Astral Poly Technik-Hold Astral Poly Technik: Networth Stock Broking

Networth Stock Broking has recommended hold rating on Astral Poly Technik, in its September 22, 2011 research report.

“Astral Poly Technik, US-based specialty chemicals maker Lubrizol Corporation, a wholly owned subsidiary of Buffett’s investment company, Berkshire Hathaway Inc, is planning to set up a chlorinated polyvinyl chloride (CPVC) industrial unit, in partnership with Astral Poly Technik, at the Gujarat Industrial Development Corporation complex in Dahej, a major chemical hub. As per Company sources for the said unit, Lubrizol will pump ~Rs.12 bn. The construction work is likely to start from January 2013 and the facility is expected to commence production from October 2014.”

“The move is expected to benefit Astral in terms of raw material (resin) linkage for its CPVC products, which is currently being imported from US. In long-run it will be able to source it domestically thereby reducing FX risk and also resulting in cost savings on freight. The JV will also open up avenues to generate additional revenues from other geographies predominantly Southeast Asia. While the development will not impact the PAT favourably till FY15E, but association with a globally acclaimed chemical major would go a longway in boosting its image further.”

“We continue to remain positive on Astral owing to 1) its leading position in premium CPVC pipes & fittings 2) restricted competition (high entry barrier) in CPVC pipes owing to limited access to a key raw material from preferred player Lubrizol 3) sustained strong demand for CPVC pipes in the country from the residential, industrial segments and from replacement of Galvanized pipes as well. Astral’s has been steadily progressing over the last 3 years with topline and bottom-line growing at CAGR of 45% and 25% during FY09- 11 respectively. Going forward we expect the top-line to grow at CAGR of 38% and bottom-line at CAGR of 40% over FY11-13E. At CMP of Rs 218, stock is trading at 10.7x FY12E earnings and 7.6x FY13E earnings. We maintain our hold rating on the stock,” says Networth Stock Broking research report.