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Astral Poly Technik Ltd. Q3 FY12 results update by Nirmal Bang

Contributed by Nirmal Bang

Sales ahead of expectations but margins decline

Revenues grew 63% YoY at Rs.160.5 crores. This was on the back of continues demand for its products and a promotional scheme offered by the company during the quarter.

The company has utilized its capacity to the tune of 9727 M.T. as against previous Q2FY12 quarter of 9822 M.T.

EBIDTA margins declined by 184 bps at 10.2% on the back of increase in expenses for the promotional scheme which was to the tune of Rs.4.5 crores. In addition material costs went up by 140 bps QoQ on the back of rupee depreciation. We expect the EBIDTA margins to improve in the Q4FY12 quarter.

Interest costs were higher at Rs.2 crore on account of capitalization of the new plant.

During the quarter the company incurred exceptional loss of Rs.5.8 crores due to changes in the exchange rates on repayment of loans. The outstanding loan amounts to Rs.70 crores.

Tax Rate during the quarter stood at 20% against 21.6% in Q2FY12. Astral reported PAT of Rs. 4.74Crs, down 44% YoY and 46.4% QoQ. Adj. PAT was up 2.2% YoY and down 4.3% QoQ at Rs.9.4 crores.

The company's expansion work at Dholka is going on with full swing and the capacity in the Q3FY12 quarter was to the tune of 53000 MT which is expected to reach 65000-70000 MT in the current quarter.

Astral is entering into new segment – CPVC Aluminium CPVC, for which it has signed an agreement with Lubrizol, exclusive for 10 years. The company is first one to make this product in the World. The plant at full capacity will give the revenue of Rs 70 crore and is a high margin product. It will start manufacturing it in Q1 FY13. The installation of the plant would be done in Mar 2012.

Manufacturing of the PVC solvent has started in the current quarter.

Valuation and Recommendation

Astral’s stock price has a hangover of the rupee depreciation which has impacted the company’s margins adversely. We feel Astral’s performance will again bounce back in FY13E considering the (a) consistent high growth of over 35%, (b) pricing power the company enjoys for CPVC product, (c) various new products in pipeline and (d) expanded capacity coming up in near future. At CMP, the stock is trading at 12.7x and 9.9x on the expected earnings for FY12E and FY13E respectively. We continue to remain positive on the stock and recommend ‘HOLD’ on the stock.