Astral - Tweaking EPS Estimates, Target Price After 1:3 Bonus Issue: Systematix

Systematix Research Report

During its Q3 FY23 result, Astral Ltd. announced a 1:3 bonus (one for three held), and the scrip has become ex-bonus today. After factoring in the impact of change in equity shares from the bonus issue, we have revised our earnings per share estimates but retained our financial estimates.

Robust growth and margins are key for its high valuations to sustain.

Business outlook:

Stable and affordable pvc prices should boost primary sales of pipes on channel filling. We expect margins in pipes and adhesives to rebound, as the company has mostly liquidated its high-cost inventory.

Aggressive store and stock keeping units expansions should drive traction in the new bathware division.

Astral expects new businesses to clock Rs 15 billion revenue over the next five years. With its large capex (Rs 10 billion over last five years) behind, better capacity utilisation (~55% currently) should drive healthy free cash flow and return ratios ahead.

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