As we all are aware Astral is last few years is quite aggressive towards creating brand for itself.
| Year | Revenue | Advertisement & Promotion | |
|---|---|---|---|
| 2022-23 | 5158 | 153 | 3% |
| 2021-22 | 4394 | 125 | 3% |
| 2020-21 | 3176 | 106 | 3% |
| 2019-20 | 2578 | 91 | 4% |
| 2018-19 | 2507 | 87 | 3% |
| 2017-18 | 2073 | 68 | 3% |
I understand some of these may be non recurring in nature and shall result in higher EBITDA margin. Management in call saying 17% to 18% margin is sustainable.
Hi all,
While reviewing the old concall of astral found that - Management can be transparent and along with that hard working.
Market size and market share: Segment-wise market size and company’s share is as follows Pipes – Rs.
37000 crore/9.6%, Adhesives – Rs. 18,000 crore/4.7%, Adhesives UK – Rs. 14000 crore/2.4%, Paints – Rs.
58,000 crore/0.4% and new businesses – Rs. 25000 crore/0.8%.
The above is from the report of sharekhan in March 2022. (https://www.sharekhan.com/MediaGalary/StockIdea/Astral-3R-May18_2023.pdf)
Below is the 2Q2023 (2QFY2023-2024) concall:
Now to summarize all the four verticals, we are very happy with the performance and we
are confident that this growth momentum will continue and we will keep working hard to
gain the market share and last but not least that our core vertical that is pipe, you can see
that in spite of higher base, we are still gaining the market share and with brand getting
more and more stronger will gain more and more market share in the coming time because
we are adding a lot of new geographies in terms of manufacturing facility, which will help
us to grow market share and reduce our trade cost.
@hitesh2710 Sir, May I request you to please let us know how much market share Astral has in above verticals as on date
Plumbing Business:
In Q3, the demand scenario is very robust, and we can deliver 15% volume growth in Q3 and 24% volume growth in the first nine months of FY24 in the plumbing business
In the plumbing business we can deliver an EBITDA margin of 16% in Q3 and 17% on a nine-month basis against our guidance of 15% to 17% EBITDA margin.
Pipe Business:
- As communicated in the last concall due to robust demand in pipe verticals Company has decided to aggressively move into expanding its capacity. As communicated earlier we are putting in three new plants, and all are going as per schedule
Guwahati Plant:
- A 22,000 metric tonne plant already started production on the water tank last quarter, and from January, we have already rolled out our pipes, so we are expecting some sales in the last quarter from this plant
Hyderabad & Kanpur Plants:
A 70,000 metric tonne and Kanpur plant 60,000 metric tonne, expansion activities are going on in these two locations in full swing. Hyderabad first phase of construction is almost over by March and in Q1 we will be starting to put machines and by Q2 end commercial production will start. The Kanpur plant layout is in progress and shortly the construction work will be started.
During the first nine months we have increased the capacity from 2.9 lakh metric tonnes to 3.29
lakh metric tonnes, 30,000 metric tonnes increase in the capacity.
Adhesive and Sealant:
Our state-of-the-art plant at Dahej is in operation and giving good results in terms of energy saving, and cost reductions what we originally planned and what we have reflected in numbers is going to be exactly seen in the coming quarters after one or two quarters as the plant gets fully functional at the scale and the inventories of different plants which has already been there and made at the older locations are sold in the market
Our Indian adhesive operation has given excellent growth in Q3, with top-line growth of 17%, and on a nine-month basis 15% in value terms. In volume terms, it is much higher due to the fall in chemical prices. Even EBITDA for the quarter was very healthy at 16.5% in Q3 and on a nine-month basis it was 16%.
Our UK adhesive top line has grown by 9% in value terms, and in volume terms, it is growing much faster, but in EBITDA terms it has given a negative 3% EBITDA in the last quarter mainly due to inventory loss and heavy FOREX loss due to the fluctuation of GBP and US dollars
Paint Business:
In the paint business we are getting ourselves ready with lots of new products at the plant and various systems and MIS in the back office at the same time we are creating a team to launch the Astral brand in a few states from Q1. So, in Q1 we are coming out with our launch of Astral brand products, and we will be addressing a few markets, at Phase-1 of it and slowly and steadily increasing the reach to different markets and almost completing our reach to the entire country in coming one to two years with the new brands, new products and new complete range of product line.
Due to this we are confident that in Q1 next year we will see a substantial improvement in the numbers and presence of brand Astral in the market. We are in the last leg of production which will be done in the Q4 post and we are foreseeing a continuous journey of growth, and the paint business has always been in a positive EBITDA number and whatever the sales have been happening and happened is always in a positive EBITDA number
Bathware:
- Compared to last quarter’s sales of Rs. 17 crores this quarter the Q3 sale was (+20) crores, which is very healthy and continuously improving. Since this is a new segment for us, we don’t want to rush and we want to grow slowly, steadily with steady and consistent growth
Astral launches a comprehensive new paint line named Astral Paints
After acquiring a majority stake in Gem Paints in 2022, Astral thoroughly prepared to enter the paint industry. The company has strategically launched its first phase in Bengaluru, leveraging three paint units. Moreover, the company will expand its paint line across India in phases, starting with Karnataka and Gujarat.
There’s heavy competition in the paint industry. Is it prudent for Astral to join that?
Incumbents - Asian Paints, Berger, Akzo Nobel dulux, Indigo and Kansai Nerolac
New entrants - Birla group’s Grasim, JSW Group, JK Cement, Pidilite.
Astral reported flat Q1FY25 numbers
Slight increase in revenue but the slight dip in EBITA margin led to flattish PAT.
Hello all,
Any reason why stock has fallen from 2400 levels to 1900 levels…? I see numbers in screener looks flat when compared to last year…
Regards
Manjunath c a
Growth Expectation in valuation Vs Real Growth moved in opposite direction.
Is this the start of a “building material company” super cycle? No more just cement company or paint company? Was Astral an early mover who read the leaves correctly. Remember when they were criticized for venturing off their core business with Gem Paints acquisition.
At last count JSW are already in cement, steel and paints. Could a bored Reliance just gobble up Asian Paints? Pidilite ofcourse has entered paints. Every pipe maker including Astral are gunning for bathware (Cera). As are tile guys like Kajaria.
Also Vguard (cables/stabilizers - home appliances) got into the kitchen with Sunflame. As did Crompton (cables/fans - home appliances) with Butterfly.
They’re just cannibalising each other and eventually the industry will consolidate under one or two companies that have deep pockets. Birla opus is everywhere within a short span of time whereas Gem is not very popular. This spend is bleeding both Ultratech and Asian paints. This is a capital intensive, commodity business where the masons and carpenters can influence the customer. Astral would do good if they focus on just pipes.
Saurabh Mukherjea’s article on Astral venturing into paints is very insightful. I might be biased here because I’m showcasing the positive articles but - he said Astral just the way they got into the adhesives space (initially everyone was skeptical) they eventually got market share and built a brand for themselves in that space. Same case with paints- Gems Paint is now rebranded as Astral paints. Gems was already a profit making company (unlike Opus at this point of time). So Astral doesnt have to do any sort of turnaround etc. They can leverage the exisiting dealerships - cross sell pipes, adhesives, along with the paint that is already getting sold.
Okay but as a rational investor - these stories sound great. Nice to read, better to hear, but Saurabh’s portfolio hasn’t performed at all in the last 5 years 
More about Saurabh later. I went through Astral’s financial results. Compare that with the competition Supreme, Prince, Finolex - you can an idea that it’s a bloodbath out there. Industry is slowing down, competition rising, dog eat dog world. Borrowing costs are high, if it comes down companies will start levering etc. But in the midst of all this, Astral’s results are solid, intact, not the 20% profit growth it had 3 years back, but definitely still doing much better in this difficult environment.
Pay close to attention to Astral’s depreciation numbers which has almost 2x’d. Capex first shows up as depreciation, and when the business cycle turns around it shows up in your Profits.
Not the time to sell Astral as of now, if you sold it back in the 2000s or higher, that would be better. But now is the time to stay tight.
Disclosure: Invested, sitting on enormous losses but holding period for at least forever? (realistically 10 years)
Saurabh of Marcellus buys at very high prices - likely he bought it in the 2000s
P/E of Astral is still very high at 65 but below the 90+ average P/E it used to trade. The lowest Covid p/e was around 50. So 30% from here is Covid low
All high P/E stocks have been derated or getting derated fast where there is no sales or profit growth. Astral is growing sales and profits in double digits consistently. I am a buyer at these prices as we cannot pick the exact bottom
Astral stock price reduced to half because everyone become aware of High PE in recession
and so FIIs are selling .we should also sell and can enter at lower level if we like the stock. selling will be tax harvesting.
A very important point, if you look at astral standalone numbers, they are very promising!
Top line growth at 15%
Bottom line at 10% (but deprecation is up 25% so even 10% looks good)
It’s understandable that a good management should deserve a higher premium.
But how high should the growth oriented management premium be when even the average Nifty50 current P/E of ~20 is already looking high- seems to be the question in Astral’s case.
When the storm comes only leaders endure and come out victorious. Piping industry is going through a downturn, but what Astral is doing is quite remarkable in my opinion. They acquired a pipe fittings company (Al Aziz). When times are bad, leaders consolidate the market by acquiring companies at lower valuations. We need to see how long will they take to find the right synergy and spur on the next leg of growth when the cycle turns.
Discl. Invested since 2022.
That’s what I’ve also noticed. There’s a huge fight (downturn in the industry, inventory loses etc. ) but Astral is like if you think I got beat up you should see the other guy! Despite bad results it’s still much better at maintaining margins and steady revenues compared to the peers. Plus this quarter there was a one time loss as well - which will not show up in the next quarter as stated by management. These are some signs of a moat in the firm. Al Aziz acquisition vastly increases their TAM and even the backward integration they’re doing for the CPVC resin raw material. Good time ahead, but before the good times gotta go through the tough times. A glimmer of hope that the stock is probably bottomed out came today - 26cr worth of stocks bought by promoter groups.
Disclosure: invested for long term and biased
