Key takeaway: ASTRA’s FY 21 AR details its strategy in a new category, Water Tanks, with a market opportunity of ~ 50 billion rupees. Pipes & Adhesives saw new launches, with a focus on Infra vertical (DWC). The distribution has expanded well. According to our analysis, during the 2015-21 fiscal year, ASTRA’s sales per distributor grew faster than its peers: + 64% in Pipeline now in line with SI & FNXP, and ~ 3x in Adhesives. During FY20-24e, ASTRA could post sales / PAT CAGR of 20% / 27%. But, retain the rich valuation. PT Rs 2,040.
Water tanks – opportunity: ASTRA ventured into Water tanks a few quarters ago, acquiring the Sarita brand. The market opportunity stands at + `50,000 million, with a historical growth of ~ 10%. A higher disorganized market (~ 70%) could imply stronger prospects for organized players. ASTRA started production in Gujarat under its own Astral brand from April 21 and will start in Rajasthan from September 21. There is likely one more facility in Tamilnadu. The category is rising well, with monthly sales now at Rs 40 million (Rs 10 million a few quarters ago). The product could be available throughout India by March 22.
Growing Sales Per Distributor: ASTRA has been constantly expanding its reach in both Pipe and Adhesives. Our analysis indicates that during the 2015-21 fiscal year, ASTRA’s pipeline sales per distributor grew faster than its peers, with + 64% to Rs 29-30 crore in fiscal 21; this is now similar to the market leaders SI and FNXP.
Prospects of support for new launches: ASTRA has launched several products in most verticals in FY 21 – 1) Piping – Astral Multi Pro – advanced technology multilayer CPVC product. 2) Water tanks – ASTRA has two variants: the Sarita brand for the economic demand and the Astral brand for the Premium. 3) Infrastructure: Rex Poly is a key player in DWC plastic pipes, which are mainly used for sewer, track and track drainage, conduit and underground cable conduit. 4) Adhesives: varied range of added products under the SolvoBond, ResiWood, TruBuild and Bond Set brands.
To hold: In general, we retain EPS from exercise 22-24e. While ASTRA is a solid franchise, the risk-reward seems stretched at its current total valuation: FY22 / 23 PE at 87x / 62x. Therefore, we maintain the ‘hold’ on ASTRA with a revised PT of Rs 2,040 (vs Rs 1,960) after renewal. Key Risks: 1) Upside Risks – Faster Rise in Rex, New Releases, Adhesives Advantages. 2) Downside risks: slowdown in demand, tepid acceptance of new launches, RM volatility, competition, price pressures.