Astral polytechnik ltd


(Nikhil Moryani) #341

All things said and done,I quite agree with what everyone has posted.

The moot question is,how strong is the demand from Real Estate?? Will the topline growth that blinds everyone keep coming in next 1-2 years?? I’ve heard a lot about dwindling sales and projects being stopped midway or work moving at a snail’s pace. At least this is the case in Central Suburbs of Mumbai. Moreover,whatever sales is coming is in the form of investment,no genuine demand.

Whats’s the scene with Real Estate around you?? And what does it mean for Astral??


(JatinK) #342

I doubt any company can have this much Pricing Power, VivekJi.

Assuming 40% growth on 60 crs last year’s PAT gives this year NOPAT of 84 crs. Now if INR stays at current level by FY14 end, it will easily lose more than 24 crs on FX loss (they have already lost 16 crs in 1Q).

PS- Agree on your point 2,3 & 4 but I feel point 1 is a bit over-stretched.

Also do you have number of MT sold in 4Q13 like you gave for 1Q14 & 1Q13??


(Ankit Gupta) #343

Hi,

Finally, I attended my first every AGM, Astral’s AGM. I took a leave from office today to attend it. Have heard a lot about Berkshire’s AGM where Munger and Buffett address the meeting. Reached the venue at 11:03 am (was late by 3 minutes) and the AGM had just started. Will give the summary of the AGM and will try to cover whatever I could recollect and note down during the AGM:

First of all, the AGM was in pretty small hall which was jam packed. The AGM started with the Chairman addressing the meeting and highlighting the performance of the company. The main point during his speech was the Hosur facility in Tamil Nadu is almost completed and will commence operations in coming few day. This plant will have a capacity of 15,000 MT. With this facility, company has 4 facilities in total (2 in West, 1 in North and 1 in South). The company is also looking to set up a facility in the Eastern part of the country. The other point that I noted was that out of 6 board meetings held in FY13, 4 were in Ahmedabad and 2 were in US with Mr. Sandeep Engineer (MD and promoter) attending the ones in US along with Mr. Kyle Thomson (nominee director of Speciality LLC).

Then there was a small question answer session where investors posed question to the management. Most of the question were not that relevant with investors asking for dinner to be arranged during next AGM and investors not getting hard copy of the Annual Report. One relevant question that I was there was the expenditure on Dabang 2 promotion. The company spent around Rs.6.5 - 7 crore for the whole promotion (including the advertisements, banners, posters etc). The management said that branding will play a very important part for the company going forward. The company has employed Oglivy & Mather as its branding partner.O&M has successfully managed the branding of companies like Fevicol & Asian Paints (was pretty much impressed with it). The management also told the investors that it will try to be very transparent with them as there were few questions on inter-group/company transactions (it was a miniscule amount and management answered it properly).

Then the main part of AGM came with Mr. Sandeep Engineer addressing the gathering. He started with the announcement of Blaze Master getting approval from BIS. The product will be launched commercially in next 3 - 4 months and there were very good enquiry for it. The Dholka plant commenced its operations last year and had some teething problems initially which have gradually been solved. Last year Astral ventured into Column pipes and has received very good response for it. The demand is much more than what the company can supply currently and they are planning to double or even triple the capacity for manufacturing column pipes. The company has also launched manufacturing of Aluminium CPVC which is first of the kind in the world. The company has orders from US for it. This is primarily used in oil & gas applications (may be oil & gas exploration is what my guess is). The company is also looking to tie up with other international plumbing manufacturers for launching a full range of plumbic products (it is looking to tie up with the largest plastic plumbic manufacturer of the world [its a Dutch company], am not able to recollect its name).

Mr. Engineer then stated that three challenges the company is currently facing:

)- Currency Fluctuation

)- Slowing economy

)- Slowdown in real estate

Mr. Engineer stressed that branding will play a very important role for the company and the company has been able to achieve growth in 13 years which not many companies are able to achieve even in 25 years. This year the company will incur capex of Rs.75 - 80 crore primarily towards adding capacities at Santej and Dholka plants in Gujarat. The company’s subsidiary, Advanced Adhesives Limited is doing pretty well and had launched PVC cement in 2012-13. It will manufacture CPVC cement in current year. The topline for the company grew to Rs.15.7 crore in FY13 from Rs.3.19 crore in FY12. The profit increased to Rs.2.44 crore in FY13 from a loss of Rs.21.71 lakh in FY12. The company’s plant is fulling getting utilised and the management is planning to add other products apart from CPVC and PVC adhesives. The Kenyan JV is also doing well and the management is planning to double its capacity from existing 3000 MTPA. The company has 2000 + workforce.

I also spoke to the CFO post the meeting and asked him about the Blaze Master market size to which he responded that its a 1000 crore market. He also told that Ashirwad is almost as big as Astral while Ajay Pipes is a pretty small player. I wanted him to ask about Forex issues but he was in a hurry. The one thing I really liked about the promoters and management was their transparency and down to earth nature. The MD told the shareholders that they can approach his secretary for any issue and he will personally look into it. The management was also planning to arrange a plant visit for the shareholders.

P.S.: Am not as experienced as other senior but I hope I have covered most of the points which were discussed in the AGM.

Regards,

Ankit


(Nikhil Moryani) #344

Jatin,I think the company has room to pass on prices to more or less maintain the margins as this must be the case for every competitor because all import raw-material and all want to grow profitably and not bleed. Highly unlikely that a competitor would not increase prices in a bid to gain market share at the cost of profitability.


(Raj Panda) #345

Hi ankit,

Fantastic coverage from AGM, thank you very much.

Regards


(Vivek Gautam) #346

Thanks a lot Ankit for attending n writing notes about AGM.

Co appointing O & M is a great news. The agency under Mr Pandey has turned businesses which worldwide commodity business like paints and adhesives into great brand stories like Fevicol n Asian Paints.

Size of opportunity big co has pricing power . Coupled with ethical promoter who have walked the talk lets ride this compounding machine irrespective of any short term problem… Pray for any fall in price to enter .


(Nikhil Moryani) #347

Thanks Ankit Bhai,well summarized.

The stress on branding is amazing but one has to look at the spends and the resultant outcome in terms of increase in revenues.

As such,there is not much to brand in a product like pipes,in my opinion,it will only create awareness and help garner market share. Can this branding initiative lead to premium pricing,I don’t think.

What are your views on cos. increased focus on branding,what could be the possible outcomes. Interesting times ahead,eager to see how all works out.


(sandeep) #348

All said and done on the revenue growth. There is a high probability that rupee will touch 65 by end of the year which might result in more forex losses . Though these gyrations are short-term in nature i strongly feel that this is not the right price to enter. Investors will get better entry levels around 420 if rupee continues to slide further.


(Prabeesh) #349

This Forex losses could be short term hiccup but my main concern is management not taking strong steps to correct it . Adding to that to include it only in full year accounts is not sitting well with me.


(Nikhil Moryani) #350

Edelweiss report on quarterly performance states that a price hike was carried to the tune of 6-7 % in June-July period.


(Vinod MS) #351

Hi Ankit,

Thanks a lot for the update. It was very useful.

Cheers

Vinod


(Vivek Gautam) #352

more:))

Amit,

Good prescience. So we’re you or any other Valuepicker able to take advantage of sharp dip in price to 447 & back swing to 575 in half an hour ?


(Amit) #353

more:))

wish i had funds ready. and I dont track market so often during office timings, only end of day. subhash nayak seems to have taken advantage, as mentioned in his portfolio thread.


(Subash Nayak) #354

Paisa hamare paas bhi kahan the sirjee :frowning: . Goddess Lakshmi bless my portfolio at the end of the month. When not in cash, and find a good opportunity, lower conviction stock are sold to make way for higher conviction stocks.

-Subash

more:))

Amit,

** wish thread.

**


(Ankit Gupta) #355

I missed the opportunity as I was busy in a meeting with my boss. Was looking for this kind of opportunity but when it came I couldn’t capitalise on it


(Vivek Gautam) #356

Astral Poly Technik Ltd. has reported a strong set of numbers for Q1FY14. Revenues

grew by 42% as against our estimate of 30%. EBITDA growth however was modest at

9.5% YoY, impacted by 9% INR depreciation during the quarter. Adequate price hikes

have been taken in June / July which should result in margin expansion over the next

quarter and rest of the year. Further, INR depreciation should result in forex losses to

the tune of INR 21 crs / INR 16 crs for FY14E / FY15E, respectively, pricing in a USD INR

exit of INR 60 / INR 65 for FY14E / FY15E. However, we see this as a transitory loss and

are not overly worried about the same given the strong long-term growth prospects

for the company. We maintain a âBuyâ on the stock with a revised price target of INR

700, valuing the company at 15x FY15E earnings. The stock has delivered a return of

124% since we initiated coverage at INR 246 on 21st August, 2012.


(Vivek Gautam) #357

Astral Poly Technik reported a whopping top line of 43.4% YoY to Rs 261.1 crore. PAT grew by 51.5% YoY to

Rs 29.2 crore on the back of strong sales and lower foreign exchange loss. The management has guided a top

line growth of 20-25% in FY14E on the back of its robust production capacity, introduction of new products

(bendable, blaze master, column pipe) and the commencing of production at Hosur plant with an initial capacity

of 15,000 MT. At the CMP of Rs 536, the stock is quoting at a P/E of 13.69x and 11.28x its FY14E and FY15E

earnings estimates. We believe that Astral Poly is well poised for growth in an exponential pattern and will

generate rewarding returns and we recommend a strong BUY on this stock


(Ayush Mittal) #358

Ankit thanks for attending the AGM and sharing your notes…its very helpful.

Ayush


(Nikhil Moryani) #359

Hello All!

Please find below the link to Astral’s new TV commercial,

The move to create awareness has kick-started,hopefully it should be on people’s mind.


(Vamsi Krishna) #360

Dear All,

Is sharp fall in CMP from 621 on July 19th to 483 close today implicates profit booking for those who entered the stock at very attractive level in 2011? Is this simply the tide of Rupees depriciation?

Kindly advice!

Regards, Vamsi