Hi Mahesh,
And whats yr definition of short to medium term inno. of years…???
Rgds
Bobby
I would have Ihave recently startedtracking whichwas
inno.
6 months to 2.5-3 years.
Rgds.
Of possible interest: From the Lubrizol Annual Report FY2009:
"In 2009, the engineered polymers product line generated total revenues of $498.1 million. This includes CVPC, Blazemaster etc. "
If the entire annual production for this resin is only 2500cr worldwide… how large can this Astral possibly be?
Interesting poser Aditya!
Would have been interesting to know the geographical spread of this $500 Mn. How much of this currently comes from emerging markets like India (where the CPVC penetration is just 5%) and China.
Sir I’am also recommended this stock from my some friend without any details but u have all the details , so pl tell me that is this is the right time to buy and accumulate in dips
also can u pl tell me that how can i updated with every recent activity in this site
why not start a conversation on NIFTY on daily basis if possible
regards
,
Sachin Prabhakar
Sir I’am also recommended this stock from my some friend without any details but u have all the details , so pl tell me that is this is the right time to buy and accumulate in dips
also can u pl tell me that how can i updated with every recent activity in this site
why not start a conversation on NIFTY on daily basis if possible
regards,
Sachin Prabhakar
We feel Astral is a decent story even at current levels, provided your time horizon is upwards of 2-3 years. The business should keep growing at 30%.
If it becomes available cheaper a few months down the line, I will buy more. I did not (could not) buy at 120 levels when Hitesh first discussed stock idea. I bought at 145, and again at 170. And I will be happy to buy more if it becomes cheaper, but I will stay invested for the long term as I have conviction in the stock story.
So It is for you to build conviction in the stock story of Astral. All the information is provided by us at valuePickr. The best part is a stock like Astral allows you to get direct feedback from the market. Have you asked yr local plumber about CPVC, visit a hardwars store on the way ask him what he thinks of CPVC, is his buisness from CPVC growing at 30%?
Do the homework Sachin , andyou will not be asking this question next time. You will know what to do because you have done the work yourself.
I hope you will do thios homework of asking plumber and a couple of local hardware shop and share the feedback in teh forum -for your own conviction & good.
cheers
Donald
Increased my position slightly more today.Always better to average on upside then on downside.
Donald shud I buy more n then sleep peacefully for 1-2 years?
.Had applied in IPO in 2007 but exited early.W
500 Mill USD does not seem to be big but the population of India is about 3 times USA and in India the penetration has just started. So this should go a long way.
Is it true that the CPVC market share in the US is about 50%…??? I recently heard that in US and Europe pipes made of SS and copper are also being used.
Rgds
Bobby
Yesterday, I went to the construction site where I have booked an apartment in Calcutta. Its being constructed by one of the largest and most prominent builders in the city. I saw Astral pipes being used there for the plumbing. I was pretty enthused by it and asked the site engineer about the pipes. He said that Astral pipes are the best right now in the market and now nearly all big builders are using it instead of GI pipes for underground piping. The finish of the pipes were also pretty good. I got a feel-good factor yesterday.
Great! These kind of feedbacks matter the most.
Guys, do go through the website of Astral…its been revamped and looks impressive.
They have also uploaded their FY 11 annual report 
There was a recent research report by Monarch Project and gives some fresh growth points.
Regards,
Ayush
Thanks Abhishek for the feedback. Good to hear that.
Did you not ask about competition. Other than Astral, do they source from CPVC pipes from any others/ Why or why not?
Expansion plans seem on schedule,a s per the AR 2011
Your Companyexpects that this additional capacity48,000 M.T. to 70,000 M.T.would be ready by October 2011 to March 2012 in phased manner. Theconstruction work at Dholka is going on in full swing. Apart from this your Company has already completedthe construction of its new warehousing facility at Ahmedabad.
Ayush - What new growth pointers are you referring to? couldnt find anything new in the Monarch report -100,000 in FY13?
I did ask about the competition. The person was not aware of any others. They were previously using GI pipes for external and PVC for internal plumbing. Now, they are using Astral pipes for the last 1 year for all. Approximately, 7-8% of the construction cost is on plumbing.
The only major growth factor that I could find was the scaling up of the solvent cement business from 50 cr to around 250 cr in 3-4 years. Other factor mentioned in the Kenya opportunity.
Yeah, like Abhishek Mentioned, apart from the regular aggressive expansion, the co is also trying to focus on market of Africa and also capture the solvent cement business.
If the co can actually scale up to 250 Cr turnover in the solvent cement business in 3-4 years, it can be a big achievement.
If one goes through the latest annual report, the undertone of the mgmt is pretty optimistic
Regards,
Ayush
Hi,
It may be pretty silly question to ask but that is the best what i can do…
- If we check the realisation of Astra’s product in last 5 years, they are on some kind of decreasing trend. This shows they do not have pricing power because of the similar quality product at same or lower cost. If we st back and recall for a minute of Porter 5 forces of competitve positioning of the company…Astral clearly lacks in this domain.
- Astral’s raw material cost is at the mercy of Lubrizol. It does not have bargaining power with its supplier so far as Lubrizol is concern… 2 down out of 5 from Porter 5 forces…
SO clearly it cant be 5 star company…according to Porter…
I am not sure about its durability of the performance…purely because of above listed logic…
Please comment on my reasoning…
Anand
Good questions, Anand. Please feel free to raise any number of questions, without hesitation. If I cant understand something obvious that others are ignoring, i better ask and find out -may be there’s more to it? Also most of us are optimists out here, we need many more skeptical people like you to keep questioning from the angle of what can go wrong?
Thanks.
Now re: pricing power
We asked about their pricing philosophy, and we were told that they are very aggressive while introducing any new product from Astral (that already has established competing products). You should have noticed that CPVC is not all …they have launched several PVC based products like SWR, Manholes, Inspection chambers and others for which they feel they can offer superior quality to existing solutions. To go after sizeable market share, they offer such new products with attractive schemes for distributors, that’s the nature of their business.
As per the Managements reckoning, the market is so huge that economies of scale once achieved, takes care of most issues. They cited the example of SWR pipes introduced in FY10…a MUmbai distributor alone was doing business in excess of 50 Cr…just think of it!
The products that they have a dominant market share like Lubrizol’s, they do not need to adopt these tactics. Every year they keep launching new products where they see promise and want to be a dominant player. So this balancing act will remain in their business model.
Re: RM from Lubrizol
Yes there is a sole supplier dependence, theoretically. But practically, there is a huge advantage. Lubrizol’s RM prices are not able to be matched by competition. They have 85% market share because of this. The France based competitor and China ones scale of operations is miniscule compared to Lubrizol. Additionally Lubrizol offers 120 days of Credit to Astral which competition does not. Practically CPVC business working capital is negative!
But I agree with your bottomline, Astral is NOT a 5***** opportunity, to get in and forget! At the same time it is definitely 4*+, we need to keep track from time to time, on issues such as those raised by you, new competition coming in, Lubrizol relationship going sour, and the like.
Meanwhile we should ride the growth which surely isn’t going away anytime soon.
Since you raised important issues, just curious did you read the Astral Management Q&A? is it fresh in your mind? If not go through it again, to build convictions on above.
-Donald
Hi Donald,
I have always been a big admirer of your insight and ability to see things black and white. Its no difference this time also. Great insight and clarity of thoughts. commendable…
I do not doubt about the fact that market is huge and they are trying to play with apt product at optimum price level. I may be wrong but their aggressive intent is not showing in their performance of the last 5 year sales realisation(check you data in stock story) which is constantly decreasing despite astronomical sales growth that indicates either they are shifting to lower price range products or they are reducing/force to reduce the price of their products. I am not saying that their EPS will not grow in the near future on the contrary I believe they are well positioned for 20-25% eps growth (provided they grow by at least 30-35% in sales) for at least 2-3 years. I am just contesting on the expectation that it would be difficult if not impossible for this company to grow by 40%+CAGR in EPS(unless they grow their sales by 60% or so).
Also for Lubrizol raw material they do not have exclusive distribution rights for its products in India as their competitors are also using Lubrizolâs product. It takes away the product differentiating factor as everybody (at least their competitors) is using the same raw material.
To me this segment is essentially a distribution play which is nothing but scale. And this game especially when somebody does not have brand equity falls into the lap of dealerâs hand who always asks more margin and hence lower profit margin for the company.
Let me know your viewsâ
18th July 2011
Thanks Anand for your detailed replies.
Extent of lower price realisations over the years has not been dissected by us. It a good point. Will revert on this after checking.
Astral enjoys a 5 yr exclusivity from Lubrizol on all products licensed from it. The stock story mentions this I thought. So where you see competition today from 2 other players Asirvasd Pipes and another Delhi based player - is only since 2006 or so. The first five years Astral was the only Licensee!
Similarly Blazemaster which can be the next blockbuster product - market is jointly being developed by Lubrizol and Astral, getting products tested and certified - it takes 18 months of heat testing for example - why do you think Astral will invest all the money and effort in getting products approved, if Lubrizol is to appoint the next licensee within 6 months!! As per the company they are trying to negotiate a 10 yr exclusivity on the back of higher investments in market development and capacity scale build-up! Again I though this was covered ion the Manageemnt Q&A
Looks like I need to revise/update the emphasis in the Astral Stock story. Let me know why these 2 points are not top of mind for you despite the 2 info pieces by us.
Practically Astral will enjoy a sustainable competitive advantage for next few years! It is open to question theoretically. But to my mind, the probabality of somebody else muscling in is negligible. Help me set up a meeting with Lubrizol guys in Mumbai -if any of you can make inroads into contacting Lubrizol - I havent had time to pursue that line, but I intend to! to nail this aspect to everyone’s satisfaction.
The real question for us to put a finger on is Can Astral scale up to address the market opportunity before it. Is it going about it conservatively or over-aggressively. Will the balance sheet be tested during teh next phase of growth coming , or it is comfortable situation?
Scrutinising form that angle - is necessary. I think we have not done enough diligence on that. Lets do that and then we can talk with more conviction - more importantly transfer that conviction to the analyst community at large. I think we could do so in the Mayur story.
On Astral we need to do more work for sure - but to my mind it is no less promising! in its own way.
Our dear friend Amit Arora of Newzealand has recently turned positive on Astral n entered around 202-204.
He is a great discoverer of the stocks n this bodes well fro Astral Poly.
I spoke with Astral CFO a few days back on their business prospects going forward. The company added 18,000 tonnes capacity in Q4 last year. Astral is targeting production of 40,000 tonnes in FY12 (29,000in FY11). Capex will be around 40 cr. Like in the past, Astral hopes to maintain around 30% volume growth in future as well. The BIS approval for the Blazemaster has still not come, but could come in next quarter. The acceptance of CPVC is still mostly in hot-water applications since it is 20% costlier to PVC. However conversion from GI to CPVC is definitely happening. The company has expanded the distribution reach vastly over last few years and that seems to be the key. I have only listed key new developments on Astral since this group would be well aware about the company’s business model.