We had recently mentioned about our trip to Gujarat and company visits there. Here is the detailed update on Astral Polytechnik.
We had first mentioned about this company in March, 2011. Since then the stock has done very well, rising from Rs 120 to 300 and we feel that it still has a good potential over a longer term. Here is a summary of the past track record of the company:
The company has had a fantastic growth – it has grown its turnover from hardly 13 Cr in 2003 to 578 Cr in 2012. We feel that the conversion from GI Pipes to CPVC is still catching up and hence the potential is still big enough and with the development and introduction of new products, company can continue with 25-30% growth rates for next few years. The stock may look fairly priced based on PE ratio but if one removes the forex losses (which are one time in nature), the stock is still reasonably priced, looking at the long term growth potential. Company is also focusing on creating a national brand.
Here are few excerpts from the management meet:
We have 4 products licensed from Lubrizol. Flowguard, CORZAN, Blazemaster and Bendable. Ashirwad & Ajay have only the Flowguard license [who are the Astral’s closest competitors].
We have about 300-350 distributors. All the states put together, no of dealers will be 9000-10000.
Project Sales are handled by Distributors with some 8-10% margins. Support is provided by the company for Project Sales.
We continuously try to interact & educate Focus groups. Consultants, Architects and Builders for Project Sales and Plumber Groups for Retail Sales.
We are happy to achieve a 25-30% growth rate consistently and at 12-14% sustainable EBITDA margins.
Astral’s new products – Blazemaster & Bendable pipe hold good potential. Co would be having exclusivity for few years.
Despite the 20% depreciation in currency and the M2M loss, the cost of Forex Loan over its full tenure will work out cheaper than our domestic rupee loans.
In 2007, we were preparing for an addressable market (ours) of 1000 Cr. We are now preparing the plants for addressing a market of 2000Cr.
We have been building up the Astral brand with our target customer base – Plumbers, Architects, Consultants, Builders/Project segment. We will next attempt on educating the CONSUMER directly. There are some mass media events planned in October/November timeframes.
For those already invested into the stock, it seems to be a good long term compounder and hence one should try remaining invested and try to increase exposure on corrections. For new investors, one should definitely study it and make it a part of portfolio and accumulate on sharp declines.