Key takeaway: ASTRA’s FY21 AR specifics its approach in a new category, Water Tanks, with market place chance at ~Rs 50bn. Pipes & Adhesives saw new launches, with focus on Infra vertical (DWC). Distribution has expanded nicely. Per our evaluation, more than FY15-21, ASTRA’s sales per distributor grew quicker than peers: +64% in Pipes now in-line with SI & FNXP, and ~3x in Adhesives. Over FY20-24e ASTRA could post sales/PAT CAGR of 20%/27%. But, retain Hold on wealthy valuation. PT Rs 2,040.
Water Tanks – chance: ASTRA forayed in Water Tanks a handful of qtrs back, acquiring the Sarita brand. Market chance stands at +`50bn, with historical development at ~10%. Higher unorganised market place (~70%) could entail stronger prospects for organised players. ASTRA commenced production in Gujarat beneath its personal brand Astral from Apr’21 and will start out in Rajasthan from Sep’21. One more facility is most likely in Tamilnadu. Category is ramping nicely, with month-to-month sales now at Rs 40mn (Rs 10mn handful of quarters back). Product could be readily available pan-India by Mar’22.
Growing sales per distributor: ASTRA has been regularly expanding its attain in each Pipes and Adhesives. Our evaluation indicates that more than FY15-21, ASTRA’s Sales per Distributor in Pipes grew quicker than peers, at +64% to Rs 29-30mn in FY21 – this is now equivalent to market place leaders SI and FNXP.
New launches help outlook: ASTRA has launched many solutions across most verticals in FY21 – 1) Pipes – Astral Multi Pro – technologies-sophisticated multi-layered CPVC item. 2) Water Tanks – ASTRA has two variants – Sarita brand for economy demand and Astral brand for Premium. 3) Infrastructure – Rex Poly is a crucial player in DWC plastic pipes – primarily utilized for sewage, rail & road drainage, Ducts and, Underground Cable Ducting. 4) Adhesives – varied variety of solutions added beneath brand names of SolvoBond, ResiWood, TruBuild and Bond Set.
Hold: We broadly retain FY22-24e EPS. While ASTRA is a robust franchise, the threat-reward seems stretched at its existing complete valuation – FY22 / 23 PE at 87x / 62x. Thus, we retain ‘hold’ on ASTRA with a revised PT of Rs 2,040 (vs Rs 1,960) post roll-more than. Key Risks: 1) Upside dangers – quicker ramp-up in Rex, new launches, upside from Adhesives. 2) Downside dangers – demand slowdown, tepid offtake in new launches, RM volatility, competitors, pricing pressures.