Buy Astral; target of Rs 1596: Prabhudas Lilladher

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Double-digit volume growth: Astral Ltd. is expected to deliver double-digit plumbing volume growth in H2FY27, driven by robust demand recovery and supported by record-high monthly sales, with management guiding for 10-13% volume growth in FY27.
  • Margin expansion: The company expects to achieve 14.3% volume CAGR in its P&F business over FY26-29, with EBITDA margins targeted at 16-18% in FY27, supported by higher H2 contribution and pass-through of cost increases.
  • Diversification and expansion: Astral is evaluating an upgrade to its FY27 domestic adhesives revenue growth guidance of 15-20%, supported by robust H1FY27 revenue growth of ~25%, and has guided for 9-10% EBITDA margins by FY27-end in its UK Adhesives business.
  • Operational efficiency: The company has incurred a capex of INR3.2 bn and expects FY27 capex at INR4.0 bn, including INR400mn for the CPVC resin plant, with machinery installation progressing ahead of schedule.

Thesis Validation Checklist

  • Volume growth: Monitor Astral's ability to achieve double-digit volume growth in H2FY27, with a focus on plumbing segment growth.
  • Margin expansion: Track the company's progress in achieving EBITDA margin expansion, driven by higher H2 contribution and pass-through of cost increases.
  • Diversification and expansion: Watch for upgrades to Astral's adhesives revenue growth guidance and progress in its UK Adhesives business.
  • Operational efficiency: Monitor the company's capex utilization and progress in its CPVC resin plant and other expansion projects.