Thanks Donald and Hitesh. This seems a very good find.
I found some details that may be of interest to everyone. Its a bit dated Feb 2010, but has some excellent details with answers from Mgmt
http://www.indiainfoline.com/Markets/News/Astral-Poly-Technik/2882552827 Link: http://www.indiainfoline.com/Markets/News/Astral-Poly-Technik/2882552827
|Capital Market / 15:17 , Feb 01, 2010 |
Demand for CPVC pipes and fittings is picking up
After the company's December quarter results, Capital Market spoke with Hiranand Savlani, Chief Financial Officer, Astral Poly Technik. Highlights of the discussion:-
- What % of our total sales would be from commercial segment and what would be from residential segment? How is the demand from commercial segment for CPVC pipes? Has the revival started?
It is very difficult for us to give exact figures as our sales are through our Distributor and not to the end customers. Having said that it would be our rough estimate that it would be 65 to70% on housing and balance on commercial side. Demand is picking up slowly but it will take some time to pick up substantially, Our company does not see any demand concern because Astral products are getting day by day very good acceptability in market, and we are regularly introducing new product range in market and because of that we are able to sustain growth of 40% CAGR since last 6 years.
- What % of total sales would be from replacement market and from new markets? How much of our total sales are from urban areas, rural areas or if you can categories into from Tier 1, 2 and 3 cities. Which are the growth drivers so far in FY'10 and will be for FY'11.
As explained above it is not possible for us to give these statistics as we are billing to our distributors and not to end customer. But we can say that so far till last year demand was more on Metro's and Tier 1 cities but this year we can see a very good pickup in demand from Tier 2 and Tier 3 cities also. The products and brand getting acceptability day by day even in Tier 2 and Tier 3 cities is helping in the sales. Further with the introduction of new products range we will become a Single Window shop for all the building community.
Replacement market played very important role in the year 2008-09 and in 2009-10. It is gaining further momentum, and in times to come i.e. year 2011 onward we will be focusing more on that side, besides our very strong network on project side demand ..
- With steel prices coming down, how does CPVC pipes cost compare with GI pipes?
We are still cheaper by 20 to 25% compared to GI pipes. CPVC is having very good advantages as far as properties over metallic pipes such as Corrosion, Scaling & Rusting is concerned. Due to these properties, the life of the metallic pipes is very low compared to CPVC pipes which gives the advantage to us and people are slowly moving from GI to CPVC products. We have today more than 11 products under brand name of Astral, applications in various segments of residential and commercial markets. Kindly share with us the
so far uptil Dec'09, and planned products for the rest of the year and for FY'11. Which product or products were the main growth drivers and why? Or if you can share the product wise growth would help. For FY'11 which will be the leading growth drivers.
We have already launched 10 products out of 11 products in India. We are planning to launch the 11thProduct i.e. Blaze Master - Fire Sprinkler System in the next Quarter.
We are getting a very good response in our new products as well. Our recently launched SWR range is receiving very good response in the markets where we have introduced the product, but we still have to spread across the country. We have launched this product in only a few states and we are targeting to launch on a pan India basis in another couple of quarters.
Similarly our Foam Core pipe is also receiving a very good response in market but the real fruit would be seen only in the next year when we will introduce this product on pan India basis. Till today we have given only in selected areas.
Our regular products CPVC and Lead Free PVC are getting more and more acceptability and we can see a very good demand in coming years.
Further some value added products are being introduced in market shortly like Under Ground Chambers and Valves.
- Do you have any tie-ups with any real estate players/residential/commercial builders for selling the pipes? Will we continue to follow the business model of distribution/dealers or any other plans?
We don't want to change our business model. We continue to work on Distribution Network. However we are planning to increase the said network on an ongoing basis which will give further strength to our brand. It may also be mentioned that our marketing team does undertake projects where we supply our material for projects but they are all executed and billed through local distributors.
Demand from infrastructure segment is increasing day by day. We are also
- How has the demand for CPVC pipes from infrastructure segments like hospitals, hotels, airports etc? Kindly update the major/recent contracts done or undergoing in these areas.
orders from Hospital and Hotel Industries. Some of the recent Hotels and Hospitals done by us are :
Kohinoor Hospital - Kurla
Saifee Hospital - Charni Road
Max Hospital - Delhi
Medi Citi- Gurgaon
Hotel Trident - BKC
Hotel Renaissance - Powai
Hotel Radisson - Amritsar
Appolo Hospital - Banglore
Colimbia Hospital -Banglore
Hotel Novatel Electronic City Banglore
Hoysela Hotel- Banglore
MAC Hotel - Banglore
Hotel Welcome Group -Banjara Hill - Hydrabad.
Delhi International Airport
Kindly update us on Blazemaster product. Its application, capacity and date of commercialization. Has the company achieved all the clearances and certificates required for its operational? What can be the margins for this product?
Blazemaster is the brand of Lubrizol and we are the licensee of Lubrizol. It's basically a Fire Sprinkler System which is these day's becoming compulsory for any multistoried buildings, Hospitals Hotel, Malls, Airports etc. The market for Blazemaster is very big. We have our internal estimate that it could be in the range ofRs.600 to 700 crores.
We have already received an approval from UL (Underwriting Laboratory- USA) and we have given the pipes for approval in India and waiting for BIS approval. As soon as we will receive the approvals we will be in a position to commercially launch the product.
Regarding Margin naturally Astral is having exclusivity in this product and it being a world class product the margins will be much higher than the normal CPVC products.
The margins for nine months stood at 15.1%. Was there any pressure on margins due to raw material prices? Was any additional marketing or selling expenditure incurred during the period? What will be sustainable margins going forward?
If you have seen our past results you will see that we are working on 14% to 16% EBITA Margins and quarter on quarter there may be a 1% here or there variation but by and large we are maintaining the same. The company will be operating on 80% plus capacity in coming quarter, the advantage of economy of Scale will be available to us and further rupee is also on appreciating trend that will always help us to maintain our operating margin. So we will be in a position to maintain our 15% EBITA margin. Further next year BLAZEMASTER, Underground Chambers and valves will be added in our portfolio which will support our operating margin if not further improve.
- The interest cost for nine months was flat on y.o.y basis. What is the current debt in the books of accounts and the working capital requirements? Will the company need further loans for expansions?
The current Long Term Debt is close to about 37 Cr. And the Short Term Debt will be approx. 33 Cr. Further the borrowing of the company is at very cheap rates due to better grading assigned by CRISIL. This helps the company in a big way.
Company will require some working capital as the business expands and if we go for any expansion we will be requiring some amount of Long Term Debt also but at the same time we would like to add that Debt Equity Ratio of the company is very comfortable 0.30 : 1 so raising debt is not an issue for the company. On the other hand Cash Profit of the company is very strong (First Nine Months Rs.-22.60 Crs.) so any kind of expansion, company can take care from Internal Accruals & little debt.
- The depreciation for the nine months has jumped by 47% toRs.6.30 crore. How much of capex have been incurred till date and what is the current installed and operational capacity of pipes. What it will be for the year-end FY'10 and FY'11
Depreciation has jumped mainly because the company has increased the capacity from 11800 MT p.a. last year to 25968 MT p.a. . Company had spend last year (2008-09)Rs.
32.50 Cr. in capex and we are further increasing our capacity to 30000 MT by March-10 and current year Capex will be close to about 15 Cr. In Last Quarter Company produced 5627 MT on 25968 hence work out to be 86%. First Nine months company has produced 13219 MT and by year end it will be close to about appx. 20000 MT.
- The company had forex gain ofRs.0.36 crore as against loss ofRs.3.08 crore in nine months ended Dec'09. At net level the company is importer. What is the hedge strategy that the company follows? Uptil how much so far the company has covered its forex exposure and at what rate?
As far as hedging is concerned company has fully hedged the long term loan i.e. Term Loan on the day it is availed from the bank. So company does not have any risk but company is taking advantage of interest arbitrage which is close to 3 to 4%.
Regarding hedging of Imports we normally hedge the near term as the rupee trend is on appreciation so we are not covering our long positions in import.
- How much was the export sales during the nine months period and which countries do we export to. Kindly share with us the latest update on JV in Kenya and our stake. Has the commercial set up for manufacturing the pipes started?
In First Nine Months we have done export to the tune of Approx.Rs.4 Cr plus, but from next year onwards it will increase as our Kenya Plant will be in operation. We have already placed the orders for machineries and we will start commercial production by April End.
We at present export to Bangladesh , Kenya and Nepal.
- Uptil what time the company continues to remain under MAT?
We will be in MAT for another couple of years and then depend on expansion plan .
- Sales and margins target for FY'10 and FY'11
Since the Raw Material prices are fluctuating it is difficult to put a specific figures for value growth but we can say that on a volume growth we will do 50% Plus growth in FY-10 & FY-11
Is there any plans to dilute the equity? Or any fund raising plans or M&A plans ?
As explained company is having debt equity ratio of 0.30: 1 This gives us enough leverage to raise the funds. Further Debt is available to the company at very reasonable pricing so company will prefer to go for any kind of capex with debt and internal accrual so that we can give the highest advantage to our existing shareholders .
Hence the question of raising further funds through QIP or Public Issue does not arise.
During the first Nine months itself company has made a Cash Profit ofRs.22.60 crore . Hence the capex plan ofRs.20 Cr for FY11 will not require any kind of QIP issue.
However if company can see any good opportunity for M&A or plan to increase the Capacity by a sizeable number, then the company may plan for QIP or Public Issue or any other form of raising resources.