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Industry overview Supported by replacement and new demand from the real estate sector and the automobile industry, as well as hospitals, the industry is projected as per Astral’s annual report to rise at a CAGR of 14% between FY18 and FY22. In recent times, the piping industry witnessed a drastic shift of demand from metal to polymer-based pipes, especially CPVC. Such pipes are now largely used for plumbing and piping applications in the real estate sector and in firefighting operations. This trend is likely to continue. Further product diversification, acquired Rex Polyextrusion ASTRA acquired a 51% stake in Rex Polyextrusion Private Limited in FY19, which helped diversify product offerings. The company plans to build a new manufacturing facility in Bhubaneshwar (Odisha), which will help lower logistics costs. The facilities in Ghiloth and Hosur became operational in FY19, and reaffirmed the company’s strong foothold, both in north and south India. Many products were launched in the adhesives and piping segments in FY19. The continued high spending on branding lowered margins, but helped it retain premium pricing; even as peers decreased prices. The company faced headwinds, due to rising CPVC prices, volatility in crude oil prices, and unrest due to strikes. Financial snapshot Revenue for plastic products and adhesives grew 19% and 17%, respectively, in FY19.The company’s PBT rose to ` 2834 million, a growth of 13% YoY. The borrowings rose 45% from FY18, due to the Rex acquisition. The EBITDA rose 21% YoY, and the net worth grew to `12,765 million, 25% YoY. However, the company’s margins fell, as the adhesive segment was affected by higher brand spend. The working capital cycle management improved. DART view ASTRA maintained its leadership in the CPVC segment. It had developed a large PVC portfolio in the past decade. With a logical expansion in the adhesive segment, APTL expanded its building materials portfolio. The diversified product portfolio in both piping and adhesive enabled it to play the building material opportunity. We believe that ASTRA is in the investment phase and will reap long-term benefits of this strategy in the next five years. We believe that revenue growth and margin profile should rise. The company’s growth trajectory remains high and return ratios are also expanding, therefore valuation should remain expensive. We reiterate Accumulate, with a target price of ` 1,458 (49x FY21E).

CMP ` 1,320

Target / Upside ` 1458 / 10%

BSE Sensex 38,551

NSE Nifty 11,499

Scrip Details

Equity / FV ` 120mn / ` 1

Market Cap ` 158bn

US$ 2bn

52-week High/Low ` 1,380/` 825

Avg. Volume (no) 50,162

NSE Symbol ASTRAL

Bloomberg Code ASTRA IN

Shareholding Pattern Mar'19(%)

Promoters 58.5

MF/Banks/FIs 8.9

FIIs 18.3

Public / Others 14.3

ASTRA Relative to Sensex

AVP Research: Nidhi Doshi Tel: +91 22 40969795

E-mail: nidhid@dolatcapital.com

Associate: Soham Mehta Tel: +91 22 40969779/9004081052 E-mail: sohamm@dolatcapital.com

80

90

100

110

120

130Ju

l-18

Aug-1

8

Sep-1

8

Oct-18

Nov-

18

Dec-

18

Jan-1

9

Feb

-19

Mar-

19

Apr-

19

May-

19

Jun-1

9

Jul-19

ASTRA SENSEX

Astral Poly Technik

Accumulate

July 12, 2019

July 12, 2019 2

Annual Report Macro View

Key Management No change.

Board of Directors

Mrs. Kaushal Nakrani was appointed by the Board of Directors as an independent director w.e.f. 29.03.2019. She is a commerce graduate from Bombay University and LL.B from Gujarat University and has been a practicing advocate for more than 18 years in the Gujarat High Court and in the areas of Banking Law, Legal Audit, Arbitration Matters, Matrimonial Matters. She is also a penal advocate of various public sector banks.

Auditors No change. M/s. S R B C & Co. LLP, Chartered Accountants continue to be the auditors of the company.

Insider Holdings

Number of securities acquired/disposed/pledged/revoked:

FY2019 FY2018

Acquired 11,600 -

Disposed 9,050 1,000,000

Pledged - -

Pledge revoked - 3,750,000

Credit Ratings

Crisil Rating FY2019 FY2018

Long Term Bank Facilities CRISIL AA-/ Stable CRISIL AA-/ Stable

Short Term Bank Facilities CRISIL A1+ CRISIL A1+

Pledged Shares No pledged shares were held during the year.

Macro-economic factors

High demand from building and construction sector, automobile industry and increasing medical hospitals aided the growth of India’s pipe industry. It has reached an estimated value of `280.0 billion by the end of FY18. The industry is projected to grow at a CAGR of 14% between FY18 to FY22.

Shareholding Pattern FY2019 FY2018

A. Promoters 53.51 53.53

B. Public Shareholding

1. Institutions:

a. Mutual Funds 5.73 6.40

b. Banks/FI 0.01 0.01

c. Bodies corp. 4.97 4.97

d. Insurance Companies

e. FIIs 2.54 3.88

f. Foreign portfolio investor 19.39 16.01

2. Non-Institutions:

a. Bodies Corp. 2.39 2.71

b. Individuals 10.82 11.66

c. Others 0.63 0.66

C. Shares held by Custodian for GDRs & ADRs

Total 100.00 100.00

Source: Company, DART

July 12, 2019 3

What’s New

Acquisitions

Rex is one of the major acquisitions of ASTRA under infrastructure division during the year. On July 9, 2018, the company acquired 51.0% of equity share of Rex, engaged in the business of Manufacturing and supply of corrugated and other plastic piping solutions, in an all cash transaction for `752.3 million. The fair value of the consideration transferred amounted to `1.5 million in total.

The goodwill of `192.2 million incorporates the value of expected synergies arising from the acquisition. Also, transaction costs of `19.5 million have been incurred and are included in other expenses.

Through this acquisition, has further expanded its offerings in providing piping solutions for sewerage and storm water, cable protection, sub-surface drainage and urban infrastructure.

Product Launches

ASTRA undertook several initiatives such as introduction of Pex-a Pro, an advanced plumbing product for hot and cold water plumbing. During the year, the company completed five major projects for this product line.

ASTRA Adhesives launched the ResiQuick Instant Adhesives.

The company also launched GEOREX, AQUA REX, PRE-STIREX, PLUS STIREX, TELE REX, MULTIREX, RESCUETAPE, RESIWOOD

Capacity Expansions

Capacity grew at a CAGR of 15% over a period of 5 years, from FY14-15 to FY18-19 while utilization grew at a CAGR of 12% over the same period.

During the year the company increased its installed capacity by nearly 35% from 152,101 MT to 205,290 MT. The Company utilized its capacity to the extent of 120,821 MT compared to 105,753 MT in FY18

The Company has incurred capital expenditure of `1.6 billion during the year. Over the last three years, the company has done large-scale capex to create capacity at regional level. Once this is completed, the Company expects capacity utilization and return on capital to improve significantly.

Ghiloth: Company has successfully commenced operations in its Ghiloth (Rajathan) manufacturing facility having capacity of 23,678 M.T. The plant manufactures CPVC and PVC and serves the north market, part of Rajasthan, Bihar, Jharkhand, East UP, and the Kolkata depot. It also manufactures corrugated pipes. This plant, which includes land and building, can be expanded to meet capacity for next five years, without additional land or building. Santej: Santej is ASTRA’s flagship plant and it underwent expansion and bottlenecking of injection molding plant. The Company added 5-6 big injection molding machines. Also, CPVC capacity was added. There is centralized clean water plant at Santej and CPVC has been completely moved here. Santej has imported machinery from Italy for automation of packaging of fittings. This year 100% automation will take place. Printing on CPVC pipes to avoid duplication will be introduced in FY20. This technology is made by only one company globally and ASTRA is importing this technology. ASTRA bought 10 acres of land, work for which will start this year and will be completed by next year. Setting up R&D and application center. The application center will train plumbers and teach them to use products.

July 12, 2019 4

Hosur: Additional capacity at Hosur is near completion. This plant has complete range of column pipes. ASTRA will add capacity in PVC- Agri pipes and drainage pipes. The Company is building a huge centralized warehouse in South. Dholka: At Dholka, ASTRA is starting to build new unit of high margin valves and will bring number of valves from plumbing (high diameter, industrial applications) which will be completed next year. Odisha: Further, the Company is also planning to commence its new manufacturing facility at Bhubaneshwar (Odisha) which will help to lower the logistics costs and strengthen its market share in eastern India. It purchased land of nearly 100,000 sq. yard to establish this manufacturing facility. Plant is expected to be ready by September 2020. With the addition of this plant the company will be able to cater to all the four zones of the country for manufacturing facilities.

Key Takeaways from the MD&A

Distribution & Branding

The company has more than 800 distributors and 30000 dealers in piping segment and 1800 distributors and nearly 400,000 dealers in adhesive segment.

To support this distribution network, the company has 9 manufacturing facilities and 18 depots across the country.

The company has increased branding through shop-branding, exhibitions, spot branding and distributors meet.

The company’s recent sponsorship of Kolkata Knight Riders, Rajasthan Royals and Sunrises Hyderabad has helped brand visibility.

During the year ASTRA incurred `16.4 million for research and development.

Government Initiatives

Initiatives like “Housing of All by 2022” and “Smart Cities Mission” is driving residential development and will direct growth of the Infrastructure Sector.

The Government has proposed to complete construction of 1 cr. houses by 2019 in the rural areas under the Prime Minister Awas Scheme.

100% FDI is permitted through the Automatic route in the Infrastructure sector.

Programs like PMKSY, PMAY-U, PMAY-G and AMRUT & Smart City are supportive to the industry.

Under AMRUT, Smart City Development, HRIDAY – Total 482 Cities with population above 1 lac have been identified. Availability of tap with assured water supply and sewerage connection in very house.

Under Pradhan Mantri Gram Sadak Yojana, government has allocated `190 billion for FY19 to FY20.

Piping Segment

Despite a logistics strike for at least 10 to 15 days and a drop in price of PVC pipes, the company has achieved revenue growth of 21.1% to `18.5 billion along with a volume growth of 18.27% in the FY19.

July 12, 2019 5

Further, the company had also achieved its highest ever EBDITA of `3,154 million registering a growth of 27.3%. EDBITA of this segment recorded CAGR of 23.6% between FY16 to FY19. PAT of `1.4 billion was reported by the segment, marking a growth of 18.9%.

Company has successfully commenced operations at its Ghiloth (Rajathan) manufacturing facility having capacity of 23,678 M.T.

Acquisition of Rex not only diversifies the product profile of the company but also integrates well into its future growth strategy.

Adhesives Segment

Adhesives business started to gain momentum with launch of new products backed by strong branding initiatives.

Revenues from this segment stood at ̀ 6.6 billion, up 15.8% YoY. 17.2% CAGR Growth in Adhesives Business between FY 16 -19.

26.8% CAGR EDBITA in Adhesives Business between FY 16 -19

Capex of ` 31.1 million was incurred for R&D activities in the Adhesive segment in FY 2019.

Resinova has evolved as the leading brand in adhesives and sealants, with an increasing market share in the adhesives segment. Also, the recent launch of RESCUETAPE, RESIWOOD and RESIQUICK has been successful in capturing a considerable adhesive market share.

July 12, 2019 6

Profit & Loss Analysis Net sales witnessed growth of 19% YoY. The sales and volumes were

impacted by logistics strike and fall in prices of PVC pipes. However, despite these headwinds, the company managed to deliver decent growth in net sales.

EBITDA margin increased from 15.6% in FY18 to 16.0% in FY19 while the gross profit margin rose from 14.6% to 14.7% during the same period. Also, the PAT margin declined from 8.3% in FY18 to 7.9% in FY19. In the piping segment margins were affected by price revision in CPVC on account of currency volatility. In the adhesive segment margins were lower on account of aggressive spends on branding of new products.

Costs of materials were higher by about 19.0% over the previous year at `16.5 million mainly due to volatile crude prices.

Profit before Tax increased by 14% over previous year to `2.8 billion. Tax rate (consolidated basis) for the current year was 30.2% compared to 29.2% in the previous year.

Profit after Tax increased by 12% over the previous year to `2.0 billion.

Total expenses increased by 19% ̀ 21.2 billion. This rise resulted mainly from 31% increase in employee expenses which was `1.4 billion.

The directors recommended a final dividend of `0.4 per share for FY19, subject to approval of members. Interim dividend of `0.3 and `0.35 per share was declared and paid during the year. This will result in total outgo of `84.1 million compared to `71.9 million in previous year.

Interest cost increased by 48% to `320 million from `216 million. Interest coverage ratio decreased from 1.97% to 1.54%. Return on Net Worth decreased from 19.09% to 17.06% in FY19.

RoE decreased from 17% in FY18 to 15% in FY19 driven by decrease in Asset Turnover from 1.7x to 1.5x.

Balance Sheet Analysis Net worth has increased by 25% on account of increase in tangible assets as

the company has constructed a building in Ahmedabad for its CSR activities and various investments in Plants and Equipment’s.

Loan funds have increased to the tune of 45% as the company has taken a working capital loan and term loans from banks as the company was short on cash after the acquisition of REX.

Deferred Tax Liabilities have increased by 99% in FY19 which mainly comprises the tax effect of the accelerated depreciation for tax purposes of tangible and intangible assets.

Cash and bank balances have increased by 124% as balances with banks in current accounts and deposit accounts have increased.

Receivable days has fallen from 54 to 43 days thus marking an improvement in the working capital management.

Inventories have increased by 10% on account of purchase of raw materials, work-in-progress and finished goods.

Gross block of fixed assets increased by 43% but net block increased by 40% due to 53% rise in accumulated depreciation.

July 12, 2019 7

Cash Flow Analysis Changes in working capital is 91% on account of decrease in inventories and

trade receivables.

CapEx for FY19 has increased by 19% in comparison with FY18 on account of increase in Property Plant and Equipment due to purchase of land and property, plant and equipment.

Free cash flow has increased by 25% as depreciation and write-offs have gone up accompanied by a rise in net interest expenses.

July 12, 2019 8

Financial Metrics and Charts Basic EPS & DPS (` per share) OCF/FCFF Conversion (%)

Source: Company, DART Source: Company, DART

RoCE (%) RoNW & RoIC (%)

Source: Company, DART Source: Company, DART

Dupont

Source: Company, DART

8.5

12.1

14.716.5

0.4 0.3 0.6 0.7

0

5

10

15

20

FY 16 FY17 FY18 FY19

EPS DPS

7%

-7%

25%

-6%-10%

-5%

0%

5%

10%

15%

20%

25%

30%

FY16 FY17 FY18 FY19

18.8

21.7

23.1

22.2

17

18

19

20

21

22

23

24

FY 16 FY17 FY18 FY19

15.3

18.6 18.9

17.2

19.5

22.523.7 23.4

12

14

16

18

20

22

24

26

FY 16 FY17 FY18 FY19

RONW ROIC

6%

8%

8%8%

5%

6%

7%

8%

9%

FY16 FY17 FY18 FY19

PAT/Sales (%)

1.8

1.7 1.7

1.5

1.5

1.6

1.7

1.8

1.9

FY16 FY17 FY18 FY19Sales/Assets

0.7

1.31.2 1.3

0.6

0.8

1.0

1.2

1.4

FY16 FY17 FY18 FY19

Assets/Equity

July 12, 2019 9

Sales (in ‘000 MT) EBITDA and PAT Margin (%)

Source: Company, DART Source: Company, DART

Inventory/Debtors/Net Working Capital days CapEx (` mn)

Source: Company, DART Source: Company, DART

Capacity and Utilisation (in ‘000 M.T.) Debt to Equity and Total Debt (in `bn)

Source: Company, DART Source: Company, DART

78

89

104

123

70

80

90

100

110

120

130

FY16 FY17 FY18 FY19

12%14%

16% 16%

6.1%7.6% 8.3% 7.8%

0%

3%

6%

9%

12%

15%

18%

FY16 FY17 FY18 FY19

EBITDA Margin (%) Net Profit Margin

60

52

6358

49

65

54

49

41

62 5556

303540455055606570

FY16 FY17 FY18 FY19Inventory No. of days

Debtors No. of days

Net Working Capital No. of days

858

1355

1597

1839

700

900

1,100

1,300

1,500

1,700

1,900

FY16 FY17 FY18 FY19

128138

152

205

7888

106121

60

80

100

120

140

160

180

200

220

FY16 FY17 FY18 FY19

Capacity (In '000 M.T.) Utilisation (In '000 M.T.)

0.3

0.3

0.2 0.2

2.3 1.9

2.8

0

1

1

2

2

3

3

0.00

0.05

0.10

0.15

0.20

0.25

0.30

FY16 FY17 FY18 FY19

Gross Debt/Equity Debt

July 12, 2019 10

4-Quarter ConCall Trend Analysis

Q1FY19 Q2FY19 Q3FY19 Q4FY19

Management Guidance &

Outlook

Overall in the next 3-4 months, the entire

expansion plan will be completed which was

laid down a year back and will be available

for utilisation. The focus is on branding in

smaller towns with user friendly programs in

order to increase customer outreach. 20%

plus growth expected in the adhesives

segment consequent upon the launch of the

ad campaign by Salman Khan. On a YoY basis

EBITDA of 15% should be maintained. FY20

CapEx should be low because by the end of

FY19 capacity should be 30,000 metric tonne

and no additional capacity will be required for

the near term. For the Resinova business,

16-18% margins should be expected. Rex

has not been consolidated in the financials in

this quarter.

The company is opening facilities in North

and Central India and witnessing good

growth in the PVC segment. Rex is being

integrated with Astral and various systems

will be implemented before the fiscal. Rescue

Tape sales team has joined the company and

in 5-6 months new products will be launched

in UK and US markets. Seal It should register

a 10% EBITDA margin in the coming quarters

following GDP growth of 1.5% in U.K. The

CPVC price rise is implemented from

September and with the rupee depreciating

and crude prices falling, there are positive

expectations w.r.t the margins. Volume

related growth is expected in Q3FY19 as

opposed to price related growth.

Management expects pipes to grow at a

sustainable rate of 14-15%. It projects

revenues for pipes including REX to grow at

the rate of 15%. Next year onwards ROCE

should be more than 20%. ATPL should

witness good EBITDA growth in Q4. EBITDA

of Rex should be 13%-14% in FY20. On a

consolidated basis, 13-14% margin in the

adhesives segment. EBITDA for pipe as a

whole including Rex is considered at 15%. UK

and US margins should improve to 13%-14%

plus level.

Rex will see sharp improvement in EBITDA

margin to approx. 14% in FY20, as against

9% in FY19. Globally, DWC market is bigger

than paint industry, which is at a nascent

stage in India. Ad spend in the adhesives

segment will be stable in FY20.The adhesives

business can give a turnover of ` 15 billion

with this capacity. Two more containers of

Rescuetape are going to come. The adhesives

business can see subdued numbers for 2-3

quarters. Capacity addition will take place in

next 3-4 months and the East plant will

be ready by next year. After that there will

be a slowdown in CapEx. Piping volume will

grow at 15% (excluding Rex), Rex volumes

could grow by 25%.Full year growth is

expected to be 20%. However, growth for

first half will be around 15%. EBITDA margin

will be in the range of 15-18% for pipes.

Plants and Capacity

Expansions

The Ghiloth plant is operational with 2-3

product lines catering to the markets of

Northern India, Rajasthan and MP and it

should start making the entire range of Astral

products. The plant in the South at Hosur is

about to be completed and 3 lakh square feet

of warehouse has been constructed there.

Within the next 3 months, expansion at the

Ahmedabad plants i.e. Santej and Dholka will

be completed for the fitting production, new

product and the warehousing segment.

Expansion at Hosur plant is underway and

will be completed before the fiscal year.

Capacity addition at Ahmedabad in injection

molding capacity upto 1000 tons with 250

new product lines which will cater to the

market in agriculture, PVC and other

segments. The company will be among the

very few in India having huge injection

molding machines with high capacities to

mode a fitting or product upto 25 to 30 kgs in

one shot.

The Hosur depot is completely operational.

After the shutdown of all depots in Bangalore

and Coimbatore region, the distributors are

getting all the product lines from Hosur.

Expansion at Santej is on the verge of

completion where the new products and the

PVC and CPVC products will be made. The

trials for launching new system of valves

have been completed and Q1FY20 they will

be launched with new technology from

abroad. Rex is at 24000-25000 metric tonne

capacity. Astral is increasing the CPVC

capacity in the southern and northern plant

so the dependency on the Ahmedabad plant

will decline. The Company will be able to

make fittings up till 12 inch to 16 inch in

there and are getting good demand of

underground drainage systems. So there also

they are increasing the capacity, which will

be completed in this quarter in the

Ahmedabad plant.

At Hosur, building is ready but not

operational. This plant has complete range of

column pipes. Will add capacity in PVC- Agri

pipes and drainage pipes. The company is

building a huge centralized warehouse in

South. All products will be available in this

warehouse. In the East, recently bought land

in Orissa near Cuttack. The company will

start construction in next 2-3 months and will

be operational by May 2020.

July 12, 2019 11

Q1FY19 Q2FY19 Q3FY19 Q4FY19

New Initiatives

Channel drains have been launched by tying

up with a German company called Hauraton

and Astral is the only company now which is

giving a complete solution of surface water

drainage. Resiquick has a good response

from the market but branding activities are

required to build the customer awareness

around the product which should take 2

quarters. Company is venturing into the

infrastructure piping segment with double-

wall corrugated pipes

The new product lines which have been

launched have started delivering good results

like Silencio which is the low noise drainage

systems, the fire sprinkler systems and the

channel drains which is sold from Germany.

For Rex, as compared to the last quarter, Rex

has delivered 50% top line growth in the

DWC category. It is working on 14%-15%

EBITDA margin but due to the write-offs,

EBITDA stands at 2.1%. Overall, it is growing

at the fastest pace.

Launched PEX in the last quarter and have

already completed close to five big projects

and about to get good number of projects in

this quarter.

Average sales of Pex is 60 lakhs. The pipes

are brought from Europe and fittings are

made in India. Kenya operations are showing

positive results from last two quarters.

Pipes Segment

The plumbing segment witnessed volume

growth and good demand for the CPVC, PVC,

and drainage piping system as well as the

newly launched products. Good demand is

coming from the housing sector thus

registering a growth of 15% which could

have been more if the change in the

receivables side was not executed.

Witnessed a lot of challenges due to the truck

hike of 10-15 days hampering the sales and

growth accompanied by an anticipated price

drop in October and currency volatilities.

Also, the company was the 1st one to revise

the CPVC prices due to the current volatility

which also affected the growth. Overall, the

CPVC segment is looking very promising with

the addition of new capacities. Rex has

delivered robust growth in sales this quarter.

Value growth gross of 15% plus and a

volume growth of 7%-8%. Growth in

volumes is around 4% which is lower due to

the funding crunch of NBFC's and reductions

in receivables. The new product. Pex-a Pro

launched in Q2 is giving good results with 5

big projects being completed and more

projects expected.

Orderbook for Rex is full for next 4-5 months

Rex volumes post its acquisition is 10,462

MT. Astral has ordered 3 corrugators.1

corrugator is added to Sitarganj plant. They

are the sole suppliers for Char Dham project

for roads.1 corrugator has reached Ghiloth

Plant one week ago. 1 corrugator is on its

way and will reach Hosur Plant. After

Lubrizol’s exit, the company dropped CPVC

products prices by 15-20%

Profitability

On a standalone basis, revenue has gone up

by 15% from `2.98 billion to `3.44 billion

after adjusting for the GST effect. Also, the

discounts given to the distributors have been

deducted from the sales figure, hence these 2

changes have dropped the top line to 15%

growth. EBITDA has gone up by 60%, this

result has been achieved as the company is

taking advantage of backward integration.

Per kg realization has been flat as the

discount readjustments, promotional

expenditures incurred on the distributors

have been deducted from the top line due to

a change in Ind AS.

For Resinova, one of the challenges was a

liquidity crunch in the market with a lot of

systemic corrections. The top line for Seal It

U.K. has been growing at 35% in the last 9

quarters and the rights of the name of

Rescue Tape have been acquired. The Kenya

business has turned into a cash positive

business with positive expectations in the

coming quarters.

Core Astral volume growth was 14%. Rest of

it is attributable to Rex. Total growth was

21.1% YoY. Receivable days have gone down

from 50 to 35 days.

CapEx

This year the CapEx is high due to the

completion of the Rajasthan plant and the

commissioning of the Hosur plant. For all the

capacities taken together, CapEx should be `

1.25 billion.

For FY19 and FY20 the targeted CapEx is `

1.5 billion with CapEx for Rex being ` 0.40

billion. Post this year, the CapEx should

reduce as 200,000 metric tons of capacity

will be available and no capacity additions

should be required in the near term.

CapEx for FY20 will be ` 1-1.5 billion which

will be 100% funded by internal

accruals.

July 12, 2019 12

Q1FY19 Q2FY19 Q3FY19 Q4FY19

Raw Materials

The raw material costs have gone down due

to backward integration and efforts are

continuously being made to reduce the raw

material costs further. As the crude oil prices

have escalated, epoxy and other raw material

costs in the adhesives side are also

increasing thereby putting a pressure on the

gross margins.

Crude oil prices are very high and that is

putting a lot of pressure on the cost side.

Attempts are being made to pass this to the

markets and hence maintain a 17% EBITDA

margin.

Inventory

De-growth in volume in order to reduce the

higher inventory level at the margin which

was not desirable. Sales have gone up 15%

in volume but in the production side, the

production exceeds the sales hence the

inventory has not dropped in absolute

numbers but on a percentage term, it has.

There was no inventory gain in this quarter.

The inventory is slightly higher this quarter

due to the anticipated fall in polymer prices in

September because of which the orders were

stopped. This resulted in robust growth in

October and 20%-23% volume growth which

is the spillover.

` 30-40 million inventory loss consequent

upon 1.5 % gross level drop and volatilities in

raw materials.

Borrowings The debt level is ` 1.08 billion on a

standalone basis.

The interest cost has gone up because after

the acquisition of Rex, the borrowings had to

increase and secondly the overall interest

rate has gone up in the markets to the extent

of 7.8% in rupee terms. The interest cost

should fall in the future as the CF's are

increasing due to the growth in the

profitability.

Headwinds / Tailwinds

` 80 million have been lost in currency

fluctuations. The company was the 1st to

revise the CPVC prices in April and beginning

of May when the currency was not

depreciated and hence some inventory gain

was registered but it went away in June when

the currency depreciated heavily.

The overall demand is sluggish due to the

variability in the crude prices accompanied by

the volatility in currency. Hence the industry

is not stable and should settle down in the

coming few months.

July 12, 2019 13

Profit and Loss Account

(` Mn) FY18A FY19A FY20E FY21E

Revenue 21,060 25,073 33,701 40,625

Total Expense 17,892 21,224 28,616 34,463

COGS 13,834 16,477 23,590 28,355

Employees Cost 1,065 1,391 1,300 1,571

Other expenses 2,994 3,355 3,726 4,538

EBIDTA 3,168 3,849 5,085 6,162

Depreciation 571 814 1,001 1,065

EBIT 2,597 3,035 4,084 5,096

Interest 216 320 338 387

Other Income 127 154 143 154

Exc. / E.O. items 0 0 20 20

EBT 2,508 2,870 3,909 4,883

Tax 724 861 1,037 1,275

RPAT 1,757 1,973 2,872 3,608

Minority Interest 0 0 56 70

Profit/Loss share of associates (27) (36) 0 0

APAT 1,757 1,973 2,815 3,538

Balance Sheet

(` Mn) FY18A FY19A FY20E FY21E

Sources of Funds

Equity Capital 120 120 120 120

Minority Interest 135 150 380 450

Reserves & Surplus 10,063 12,657 16,053 18,811

Net Worth 10,182 12,777 16,173 18,931

Total Debt 1,891 2,753 1,921 2,101

Net Deferred Tax Liability 267 533 58 60

Total Capital Employed 12,475 16,212 18,532 21,542

Applications of Funds

Net Block 6,077 8,517 7,345 7,119

CWIP 3,079 3,346 3,066 3,107

Investments 0 2 0 0

Current Assets, Loans & Advances 7,531 9,128 13,150 17,295

Inventories 3,572 3,958 4,815 5,791

Receivables 3,067 3,391 3,610 4,342

Cash and Bank Balances 437 981 3,152 5,483

Loans and Advances 149 515 1,330 1,437

Other Current Assets 306 283 242 243

Less: Current Liabilities & Provisions 4,212 4,780 5,313 6,390

Payables 3,491 3,897 3,660 3,660

Other Current Liabilities 721 882 1,653 2,730

sub total

Net Current Assets 3,319 4,350 8,121 11,315

Total Assets 12,475 16,214 18,532 21,542

E – Estimates

July 12, 2019 14

Important Ratios

Particulars FY18A FY19A FY20E FY21E

(A) Margins (%)

Gross Profit Margin 34.3 34.3 30.0 30.2

EBIDTA Margin 15.0 15.4 15.1 15.2

EBIT Margin 12.3 12.1 12.1 12.5

Tax rate 28.9 30.0 26.5 26.1

Net Profit Margin 8.3 7.9 8.4 8.7

(B) As Percentage of Net Sales (%)

COGS 65.7 65.7 70.0 69.8

Employee 5.1 5.5 3.9 3.9

Other 14.2 13.4 11.1 11.2

(C) Measure of Financial Status

Gross Debt / Equity 0.2 0.2 0.1 0.1

Interest Coverage 12.0 9.5 12.1 13.2

Inventory days 62 58 52 52

Debtors days 53 49 39 39

Average Cost of Debt 10.3 13.8 14.5 19.3

Payable days 60 57 40 33

Working Capital days 58 63 88 102

FA T/O 3.5 2.9 4.6 5.7

(D) Measures of Investment

AEPS (`) 14.7 16.5 23.5 29.5

CEPS (`) 19.4 23.3 31.9 38.4

DPS (`) 0.6 0.7 4.0 5.0

Dividend Payout (%) 4.1 4.2 17.0 16.9

BVPS (`) 85.0 106.7 135.0 158.1

RoANW (%) 18.8 17.2 19.5 20.2

RoACE (%) 23.1 22.2 24.3 26.2

RoAIC (%) 23.7 23.4 27.6 34.1

(E) Valuation Ratios

CMP (`) 1320 1320 1320 1320

P/E 90.0 80.1 56.1 44.7

Mcap (` Mn) 1,58,051 1,58,051 1,58,051 1,58,051

MCap/ Sales 7.5 6.3 4.7 3.9

EV 1,59,505 1,59,820 1,56,819 1,54,669

EV/Sales 7.6 6.4 4.7 3.8

EV/EBITDA 50.3 41.5 30.8 25.1

P/BV 15.5 12.4 9.8 8.3

Dividend Yield (%) 0.0 0.1 0.3 0.4

(F) Growth Rate (%)

Revenue 11.2 19.1 34.4 20.5

EBITDA 20.1 21.5 32.1 21.2

EBIT 21.6 16.9 34.6 24.8

PBT 23.3 14.4 36.2 24.9

APAT 21.5 12.3 42.7 25.7

EPS 21.5 12.3 42.7 25.7

Cash Flow

(` Mn) FY18A FY19A FY20E FY21E

CFO 2,818 3,420 6,939 3,630

CFI (1,853) (2,934) 455 (391)

CFF (711) (49) (1,730) (908)

FCFF 980 1,224 7,390 2,828

Opening Cash 180 435 871 3,152

Closing Cash 435 871 3,152 5,483

E – Estimates

DART RATING MATRIX

Total Return Expectation (12 Months)

Buy > 20%

Accumulate 10 to 20%

Reduce 0 to 10%

Sell < 0%

Rating and Target Price History

Month Rating TP (`) Price (`)

Feb-18 Accumulate 883 793

Jun-18 Accumulate 1,159 1,003

Aug-18 Accumulate 1,245 1,116

Nov-18 Accumulate 1,235 1,046

Feb-19 Accumulate 1,378 1,169

May-19 Buy 1,447 1,234

Jun-19 Buy 1,447 1,276

*Price as on recommendation date

DART Team

Purvag Shah Managing Director purvag@dolatcapital.com +9122 4096 9747

Amit Khurana, CFA Head of Equities amit@dolatcapital.com +9122 4096 9745

CONTACT DETAILS

Equity Sales Designation E-mail Direct Lines

Dinesh Bajaj VP - Equity Sales dineshb@dolatcapital.com +9122 4096 9709

Kartik Sadagopan VP - Equity Sales kartiks@dolatcapital.com +9122 4096 9762

Kapil Yadav VP - Equity Sales kapil@dolatcapital.com +9122 4096 9735

Ashwani Kandoi AVP – Equity Sales ashwanik@dolatcapital.com +9122 4096 9725

Lekha Nahar Manager – Equity Sales lekhan@dolatcapital.com +9122 4096 9740

Equity Trading Designation E-mail

P. Sridhar SVP and Head of Sales Trading sridhar@dolatcapital.com +9122 4096 9728

Chandrakant Ware VP - Sales Trading chandrakant@dolatcapital.com +9122 4096 9707

Shirish Thakkar VP - Head Domestic Derivatives Sales Trading shirisht@dolatcapital.com +9122 4096 9702

Kartik Mehta Asia Head Derivatives kartikm@dolatcapital.com +9122 4096 9715

Bhavin Mehta VP - Derivatives Strategist bhavinm@dolatcapital.com +9122 4096 9705

720

870

1,020

1,170

1,320

1,470

Jan

-18

Fe

b-1

8

Ma

r-18

Ap

r-18

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

Nov-1

8

Dec-1

8

Jan

-19

Fe

b-1

9

Ma

r-19

Ap

r-19

Ma

y-1

9

Jun

-19

Jul-1

9

(Rs) ASTRA Target Price

Dolat Capital Market Private Limited. Sunshine Tower, 28th Floor, Senapati Bapat Marg, Dadar (West), Mumbai 400013

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Dolat Capital Market Private Limited.

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