PL First Cut – Astral Ltd Q2FY24

PL First Cut – Astral Ltd Q2FY24 – Praveen Sahay – Research Analyst, Prabhudas Lilladher Pvt Ltd

Astral Ltd Q2FY24 Result First cut

CMP: Rs1963 | Mcap: Rs 527bn | HOLD

Robust volume growth, beat our earnings est.

➡️ Astral’s revenue of Rs 13.6bn (up 16.3% YoY) was in-line with of our est. (PLe. Rs 13.6bn) and 2% below cons. est. of Rs 13.9bn, led by 17.3% YoY growth in Plumbing segment and 14% YoY growth in Paints and Adhesives Business.

➡️ Plastic pipe volume grew by 27.8% YoY vs our est. of 25% YoY growth.

➡️ Gross margin expanded by 870bps YoY to 38.9%, above our est. of 35.5%, on account of increase in VAP mix and lower RM procurement cost, reflected with reduction in payable days & received cash discount. However, with reduction CPVC resin, inventory loss was ~Rs 200mn in Q2FY24.

➡️ EBITDA stood at Rs2.2bn (up 52.8% YoY), ~9% above our est. (PLe. Rs2.0bn).

➡️ EBITDA margin expanded by 390bps YoY to 16.1%, above our est. of 14.9%, Plumbing EBITDA margin improved by 460bps YoY to 18% and EBITDA margin of Paints and Adhesives business improved by 220bps YoY at 14.8%. In case of faucet and sanitary ware of EBITDA loss was Rs41mn for Q2FY24.

➡️ PAT stood at Rs1.32bn (up ~83% YoY), ~12% above our est. of Rs 1.17bn & 6% below cons. est. of Rs 1.4bn

Plumbing business – robust vol. growth

ASTRAL’s plumbing business posted revenue of Rs9.8bn (up 17.3% YoY). This was led by robust volume growth of +27.8%. EBITDA margin expanded 460bps YoY to 18.0%, primarily with improvement in product mix towards VAP and GM improvement. EBITDA per Kg (incl. OI) for Plastic pipe segment at Rs 34.7 vs Rs 35.2 in Q1FY24. Management expects margins to maintain & improve with increase in bath business revenue and strong vol. growth in plastic pipe segment in FY24.

Paints and adhesives – healthy revenue growth in dom. adhesive business with margin improvement

Paint & adhesives revenue grew 14% YoY to Rs3.8bn, and excluding GEMS paint P&A business grew at 17.2% YoY. The growth was majorly contributed by domestic adhesive business; SEAL-IT was flat sequentially. P&A EBITDA margin expanded by 220bps YoY to 14.8% in Q2FY24, with higher margin in domestic adhesive business (~16%) while SEAL-IT margin impacted due to high cost inventory which expected to normalise from Q3FY24 onwards. Management expects margins to improve in 2HFY24 on account of full benefit of softening in raw material prices & SEAL-IT margin improvement.

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Astral is trading at 80x/63x/49x FY24/FY25/FY26 earnings, we still believe that Astral is a consistent quality performer and it is a compounding story. With strong performance in 1HFY24 and strong volume guidance of 15-20% with margin improvement in FY24, we maintain our FY24 estimates with 22% revenue growth with 18.2% EBITDA margin in H2FY24.