Astral Polyteknik - A Closer Look

Astral Poly Technik Ltd. (Astral) is a pioneer & market leader of CPVC pipes & fittings in India. Astral is a  licensee of Lubrizol, USA, to manufacture & market its world class plumbing products in  India.

GI  pipes were  in  existence  in  domestic  plumbing  industry  but  now  CPVC  pipes  are gaining ground as they don’t corrode over time which is a major concern with the GI pipes. Also, due to lighter weight, it’s easier to transport and install CPVC pipes. CPVC pipes also offer cost benefits as they are 20-25% cheaper than the GI pipes and have a  longer  life span of around 30-35 years compared to around 10-15 years for GI pipes. The strength of these CPVC pipes make them better substitutes of GI pipes for many residential and industrial applications.

Astral has an exclusive license to manufacture Lubrizol’s global top-seller Blazemaster FireSprinkler Systems, based on CPVC platform. The company has also picked up 85% stake in
Advance Adhesives Pvt. Ltd. to produce Cement Solvent (solution for joining pipes) via technology developed by global Adhesives major, IPS, USA. This has a good potential for Astral.

The advantage for Astral is that the raw material is restricted and not easily available. In addition, Lubrizol is in talks with Astral management to setup a joint venture in India. Astral is  aggressively expanding its capacity to meet the robust demand and is expected to more than double to 100,000 TPA by end of FY13 from the current capacity of 48400 TPA.

The company is also spreading its wings in Africa and has opened a manufacturing unit in Nairobi, Kenya.

The  Company  has  reputed  clientele  which  includes  major  construction  houses  like  Hiranandani Construction, Raheja Group, Tata Housing, Nagarjuna Construction, The Oberoi Group, Taj  Group  of  hotels, Le Meridian and  other major  clients  like NTPC,  TISCO,  Reliance  Industries,  Tata  Chemicals  etc.

FINANCIALS

	FY11	FY10	FY09	FY08	FY07
Sales	436.76	304.52	204.99	144.53	104.46
Other Income	4.21	4.24	-4.78	4.68	1.44
Op Profit	53.29	42.01	29.42	20.7	13.39
EBDIT	57.5	46.25	24.64	25.38	14.83
PBT	41.54	33.63	15.85	19.42	10.75
PAT	33.6	28.03	14.19	17.08	9.11
EPS	14.95	24.94	12.63	15.2	8.11
Depreciation	10.72	8.6	6.17	3.26	2.2
Interest	4.59	4.84	5.31	2.69	1.88
Effective Interest Rate(%)	11.27%	11.98%	8.52%	8.39%	7.71%
Tax	7.95	5.57	1.65	2.34	1.65
Effective Tax rate (%)	19.14%	16.56%	10.41%	12.05%	15.35%

Dupont Analysis
OPM(%)	12.20%	13.80%	14.35%	14.32%	12.82%
NPM(%) -- (A)	7.69%	9.20%	6.92%	11.82%	8.72%
Asset turnover(avg) -- (B)	2.30	1.92	1.32	1.29	1.14
RoA(%)	17.73%	17.68%	9.15%	15.26%	9.91%
Financial Leverage -- ( C)	1.27	1.34	1.67	1.40	1.36
RoE(%) -- (=A*B*C)	22.58%	23.73%	15.30%	21.39%	13.48%
RoA(%)	17.73%	17.68%	9.15%	15.26%	9.91%

VALUATION
At the CMP of 198, the stock is trading at a PE of 13.24.

My conservative FY14 expected EPS is about 26. But, it is likely to do reasonably better as the new capacity comes online by FY13-14. If the capacity additions work out as planned, then EPS can be in the range of 30-32.

Expected price is around 330-360 in the next 2-3 years.

This is a stock with excellent long-term prospects and is good for buying.

Note: I am invested in this stock and investors need to do their own due diligence or refer to their investment advisor before making an investment decision.