Astral has shown stupendous performance cashing in on opportunity in plastic piping industry,particularly in housing related market. The opportunity still persists and there’s lot to eat but competition is heating up and many want a share of the pie.
Astral has a strong hand with good awareness in the market because of its branding initiative,a plus point. But is it sustainable?? What if it becomes a market where price is a sole determinant of sale,is there a possibility?? Are there any customer switching costs??
What I understand from talking to my Uncle who is a civil engineer with experience of almost 15 - 20 years of experience in construction line (he works for a construction company) was that the quality of Astral’s products stands apart from others. He said that people don’t mind by 5 - 10 % extra for quality products especially if it is for a critical application (hot and cold applications where CPVC pipes are primarily used). This is primarily to do with the CPVC chemical supplied by Lubrizol is of higher quality compared to CPVC chemical supplied by other companies. Even I have noticed some small players like Kisan, Prince etc (apart from reputed companies like Supreme) entering into these space.
Even Ayush had asked the same question about competition heating up during Q2FY14 results concall and management had given the same answer about the quality of Lubrizol’s CPVC chemical. Apart from quality, in my opinion their product launches will also play a very important role in this. They have recently entered into Column Pipes which is a 2000 crore market as per management. Also, Fire Sprinklers (Blaze Master) is a huge opportunity of Rs.1000 crore and I think it should have high entry barriers.
Yeah,I’ve been hearing the same about quality and continuous,strong growth is also a corroboration. But,I would request everyone holding the stock to get feedback about quality of Astral viz-a-viz competitor’s products. If everyone is on the same page about quality,there is nothing that can stop the flow of sales to Astral.
And secondly,if it’s only because of CPVC compound that the quality is great,it remains to be seen how is Astral going to acquire market share in South which is basically a stronghold of Aashirwad.
Ambit makes Astral the top picks in plastic pipes sector.its for the first time I am reading coverage from them on Astral . They find it better then their other picks Suprem Ind n Finolex in the same sector.
Dolan capital covering Astral for long has given a target of 302.
Astral is not just a quality CPVC pipe player. They are turning out to be one of big innovator, when it comes to new product/product segment launch.
Bendable pipes, CPVC borewell tubes (being from village, I know what a pain it is having metal borewell pipes, they simply rust with time, CPVC pipe should be a super hit here), Blazemaster are few of the 1st in segment product launch they are doing. So the future should be taken care of by them.
Besides, they have major presense in west/north india, I guess. So the rest of india is nascent market to conquer by their quality/innovative product.
New plats in Hosur, which is going to be operational, should give a boost to short-term sales/np.
I had some 20 mins odd time to kill, in and around the electrician/plumbing material dealer/shopkeeper, which is present near my home. Some comments from him
1). What brand of pipe/fitting to be used is highly dependent on dealer/plumber. Not much awareness about various brands by end consumer. But people are slowly getting brand conscious.
2). Plumbers get maximum benefit by using low quality, chinese imported, local branded stuff.
3). Astral/Ashirvad are of better quality than these chinese/local stuff, and are costlier.
4). Astral/Ashirvad are of similar quality (same raw material from USA). Astral seems to be of slightly better quality
5). Dealer support by Astral is the best. Astral seems to have given some sort of gifts (umbrella) to plumbers. This seems to be the way to make plumber aware of astral brand.
6). The shop has big banners of astral, has small banners by Ashirvad.
7). The guy has very high regards for Astral stuffs.
Wow! Hats off to Mr. Engineer. This man is a relentless warrior and I have no doubts the co. will tackle competition astutely. It has a huge advantage in the sense of pull that the co. has created for its products and the way he said the co. has the pulse of the market.
This business is a perfect combination of an amazing boat and a great rower. Feel proud to be associated with Astral.
@Donald: Wondering, even if anything comes out of the meet up would we ever consider buying Astral at these price points? Is it more of a sell right now or not, decision?
Don’t think we need to have such short-term focus for long term A category business.
As always we will focus on the tangibles - new product categories, addressable market size, limited competition, sustainability of existing products and growth, and sustainability of competitive advantage.
We have never limited ourselves to Valuation calls while conducting Management Q&As. Understanding the business is more important. Mr Market always gives us opportunities!
Those interested, please put up your questions, without inhibiting the thought process.
Q1 : Is the company doing anything to educate the plumbers about the products. Because more often than not, the retail sales are by way of suggestions of plumbers. A case in point being (cement companies give masons free term insurance policies, and also educate them about the product superiority and better ways to use it). This helps in influencing decision guiders.
Q2 : How is the company targetting organised Real Estate Market. Has it been in tie up with any Real Estate Players, and what is its strategy.
A few questions for the management I could think of,
COMPETITION
1). Will the co. have to shave off the slight premium pricing it enjoys on it’s CPVC products and sell on par with competitors due to competition heating up?? Especially in the addressable market of FlowGuard,which occupies a major chunk of CPVC market??
2). Having practised pull strategy by branding and promotions,will the co. now have to resort to push strategy by increasing margins for dealers due to increasing competition??
3). What’s the status on Hosur facility??How does the co. plan to capture the southern market given it’s a strong hold of Ashirwad?? What does it read of JV with Aliaxis?? Is Ashirwad entering similar product categories like the ones in which the co. is entering??
NEW PRODUCTS
1). What’s the status on approvals for BlazeMaster?? The co. had indicated that it’ll sell BlazeMaster through a different channel,what is the status on development of the same?? How much lead time the co. has over it’s competition in the BlazeMaster category?? For how long will BlazeMaster remain exclusive with the co.??
2). What industries form the target market for Bendable?? Since,the co. is the only player in the world making such pipes,what kind of growth is seen ahead?? Is Lubrizol helping in pushing Bendable to other pipe manufacturers it supplies or in any other way?? For how long will Bendable remain exclusive to the co.??
3). Do customers buying pipes from the co. prefer buying co.'s solvent cement too?? Is there any strategy adopted to sell solvent cement and pipes in a bundle?? What’s the status on production on Solvent Cement in-house?? Any idea,how big solvent cement can become in next 5 years??
4). How much will new products like BlazeMaster/Bendable/Column Pipes contribute to total sales in next 5 years?? Which product is the co. betting on the most??
5). What kind of margins does the co. enjoy on BlazeMaster/Bendable/Column Pipes??
