Buy Astral; target of Rs 1810: ICICI Securities

Moneycontrol • 4 days ago

Original source

Key Investment Pillars

  • Astral's pipe volume growth is expected to remain healthy due to stable raw material prices and the implementation of the Minimum Import Price (MIP) and Basic Customs Duty (BCD), which will reduce volatility in volumes.
  • The company's adhesives business is expected to grow at 20% in revenue with an operating profit margin (OPM) of 13-14% in FY27, driven by an increase in product portfolio and geographical reach.
  • Astral's profitability in both pipes and adhesives segments is expected to improve as raw material inflation has been passed on, and the company has taken cost optimization measures.
  • The company's bathware segment is expected to grow at 25% in FY27, and the paint segment is expected to grow at 25%+ with a low single-digit margin.

Thesis Validation Checklist

  • Investors should watch for robust pipe volume growth and improving profitability in both pipes and adhesives segments over the next 12 months.
  • The company's ability to maintain its guidance of double-digit pipe volume growth and 16-18% OPM in pipes, and 20% revenue growth and 13-14% OPM in the India adhesives business, will be key to validating the thesis.
  • Any sharp fall in PVC prices or high increases in raw material prices for adhesives could impact the company's profitability and demand, and thus, are key risks to watch out for.