Why is ROE (and ROCE) of supreme significantly higher than that of Astral? Not sure if forex losses can explain it all.
also, unlike supreme, astral seems to avoid low margin areas like agri pipes. Still both supreme and astral have similar operating margins. Does this have to do only with economies of scale ?
http://www.thehindubusinessline.com/companies/article2692074.ece
HI Ranvir,
thanks a lot for your effort. I think such type of ground work is very valuable. I found the following in the Management Q&A 2012 which probably answers your question to some extent:
“…We continuously try to interact & educate Focus groups. Consultants, Architects and Builders for Project Sales and Plumber Groups for Retail Sales. In the Southern Market we have seen Plumbers are more educated. The West market requires huge training. We conduct almost 3 trainings every week there.’…”
This is the first concrete news I found on hurdles faced by planned JV between Astral and Lubrizole.
interesting case study : blazemaster
http://www.lubrizol.com/CPVC/Resources/BlazeMaster/Case-Study-Fontaineblaeu.html
also would request if we could find out about the costs of the new marketing strategy , ad films and south india launch of astral plumbing products .
Yesterday for the first time saw an ad on Television for Astral pipes.
Would request the senior fellow members to throw some light on the issue:
1). Astral appears to be a good fundamental story for 3-5 years perspective .
2.The country like the fy 09 had again losses of the tune of 15 crores in fy 12 , other wise the earnings could have been far better . eps for fy12 rs 17 (np rs 39 cores ) if we add the losses it would have been 54 crores (eps would have been 25 rs) .
3). considering it is a net importer and a weak rupee is a burden for the profitability . Also considering rupee would remain weak for atleast a year or two ( main reasons being a.weak euro (dollar strengthening cause of double dip recession of eurozone )
b.Election time in india soon (populist measures by the govt would lead to increased fiscal deficit and hence weak rupee).
Would astral be able to recover the profits after say the elction year(assuming that the rupee appreciates after that ) and would the conviction levels in the story would be as strong after 2 years.
Meghmani organics with kaneka and mitsui will be setting up a plant of cpvc in india . the production is planned to start by 2014. basically they will be producing cpvc and will be supplying it for cpvc plumbing . Now the plan of astral to set up cpvc plant with lubrizol has hit a legal hurdle (meghmani has liquid chlorine avb with it for cpvc production ).
how will it affect astral and benefit other cpvc companies (esp supreme ) in terms of cost and avb of the cpvc compound .
till 2014 this will not be of much concern ,…how do things shape up or will shape up after 2014 is of concern .
Hi Ranvir,
I think though the competition in CPVC will keep growing but theopportunitysize is quite big and Astral being the leading player should be able to command a brand re-call and premium. The recent ad spends etc should help them in sustainable profitable growth.
Ayush
Recently i was in Jaipur capital of Rajasthan and decided to do some ground work in pipes market ( astral and supreme) .
Jaipur has a centrally located market known as Atish market which has more than 50 shops where majority of shops are either of plumbing ,sanitaryware or tiles.
Observations :
1). Rajasthan has still very less exposure in cpvc plumbing . Shopkeepers still recommend the old GI pipes citing some unjustifiable reasons . Although they do admit that cpvc plumbing is fast (plumbers are preferring it these days as cpvc plumbing takes less time to install ).
2). There were cpvc plumbing brands available i.e ashirwad , ajay , prince etc… which gave me a feeling cpvc is more of a commodity now ( m not talking about the cpvc compound which astral talks about )
3). The overall awareness in the capital of Rajasthan gives the feeling that the market is grossly under-penetrated and lot can be done to increase the awareness of plumbers and shopkeepers .(what is astral doing about it…)
4). In one of the showroom where i had a brief conversation and when the name of astral plumbing was taken ,…there was a sudden mention of the dabang add and how it was being liked by plumbing community in general . Also heard the comment that no one even talked about the company few years back.
5). Other major observation was Kajaria Ceramics …it had showrooms and hoardings almost everywhere ( felt like kajaria is in massive demand and every shopkeeper wants to be part of kajaria ).
6). Finally after searching on astrals website i found a astral dealer whose shop was one off and was located at a far off place .( bit strange to me …)
regards
ranvir
Thanks Ranvir for the scuttlebutt,
On my last visit to Kolkata, I have found Astral slowly making inroads into what was till now a Supreme bastion.
And the best part is there is abundant room for everyone to grow simultaneously without cannibalizing each other’s sales.
CPVC pipes may be commodity, but Astral is not into that commodity play, it is slowly carving out a brand niche on it’s own.
A superior product + strong advertisement + pretty strong entry barriers + sustained demand in the market place = all recipes for branded product right in place. Now all they need to do is play along and do not do anything drastic.
saw the astral ads being displayed in the india-pak match at motera gujrat.
Any idea about market size for Bendable which is CPVC fused with aluminium to give more strength . It sells at large premium to ordinary CPVC n Astral is the exclusive distributor for it.
Similarly views invited for Blazemaster CPVC fire sprinklers.nhow much addition to top line n bottom lines can these product for Adtral?
Any impact of branding courtesy Dabang 2 on Astral ?
This is one good stock which is showing a good trend. The stock is currently above its 5DMA and 25 DMA which reflects good momentum in the stock. The stock is since January 2012 trading above its Bullish Support Line (blue colour). The stock made a double bottom at 330 and now made a double top at 410 and broke further up giving a buy signal once again. This gives a price objective of 580.
Chart is here:
Hemant & Hitesh bhai your comments on todays price movement and price targets as per TA?
article on possible buyout of ashirwad. http://www.business-standard.com/india/news/belgium-based-mnc-close-to-acquiring-ashirvad-pipes-in-150-million-deal/201748/on
Q3/Fy-13 Results out…
Total Income up 28% to 206.47 Cr from 161.27 Cr.
EBIDTA up 17.6% to 19.64 Cr from 16.69 Cr.
Net Profit more than doubled to 10.61 Cr from 4.74 Cr.
EBIDTA margin is 9.5% v/s 11.9% (SQ-12) and 10.4% (DQ-11)
NET Profit margin is 5.1% v/s 5.1% (SQ-12) and 2.9% (DQ-11)
Total Raw material costs as a %ge to Income is 75.5% v/s 72.2% (SQ-12) and 74.5% (DQ-11)
Employee costs to Income is 2.5% v/s 2.2% (SQ-12) and 2.3% (DQ-11)
Other expenses to Income is 12.5% v/s 13.7% (SQ-12) and 12.9% (DQ-11)
Financial costs to EBIT is 11% v/s 8.9% (SQ-12) and 15.1% (DQ-11)
Tax Rate 24.5% v/s 20% (SQ-12) and 20% (DQ-11)
Rise in employee expenses somewhat affected EBIDTA
Jump in Net profits mainly driven by nil forex loss v/s loss of 5.8 Cr.
9M/Fy-13 v/s 9M/Fy-12:
Total Income up 40.6% to 560.1 Cr from 398.47 Cr (Fy/11-12: 581.22 Cr)
EBIDTA up 37.7% to 63.37 Cr from 46.02 Cr (Fy/11-12: 83.73 Cr)
Net Profit up 48% to 30.31 Cr from 20.47 Cr (Fy/11-12: 39.76 Cr)
Reported 9-month EPS 13.48 v/s 9.11 (Fy/11-12: 17.69)
Recorded TTM diluted EPS: Rs. 22.07
On 28/01/2013, stock on BSE Closed at Rs. 378/- Up 2.8%
(Results came in after market hours)
A note of caution:
Auditors note states as below:
Loss arising on forex rate fluctuation on outstanding balances as at the end of quarter has not been given effect in the above results. Company will account for the same at the end of the financial year. Such loss for the quarter is Rs 579.03 lacs and for the period is 598.03 lacs. This has resulted in the profit for the quarter being overstated by Rs. 579.03 lacs and for the period being overstated by Rs. 598.03 lacs.
If I were to remove above mentioned amounts from Profits, Adjusted net profit for quarter is 4.82 Cr v/s 4.74 Cr and for 9 months, 24.33 Cr v/s 20.47 Cr.
Lets see how markets take the auditors note regarding forex loss in case of astral. Results came in after market close so reaction --whatever positive or negative will be seen tomorrow.
Quarterly results seems to bemediocreat best. The reason being the Costs have shot up substantially to get the same sales. On YoY on basis they look fine though.
Spoke to an Ashirwad dealer. he said that Ashirwad had increased the prices of its product on 1st december but astral had for the first time in his memory had not done so.
But as per his info Astral wud now be increasing price on 1st Feb 2013.So that cud be the reason for subdued performance this qtr for Astral.
He also confirmed on news of Asirwad takeover by the Belgian co .If thats really true then its massive positive for Astral as valuations for the same was very high.
Views Invited.
