and Apollo – ~7%). The adhesives business posted robust growth and margins, mainly due to the revamp of its distribution network. ASTRAL is continuously foraying into new product categories (the latest is water storage tanks). Considering the company’s history of successfully scaling up, we
expect ASTRAL’s growth trajectory to get steeper. At CMP of INR1,944, the stock is trading at 68x/60x FY22/FY23E EPS. We believe the company is a compounding story. Due to the healthy pickup in business, we have revised our FY21/FY22/FY23E earnings estimate upwards by 37%/22%/17%. We maintain our ‘BUY’ rating on the stock with a revised target price of INR2,090 per share.
Particulars (INR cr) Q3FY21 Q3FY20 YoY (%) Q2FY21 QoQ (%) FY21E FY22E YoY (%)
Net Sales (INR cr) 898 664 35.1% 747 20.1% 3,014 3,602 19.5%
EBITDA (INR cr) 192 118 62.4% 144 33.7% 610 677 11.0%
EBITDA margin (%) 21.4% 17.8% 19.2% 20.3% 18.8%
PAT (INR cr) 124 68 81.8% 88 41.0% 378 433 14.4%
Dil. EPS (INR) 8.2 5.7 7.3 25.1 28.7 14.4%
Dil. P/E (x) 78 68
ROCE (in %) 26.4 25.1
Edelweiss Wealth Research 2
Q3FY21 Result Highlights Astral Poly Technik Ltd.
Particulars (INR cr) Q3FY21 Q3FY20 YoY (%) Q2FY21 QoQ (%) 9MFY21 9MFY20 YoY (%)
Income from operations 898 664 35.1% 747 20.1% 2,049 1,949 5%
Cost of goods sold 556 401 38.6% 461 20.7% 1,282 1,206 6%
Employee expenses 52 43 21.6% 49 8.0% 144 134 7%
Other expenses 97 102 -4.5% 94 3.0% 233 280 -17%
Total operating expenses 706 546 29.2% 604 16.9% 1,659 1,619 2%
EBITDA 192 118 62.4% 144 33.7% 390 330 18%
Depreciation and amortisation 30 27 9.5% 29 4.2% 87 79 11%
EBIT 162 91 78.4% 115 41.1% 303 251 20%
Interest expenses 2 5 -68.3% - 1 - 7 22 -69%
Other income 6 2 177.3% 5 24.5% 15 12 24%
Profit before tax 166 88 89.9% 121 38.0% 311 242 29%
Provision for tax 41 19 112.9% 28 45.9% 72 43 68%
Core profit 125 68 83.4% 92 35.5% 239 199 20%
Extraordinary items 1 0 4 7 0
Adjusted net profit 124 68 81.8% 88 41.0% 232 199 17%
Equity capital (FV -INR 1) 15 15 15 15 15
No. of shares (Cr) 15 15 15 15 15
Diluted EPS (INR) 8 5 83.4% 6 35.5% 16 13 20%
Segment details
Revenue (INR cr)
Q3FY21 Q3FY20 % change Q2FY21 % change 9MFY21 9MFY20 % change
Pipes 673 506 33.0 550 22.2 1532 1491 2.8
Adhesives 225 158 41.9 197 14.2 516 459 12.6
Pipes 129 73 76.0 87 48.1 239 197 21.2
Adhesives 36 18 103.4 29 22.2 69 58 18.7
Pipes 19.2% 14.5% 15.8% 15.6% 13.2%
Adhesives 15.9% 11.1% 14.9% 13.4% 12.7%
Estimates Change
FY21E FY22E
(INR cr) Old Revised Change (%) Estimate Reported Change (%)
Net sales 2,719 3,014 10.8 3,231 3,602 11.5
Gross Profit 1,033 1,145 1,195 1,333
Gross margin (%) 38.0 38.0 37.0 37.0
EBITDA 476 610 28.3 575 677 17.8
EBITDA margin (%) 17.5 20.3 17.8 18.8
PBT 362 506 39.7 465 569 22.2
PBT margin 13.3 16.8 14.4 15.8
Net profit 277 385 39.2 354 433 22.2
Adj EPS (Rs) 18.3 25.1 36.9 23.5 28.7 22.2
Edelweiss Wealth Research 3
Q3FY21 Result Highlights Astral Poly Technik Ltd.
Financials in Charts
Consolidated Sales & growth
Consolidated EBITDA & margin
Pipes Volumes & Realisations Pipe Sales & EBITDA margin
Adhesives-Revenue & EBITDA margin Resinova -Revenue & EBITDA margin
Source: Edelweiss Wealth Research
0%
5%
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3,000
4,000
FY16 FY17 FY18 FY19 FY20 FY21E FY22E
(IN
R c
r)
Revenue (INR cr) Growth (YoY) RHS
12.3%
13.7%14.9% 15.4%
17.2%
18.8%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
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FY16 FY17 FY18 FY19 FY20 FY21E FY22E
(IN
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EBITDA (INR cr) EBITDA margin (%) RHS
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7
FY1
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FY1
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0
FY2
1E
FY2
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(IN
R p
er K
g)
MT
Pipe & fittings Sales Volume (MT)
Realisation (INR per Kg) RHS
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
19.0%
-
500
1,000
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3,000
FY16 FY17 FY18 FY19 FY20 FY21E FY22E
(IN
R c
r)
Sales (incl REX) (INR cr) EBITDA margin (%)
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
-
200
400
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1,000
FY16 FY17 FY18 FY19 FY20 FY21E FY22E
(IN
R c
r)
Adhesives Sales (INR cr) EBITDA margin (%) RHS
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14.0%
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18.0%
20.0%
0
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200
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500
600
700
FY16 FY17 FY18 FY19 FY20 FY21E FY22E
(IN
R c
r)
Resinova Sales (INR cr) EBITDA margin (%)
RHS
RHS
Edelweiss Wealth Research 4
Q3FY21 Result Highlights Astral Poly Technik Ltd.
Previous Outlook Q2FY21 Result Update While the numbers reported in the quarter were above estimates with the sales shaping up firmly each month since the washout
experienced in the month of April, however, on like-to-like comparison Astral did relatively better than peers in plumbing pipe &
fittings business. The adhesives business which had been underperforming due to the overhaul in the distribution network pro-
actively undertaken by the management is finally accruing the benefits of the same and we expect it to restart growing with an
improved margin trajectory. While there can be near term pain led by disruptions due to COVID-19, but we believe that the strong
distribution network, plumber connect & consolidation post COVID disruptions provides Astral with ample opportunities to grow
faster than the industry. At the current market price, the stock is trading at 64x/47x FY21/FY22E EPS, respectively. We have
tweaked our FY21 & FY22 earnings estimate by 2% and 1.9% respectively. We maintain our ‘BUY’ rating on the stock with a revised
target price of INR 1131 per share, valuing it at 50x FY22E EPS which is average of 5-year 1-yr forward P/E.
Q2FY21 Result Update
Astral reported a better than expected number with sales momentum shaping up firmly each month over the last and the
company fared better compared to its peers in volume terms in plumbing pipe & fittings business. The adhesives business which
had been underperforming due to the overhaul in the distribution network pro-actively undertaken by the management is finally
accruing the benefits of the same and posted a robust growth. Astral is likely to foray in to a new product category and considering
the company’s history of successfully scaling up, we expect the growth trajectory for Astral to become steeper going ahead. At
the current market price, the stock is trading at 63x/49x/42x FY21/FY22/FY23E EPS, respectively. We have upward revised our
FY21 & FY22 earnings estimate by 10% and 4.5% respectively and introduced FY23 estimates. We maintain our ‘BUY’ rating on
the stock with a revised target price of INR 1376 per share, valuing it at 50x FY23E EPS.
Q1FY21 Q2FY21
Edelweiss Wealth Research
Financials
5
Astral Poly Technik Ltd.
Income statement (INR Cr)
Year to March FY19 FY20 FY21E FY22E FY23E
Income from operations 2,507 2,578 3,014 3,602 3,931
Direct costs 1,648 1,596 1,868 2,269 2,477
Employee costs 139 175 194 223 244
Other expenses 475 539 535 656 716
Total operating expenses 2,122 2,135 2,403 2,925 3,192
EBITDA 385 443 610 677 739
Depreciation and amortisation 81 108 117 125 126
EBIT 304 335 493 552 613
Interest expenses 32 39 15 13 11
Other income 15 12 28 29 36
Profit before tax 287 308 506 569 637
Provision for tax 86 57 120 136 151
Core profit 201 251 385 433 486
Extraordinary items 0 0 -7 0 0
Profit after tax 201 251 378 433 486
Minority Interest -4 -2 0 0 0
Share from associates 0 0 0 0 0
Adjusted net profit 197 250 378 433 486
Equity shares outstanding (mn) 12 15.1 15.1 15.1 15.1
EPS (INR) basic 16.5 16.5 25.1 28.7 32.2
Diluted shares (Cr) 12.0 15.1 15.1 15.1 15.1
EPS (INR) fully diluted 16.5 16.5 25.1 28.7 32.2
Dividend per share 0.8 1.6 1.3 2.3 2.6
Dividend payout (%) 4.8 9.6 5.2 8.1 8.2
30% 18% 24% 24% 24%
Common size metrics- as % of net revenues
Year to March FY19 FY20 FY21E FY22E FY23E
Operating expenses 84.6 82.8 79.8 81.2 81.2
Depreciation 3.2 4.2 3.9 3.5 3.2
Interest expenditure 1.3 1.5 0.5 0.4 0.3
EBITDA margins 15.4 17.2 20.3 18.8 18.8
Net profit margins 7.9 9.7 12.6 12.0 12.4
Growth metrics (%)
Year to March FY19 FY20 FY21E FY22E FY23E
Revenues 19.1 2.8 16.9 19.5 9.1
EBITDA 22.5 15.1 37.8 11.0 9.1
PBT 15.7 7.2 64.3 12.5 12.1
Net profit 14.4 25.0 53.3 12.4 12.2
EPS 13.4 0.4 51.6 14.4 12.2
Edelweiss Wealth Research
Financials
6
Astral Poly Technik Ltd.
Balance sheet (Standalone) (INR Cr)
As on 31st March FY19 FY20 FY21E FY22E FY23E
Equity share capital 12 15 15 15 15
Preference Share Capital 0 0 0 0 0
Reserves & surplus 1,266 1,488 1,825 2,194 2,603
Shareholders funds 1,278 1,503 1,840 2,209 2,618
Secured loans 163 109 111 81 51
Unsecured loans 30 23 23 23 23
Borrowings 193 132 134 104 74
Minority interest 15 17 17 17 17
Sources of funds 1,486 1,652 1,992 2,330 2,710
Gross block 1,335 1,592 1,677 1,782 1,807
Depreciation 229 337 455 579 706
Net block 1,105 1,255 1,222 1,202 1,101
Capital work in progress 81 44 25 0 0
Total fixed assets 1,186 1,299 1,247 1,202 1,101
Unrealised profit 0 0 0 0 0
Investments 0 0 0 0 0
Inventories 396 540 537 592 646
Sundry debtors 339 228 289 345 377
Cash and equivalents 98 130 502 981 1,447
Loans and advances 6 4 5 5 5
Other current assets 32 60 71 84 92
Total current assets 871 963 1,404 2,008 2,568
Sundry creditors and others 554 588 636 858 936
Provisions 3 4 4 4 4
Total CL & provisions 557 591 640 862 940
Net current assets 315 372 763 1,147 1,628
Net Deferred tax -53 -43 -43 -43 -43
Misc expenditure 39 24 24 24 24
Uses of funds 1,486 1,652 1,992 2,330 2,710
Book value per share (INR) 107 100 122 146 173
Cash flow statement
Year to March FY19 FY20 FY21E FY22E FY23E
Net profit 201 251 392 433 486
Add: Depreciation 81 108 117 125 126
Add: Misc expenses written off -24 14 0 0 0
Add: Deferred tax 20 -10 0 0 0
Add: Others -4 -2 0 0 0
Gross cash flow 275 362 509 558 612
Less: Changes in W. C. -63 25 19 -96 15
Operating cash flow 339 336 490 653 597
Less: Capex 352 221 65 80 25
Free cash flow -13 115 425 573 572
Edelweiss Wealth Research
Financials
7
Astral Poly Technik Ltd.
Ratios
Year to March FY19 FY20 FY21E FY22E FY23E
ROAE (%) 17.2 18.0 23.0 21.4 20.1
ROACE (%) 21.7 20.7 26.4 25.1 23.9
Debtors (days) 49 32 35 35 35
Current ratio 1.6 1.6 2.2 2.3 2.7
Debt/Equity 0.2 0.1 0.1 0.0 0.0
Inventory (days) 58 77 65 60 60
Payable (days) 57 67 57 65 65
Cash conversion cycle (days) 50 41 43 30 30
Debt/EBITDA 0.5 0.3 0.2 0.2 0.1
Adjusted debt/Equity 0.1 0.0 (0.2) (0.4) (0.5)
Valuation parameters
Year to March FY19 FY20 FY21E FY22E FY23E
Diluted EPS (INR) 16.5 16.5 25.1 28.7 32.2
Y-o-Y growth (%) 13.4 0.4 51.6 14.4 12.2
CEPS (INR) 23.3 23.7 33.3 36.9 40.6
Diluted P/E (x) 118 118 78 68 60
Price/BV(x) 18.2 19.5 16.0 13.3 11.2
EV/Sales (x) 9.3 11.4 9.6 7.9 7.1
EV/EBITDA (x) 60.8 66.3 47.5 42.1 37.9
Diluted shares O/S 12.0 15.1 15.1 15.1 15.1
Basic EPS 16.5 16.5 25.1 28.7 32.2
Basic PE (x) 118.0 117.6 77.6 67.8 60.4
Dividend yield (%) 0.0 0.1 0.1 0.1 0.1
Edelweiss Wealth Research 8
Astral Poly Technik Ltd.
Edelweiss Broking Limited, 1st Floor, Tower 3, Wing B, Kohinoor City Mall, Kohinoor City, Kirol Road, Kurla(W)
Board: (91-22) 4272 2200
Vinay Khattar
Head Research
Rating Expected to
Buy appreciate more than 15% over a 12-month period
Hold appreciate between 5-15% over a 12-month period
Reduce Return below 5% over a 12-month period
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Edelweiss Wealth Research 9
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Edelweiss Wealth Research 10
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