The numbers are probably self-explanatory! Interestingly, Supreme has consistently improved its RoCE over the last 10 years. It used to be around 10% in 2002-03 and has moved to nearly 45% currently. It's CPVC business has grown 60% this year, as Vinod has mentioned.
What I am most interested in is however, the composites business. which I think may be a big differentiator. This is their 5th and newest line of business. The company has received ISO approval for making fibre glass gas cylinders and are expected to start their trial run from Jan'13.
Disclaimer: Invested in both Supreme and Astral and they are in top 5 holdings in my portfolio
Spoke to a retailer in Bangalore. He had displayed two similar sized posters on CPVC pipes of Ashirwad and Supreme. Here are the points:
Ashirwad has the highest price among all 3, with Supreme and Astral having similar price.
Ashirwad has higher sales as customers ask for it (brand is around since 1975)
He beleives that Ashirwad has superior quality inspite of Astral also using lubrizol compound (Actually is there any possibility of this case, could the manufacturing process be different?)
He said Astral Bangalore distributor is all India no 1 for Astral because Bangalore market is huge for CPVC and compared to other cities. Higher awareness?
All three players as per him are aggressive and conducts plumbers, contractors meetings etc.
There are other players like Ajay and Prince which have no demand.
He showed me a new poster from Ashirwad which is also introducing a bigger range of products. I think everyone is after the âone stop shopâ formula.
He said he will soon display the poster of Astral too
While I was about to leave he told that the market is huge and there is room for all players and adviced me to stay put if I have invested in Astral
Sorry for got to mention - he said the decision on brand is never made by the plumber, but by the customers which in his case are owners of the residential buildings.
We are getting an idea we should find a way to incentivise folks to do local scuttlebutt and report for the companies/products that they can touch n feel
Going by the stock advise, Looks like you have made a new friend:) If he is in your locality probe more. Donât plumbers come and buy from him. How many of them do individual house/repairs. How much is replacement of GI.
When he says owners of buildings - does he mean Apartment Complex - and therefore it is the Association. Does he think individual house owners have the ability/time/expertise to decide on whether to use PVC or CPVC and then which brand - logically they sghould be depending on Plumbers - which is what I have seen in 2 cases.
Basically probe deeper to âŚvalidate & revalidate all claims by Astral.
He meant house owners and not large apartments. Associations will come into picture for replacement only I guess and that time hasnt come in that locality. He said plumbers go for the cheapest option, but owners are the ones whodecide. CPVC competes with GIonly,for both new depoloyment and replacement for cold-hot water usage and so I guess the lower price of CPVC could have made owners decide on CPVC first and then on a brand with higher recall (my guess only, will revalidate in my next opportunity). If that is the case any adcampaignby Astralfor brand building would bein the right direction.
Sorry guys , am a late contributor, I had done renovation in my house bathroom, and the plumber strongly recomended me to install plastic pipes instead of gi pipes, then I came to know about this company, he told me this six months back. He told me its more stronger and flexible then the gi pipes, and nowadays he is preferring this pipes only, this pipes installing is more easier for the plumbers.
Whe somebody like to gives a cautionary statement it is to be taken seriously. But pls explain why you thought so? Will help to learn and avoid mistakes for everyone
The thing going in favour of Astral is the huge opportunity in front of it. When we as outsiders feel that this opportunity can make Astral the next something i.e Supreme, I am sure there are many players in the industry who are quietly working towards having their share in the pie. Though this thread has adequately addressed this issue, as the noise gets louder, we need to be more alert of the moves made by competitors.
Discl: - I am not invested in Astral. My employer is in the process of awarding the contract for Plumbing for our mixed used project in Nagpur. I am willing to wait until that time to understand the intricacies and then take a call.
Is supreme industries also manufacturing CPVC pipes ? I thought that ista Lubrizol patented technology with Astral,Ashirwad n Ajay being the. 3 distributors?
Does suprem gets CPvC compound from A Japanese manufacturer a competitor ?
If thatâs the case coupled with unique product range of Suprem industries and CpVC huge growth doesnât Supreme industries is a better fit ?
Supreme buys its CPVC compund from Kaneka Corp of Japan. In fact, there was some talk last year of Kaneka taking a minority stake in Supreme (refer to: http://www.business-standard.com/india/news/japan\s-kaneka-eyes-stake-in-supreme-industries/446848/). But nothing happened. CPVC compound has been off-patent for a long time, but the number of bulk manufacturers are very few with Lubrizol being the largest one.
Yes, Supreme also produces CPVC pipes and has been grown it 60% this year and expects to do the same next year as well. The management has been conservative so I do think they will be able to deliver on the growth.
The difference between Supreme and Astral is that while Astral is more a specialty play, Supreme is more diversified. It has multiple segments (5 from this year) including furniture, pipes, industrial products, packaging & material handling and composites. So, the growth is likely to be less compared to Astral. Also, Astral is much much smaller so it has a lot of space to grow. Astralâs product mix is unique.
Overall, I think Astral is also going to do very well. But, it will continue to be âyounger brotherâ to Supreme in my portfolio
Disclosure: I own both Supreme & Astral and am not planning to sell either one at this time. I am likely to add on to my positions in Astral if there is some price softening.
I have always been maintaining Astral Poly Technik is a story - not well understood - by the larger Investment Community, just like Mayur Uniquoters wasnât for a lot of time in its 3-yr 8x journey.
It has been our endeavour through repeated detailed Q&As to portray the company in its true colours! But we have failed to effectively communicate a few points about this company and its business
a) Competition scenario is in Astralâs favour - not the other way round
b) Forex Management - is a non-issue over the long term
c) Exclusivity & Scale (when it comes in next 3-5 Years) will take this company to a new league
Please take the discussion forward. Do you think, this time round these 3 points above are more real -that you are able to appreciate better?
I want to take the Astral discussion further. With help from you all.
Astral Opportunity is big. It is very very well-placed to harness & exploit the opportunities before it. I have a big hunch at this point of time, Astral deserves a higher allocation in my Portfolio than Mayur.
However Astral is not cheap, like Mayur was 2-3 years back. But valuations have caught up with Mayur, so my bullishness is tempered there. At the same time, scaling up from here and going to the next level is not a given for Mayur. To do that it will have to compete and win marketshare from much bigger competitors in export markets, with better and/or comparable technology. Form here on, there are many IFs on that journey for Mayur.
By contrast, it seems to me for Astral, there are very few IFs. It is sort of destined to reach there. The company-its-dealer & distribution network is a very well-oiled machine. The company monitors & incentivises this critical activity superbly - we have sampled this time & again over the last 2 years. The company has been walking the talk, introducing new products every year. It has a great relationship with Lubrizol, something that it will exploit to the hilt when the right opportunity comes along - by way of exclusivity for the new products. if they can keep going the same way, in another 2-3 years, economies of scale will be such that growth financing will be much less dependent on borrowings.(?)
For the next 5 years, why is Astral not a better bet than Mayur? Mayur is still a good bet. I am not about to forget my quarterly dividends! And a 20% compounding in earnings.
Sorry for a little leading-bias kind of pitch while introducing the discussion. Its my way of getting balance in - cause there are too many folks at ValuePickr who have made good money in Mayur, and too few who have dabbled in Astral/or tried to understand Astral business in detail. We need to let objectivity come in.
Love to hear comments from you all.Love to be challenged - with facts & figures - and considered opinions.
Excellent write up on Astral Mangement Q&A. Thanks for sharing all the knowledge on stocks.This is my first writing on valuepickrâŚ
In Q & A on mass media advertisementsâŚ
âWe will next attempt on educating the CONSUMER directly. There are some mass media events planned in October/November time framesâ
Are they planning anything specific to South? basically I am from bangalore and I see Ashirwad has got virtual monopoly ( Not sure about other cities though) in Bangalore. I guess with Hosur plant they will be in a better position to compete but at least any short term plans they have?
Donald, You have been speaking of the excellent dealer network that Astral has developed. That is indeed good news.
Here is my skepticâs viewpoint
We should not read a great deal into the dealer network. In this business unless a company has dealer relations they cannot survive. I want to take Supremeâs example here (again!!). In Calcutta, you will be very hard pressed to find any Astral dealer/retailer whereas you will find Supremeâs products in nearly every hardware store.
Secondly, for the Blazemaster segment, most current fire sprinkler systems are based on HDPE (High Density PolyEthylene), as per my understanding. So, it is not that Astral is the only company who is manufacturing an alternate to GI pipes for fire sprinklers, as the management may be indicating (atleast that is what I understood from the Q&A). And HDPE manufacturers are a dime-a-dozen in India! (I dont think anyone uses GI pipes for fire sprinklers any more.
Disclosure: I am invested in Astral and it is in the top 5 of my holdings. My views are likely to be biased.
