Overview

Astral Poly Technik Ltd (NSE:ASTRAL) has been a pioneer in introducing Chlorinated Polyvinyl Chloride (CPVC) pipes and fittings in the country. The Company offers a wide array of products across piping and adhesives categories to meet the dynamic needs of the real estate sector and millions of Indian households. With 12 strategically-located manufacturing facilities in India and overseas, Astral is counted for bringing the most innovative piping and adhesive products with unmatched quality.

Underpinned by its entrenched market presence and wide geographical footprint, Astral today is an integrated CPVC player with robust capacity and execution prowess. The Company has strengthened its product portfolio by acquiring Rex Polyextrusion Private Limited (REPL) a couple of years back. The expanded product suit enables the Company to offer newer products in the infrastructure segment with varied applications. With strong focus on promotion, the Company has continuously increased its brand visibility and customer penetration across the country.

Over the years, Astral has successfully diversified from manufacturing pipes and fittings to entering the adhesives business via acquisition of Resinova Chemie Limited and Seal IT Services

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Manufacturing Plants

Astral Pipes is equipped with state-of-the-art production facilities across the country which enables to meet requirements of various geographies and markets. The company's backward integration capabilities for CPVC compounding (45000 MT pa) enables it to become a genuine Indian Manufacturer. The company's six manufacturing units across the country have automated material handling and feeding systems. Astral Production process and control is based on SCADA system and Astral Polytechnik has in-house QC department to keep close control over the production quality.1

The company's pipes manufacturing units are:

  • Santej, Gujarat
  • Dholka, Gujarat
  • Hosur, Tamil Nadu
  • Ghiloth, Rajasthan
  • Sangli, Maharashtra
  • Sitarganj, Uttarakhand

Indian Piping Industry Overview

Over the past five years, domestic plastic pipe industry has clocked a 10% CAGR and now its market size stands at ~` 30,000 crores (Source: Article published in the Money Control, May 28, 2020). Wherein, the 60-65% market share accounts to organised players and remaining to the unorganised ones (Source: Business India, 2019). The major driver behind the growth is Government infrastructural spending, increasing constructions, industrial production, irrigation sector, replacement of aging pipelines, among others. Besides, its superior properties and economical cost makes plastic pipes favourable over metal pipes. Amongst all plastic pipes, the 65% of the industry demand is for Unplasticised. 2

Polyvinyl Chloride (UPVC), 15% for Chlorinated Polyvinyl Chloride (CPVC) and remaining constitute to others (Source: HDFC securities, December 2019). There has been growing adoption in PVC/CPVC pipes owing to its corrosion resistant, flame resistant, easy to install & handle, environmentally sound and durability features. Along with this, increased focused by the Government in the end user application will be the major contributor in the growth. Consequently, it is also creating upsurge in the demand for solvent cement used in the fitting and attaching of pipe.

Outlook

Going forward, the Indian plastic pipe industry is estimated to register a 10% CAGR by 2024-25 to reach ` 500 billion (Source: Money Control, May 21, 2020). However, in the near term, especially in the Q1 of 2020- 21, the corporate earnings of pipe manufacturers will be impacted to some extent owing to slowdown caused by the COVID-19. Relative to other sectors, it is still resilient as the Government gave boost to agriculture and housing sector through handsome stimulus package. Also, the relaxation in the lockdown norms will open doors for construction and plumbing activities. Besides, the industry has 35-40% unorganised players and around 60-65% organised players. Amid economic slowdown, several unorganised and organised players might face trouble owing to liquidity issues and weak balance sheet. As a result, organised players with robust financials are likely to gain sizeable market share.

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Opportunities and Growth Drivers

Consolidation in the industry

Post GST era, the unorganised players in the plastic pipes industry were already finding it difficult to gain advantage on the price. Now with COVID-19 scenario, the companies with high debt and weak cash flow are bound to head towards consolidation. This will allow organised players with opportunities to acquire regional players at lower valuation.

Government initiatives

The Government schemes such as Housing for All” by 2022, “Nal se Jal” by 2024, project AMRUT & Swachh Bharat Mission, National Rural Drinking Water Programme, among others augurs well for the plastic pipe industry. These schemes aims at cleanliness, providing basic services, such as Water Supply and Sanitation (WSS), and ensuring that every household has access to a tap with assured water supply and a sewerage connection.

Replacement of ageing pipes

Traditional pipe material like iron, steel and concrete used in the cities and buildings are getting older and corroded, reducing its stability. PVC/CPVC pipes are highly recommended as replacement by the plumbers owing to its lower cost and ease of installations.

Rising aspirations of the middle-class population

The demand for pipes is influenced by rising disposable income of the middle class population. Presently, there is a shift in terms of lifestyle changes, wherein people prefer branded and quality tiles/faucet/ceramic to renovate their homes and enhance the aesthetic appeal of bathrooms. This will in turn create demand for pipes as well.

Hydroponic PVC system

spiring urban and conscious farmers are adopting the effective way of doing farming in a minimalistic space. Once of which is hydroponic method, wherein usage of PVC pipe is very popular. With times, increasing number of companies will enter into the space to develop readymade Hydroponic system.

Challenges

Cost of raw material

The higher raw material prices can increase the production cost of the players operating in the industry. However, the increase in raw material prices does not impact pipe manufacturing players as the higher cost is passed down to the downstream industry users.

Stagnation in the construction industry

Slow pace of construction activities can hamper the margins of the pipe industry players. However, the industry is less likely to be impacted owing to sustained demand for replacement of traditional pipes and shift from unorganised to organised players.

Slowdown in the capex of the downstream industry

The downstream industry’s cautious approach towards capital expenditure in the projects can affect the order books of the plastic pipe players. Also, the COVID-19 situation has made this quite apparent and probably, it would take couple more quarters before the things starts falling in place.

Indian Adhesive Industry Overview

Adhesives are widely used across numerous end user industries such as packaging, construction, furniture, automotive, assembly operations among others. The major demand for adhesive comes from the packaging and automotive industry in the country.

Increase in disposable income levels and booming retail markets are propelling growth in packaging industry which is conducive for driving demand for adhesives. Rapid urbanisation coupled with growing infrastructure and real estate construction projects is further projected to fuel the demand. An increasing number of global as well as domestic adhesive companies have set up facilities to address the growing demand for adhesives from various end user industries. The India Adhesives & Sealants market is expected to record a CAGR of 11.17% during the forecast period of 2019–2024.

Financial Highlights

2019-20 was the tremendous year for Astral as it showed an increased product realisation and steady numbers even amid turbulent times. The Group’s revenues in 2019- 20 stood at Rs 25,779 million. The EBIDTA improved by 14.3% to Rs 4,534 million in 2019-20 from Rs 3,967 million in 2018-19. The Company achieved a profit after tax of Rs 2,496 million in 2019-20 as against Rs 1,973 million in 2018-19, an increase of 26.5%.

Owing to the unexpected COVID-19 attack and subsequent lock down in country, the Company witnessed weakened sales in piping and adhesive segments in the month of March 2020. Consequently, in the Q4 of FY 2019-20, the closing inventory level increased with reduced receivables.

Piping Business

The Company’s piping business has consistently outperformed the industry growth. The spectacular growth momentum is led by capacity expansion, spurring volume growth, reputed brand name and large distribution network. The recently introduced product PEX-A-PRO has seen positive response from the market, with consistent business. The piping segment’s revenues in 2019-20 stood at Rs 20,428 million. The EBIDTA improved by 20.7% to Rs 3,806 million in 2019-20 from Rs 3,154 million in 2018- 19. Profit after tax stood at Rs 2,008 million in 2019-20 as against Rs 1,414 million in 2018-19, showing an increase of 42.0%.

Adhesives Business

Over the past few years, the Company has leveraged its geographical strength and existing distribution network along with its own cross-selling opportunities to grow in the adhesive segment. Combined Revenue of Resinova and Seal IT stood at Rs 5,830 million, while EBIDTA was recorded at Rs 765 million in the FY 2019-20. With right structural changes and strategies, Resinova is expected to capture higher market share in the adhesive and sealant segment. The Company recently launched an instant hand sanitizer ‘Resi Shield’ to help curb the COVID-19 pandemic.

Astral Poly Tec Consolidated December 2020 Net Sales at Rs 897.50 crore, up 35.15% Y-o-Y 3

February 03, 2021; Reported Consolidated quarterly numbers for Astral Poly Technik are:

  • Net Sales at Rs 897.50 crore in December 2020 up 35.15% from Rs. 664.10 crore in December 2019.
  • Quarterly Net Profit at Rs. 123.20 crore in December 2020 up 82.25% from Rs. 67.60 crore in December 2019.
  • EBITDA stands at Rs. 198.10 crore in December 2020 up 64.53% from Rs. 120.40 crore in December 2019.
  • Astral Poly Tec EPS has increased to Rs. 8.18 in December 2020 from Rs. 4.43 in December 2019.

References

  1. ^ https://www.astralpipes.com/about-us
  2. ^ https://www.astralpipes.com/uploads/investor_broucher/1595913845_astral_annual_report_2019-2020.pdf
  3. ^ https://www.moneycontrol.com/news/business/earnings/astral-poly-tec-consolidated-december-2020-net-sales-at-rs-897-50-crore-up-35-15-y-o-y-6444201.html
Tags: IN:ASTRAL
Created by Asif Farooqui on 2020/10/26 09:42
     
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