This leading pipe manufacturing company rallied 250% in the last 18 months with strong fundamentals.
Astral had a dream run in covid time, the stock rallied from Rs 730 to Rs 2,270 today, registered return of 250% in last 18 months.
Astral Poly Technik Ltd was established in 1996, which is among the fastest-growing piping companies, manufactures plumbing and drainage systems. It has also forayed into the adhesive business over years.
Piping Division (77% of revenues) -This is the main business of the company, it manufactures pipes and fittings for plumbing, sewerage, agriculture, industries, fire sprinklers. It also manufactures pipes for conduit & cable protection, ancillary products, urban infra and ducting.
Adhesives Division (23% of revenues) - Its adhesives business sells a wide range of products viz. Epoxy adhesives & putty, silicone sealants, construction chemicals, PVA, cyanoacrylate, solvent cement, tapes and other products.
The piping division mainly caters to the infrastructure industry and, Adhesives mainly cater to the automotive and packaging industry.
1. Strong brand equity - Astral has continuously invested in brand & promotional activities through Bollywood movies, associate sponsor of Indian Premier League teams among others. It also boarded Ranveer Singh (star) as the brand ambassador of Astral pipes for three years.
2. Wide and deep distribution reach - The company has a base of 800+ distributors and 31,000+ dealers for its piping business and a base of 1,300+ distributors and 130,000+ distributors for its adhesives business.
3. Product innovation & Backward integration – Astral is the first company to introduce CPVC pipes in India in 1999 which has more stability and withstand high temperature than PVC pipes. After a few years to save cost they started manufacturing raw materials for CPVC pipes.
In the last ten years from FY10 to FY21, revenue has grown at a CAGR of 23% and profit has grown at a CAGR of 28% which shows the steep growth of the company. The operating margin is consistent and stable in the range of 12% to 20% for the last 10 years. Very few companies have exceptional financials like this, Astral is one among them.
Yesterday the Q2 numbers were out. The stock was more than 2% up after excellent Q2-FY22 numbers. Net sales grew 54% on a YoY basis stood at Rs 1,154 crore, EBITDA grew by 48% on a YoY basis to Rs 219 crore, Net profit jumped 63% on a YoY basis to Rs 143 crore.
Growth drivers – Government infrastructure spending, increasing construction, government schemes like “Housing for all” by 2022, National rural drinking water program would benefit pipe companies, Astral would be a major beneficiary.
Valuation - Companies with strong fundamentals and strong growth prospects will trade in premium. It is trading at a TTM P/E of 87x against an industry P/E of 25x. It is definitely higher in valuation.
Do you feel fundamentals and company performance would justify buying it?
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