Add Astral Poly Technik, target price Rs 1,096: ICICI Securities
Considering near-term Covid-19 impact on volumes and margins, the brokerage has cut its earnings estimates by 17.2 per cent/17.5 per cent/11.8 per cent for FY20/FY21/FY22, respectively.
By ETMarkets.com | Updated:
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ICICI Securities has given an add rating to Astral Poly Technik with a revised target price of Rs 1,096 (Rs 1,243 earlier) at 40 times FY22E earnings.
The countrywide lockdown due to the Covid-19 outbreak is expected to moderate Astral Poly Technik’s expected strong earnings visibility in the near term. However, considering the partial need-based and non-discretionary nature of its product portfolio, expected consolidation in PVC/CPVC pipes segment, lean channel inventory and systemic corrections largely being over, the company is expected to make an impressive bounce back once the nationwide lockdown is lifted.
The share price has moved down by -3.95 per cent from its previous close of Rs 970.35. The last traded price is Rs 932. Incorporated in 1996, Astral Poly Technik has a market cap of Rs 14642.86 crore.
Investment Rationale
Considering near-term Covid-19 impact on volumes and margins, the brokerage has cut its earnings estimates by 17.2 per cent/17.5 per cent/11.8 per cent for FY20/FY21/FY22, respectively.
While the adhesives segment is likely to suffer a decline in growth in Q2FY21, it is expected to get back on growth track from Q2FY21 driven by better execution post the recent changes in distribution model and scaling up of team strength with the recent induction of a key sales and marketing head. The recent foray into high growth segments like waterproofing, wood-based adhesives, etc, and lower base of last year are also expected to help the company. The brokerage expects the segment to post double-digit revenue growth and sharp improvement in profitability (led by recent meltdown in crude prices) starting FY21.
For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 664.10 crore, down -2.09 per cent from last quarter sales of Rs 678.30 crore and up 4.80 per cent from last year's same quarter sales of Rs 633.70 crore. The company reported net profit after tax of Rs 68.50 crore in the latest quarter.
The countrywide lockdown due to the Covid-19 outbreak is expected to moderate Astral Poly Technik’s expected strong earnings visibility in the near term. However, considering the partial need-based and non-discretionary nature of its product portfolio, expected consolidation in PVC/CPVC pipes segment, lean channel inventory and systemic corrections largely being over, the company is expected to make an impressive bounce back once the nationwide lockdown is lifted.
The share price has moved down by -3.95 per cent from its previous close of Rs 970.35. The last traded price is Rs 932. Incorporated in 1996, Astral Poly Technik has a market cap of Rs 14642.86 crore.
Investment Rationale
Considering near-term Covid-19 impact on volumes and margins, the brokerage has cut its earnings estimates by 17.2 per cent/17.5 per cent/11.8 per cent for FY20/FY21/FY22, respectively.
While the adhesives segment is likely to suffer a decline in growth in Q2FY21, it is expected to get back on growth track from Q2FY21 driven by better execution post the recent changes in distribution model and scaling up of team strength with the recent induction of a key sales and marketing head. The recent foray into high growth segments like waterproofing, wood-based adhesives, etc, and lower base of last year are also expected to help the company. The brokerage expects the segment to post double-digit revenue growth and sharp improvement in profitability (led by recent meltdown in crude prices) starting FY21.
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FinancialsFor the quarter ended December 31, 2019, the company reported consolidated sales of Rs 664.10 crore, down -2.09 per cent from last quarter sales of Rs 678.30 crore and up 4.80 per cent from last year's same quarter sales of Rs 633.70 crore. The company reported net profit after tax of Rs 68.50 crore in the latest quarter.
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