Astral Expects Stronger Q4 With Expanded Capacities
Astral Ltd. expects 15%–20% of overall value growth in FY24 because of expanded capacities.
Astral Ltd. expects expanded capacity to aid its earnings in the quarter ended March.
The maker of pipes and fittings reported volume growth of 30% and revenue growth of 15% in the third quarter ended December. It expects 15%–20% of overall value growth in FY2024, aided by capacity expansion.
With the company's new facility in the east already rolling out PVC and CPVC pipes while waiting next in line, volume growth will see an uptick in quarter four as well, Hiranand Savlani, chief financial officer at Astral, told BQ Prime's Niraj Shah.
Despite reporting a loss of Rs 5.5 crore on inventory and facing margin pressures, the CFO is confident that the next quarter will see robust margins as inventory gains are imminent and "Q4 is always the best quarter for volume attraction".
Astral's Verticals
PVC prices have become more stable, especially looking at the constant figures from Jan. 1 to Feb. 8. This motivates the dealer community to pick up inventory, which will further help boost margin growth in Q3 and Q4.
Similarly, on the chemical side, in the adhesive and paint businesses, prices have dropped. "This will give us extra margin in Q4 and reduce high-cost inventory," said Salvani.
Overall, margins in all three primary segments, which are paint, adhesive, and pipes, will ramp up in Q4, which will sequentially also show up in Q1 of FY2024.
As for plumbing, Salvani said construction activity is gradually picking up, and approximately 60% of the revenue growth happens in the second half of the financial year, mostly in Q4.
"We are of the view that Q4 will be much stronger than Q3," he said. Moreover, with the stabilisation of polymer, demand will gain strength too.
Astral's Regional Reach
According to Salvani, the plants Bhubaneshwar and Dahej will begin contributing to revenue in a meaningful way in the first quarter of FY24 as more products from the CPVC and adhesive segments are added to the basket. This will mean a better contribution to volume and revenue growth from the plants in the east, from the first quarter onward.
"Our plants in Sangli and Aurangabad, too, have been better equipped with machines to roll out PVC products, which wasn't the case before," said Salvani.
Capacity Utilisation
Capacity utilisation in the first nine months was 57%, which is expected to inch up to 60% and above in the fourth quarter, as per the CFO.
Also, considering the products that will be rolled out from the new plants, "capacity utilization will further improve by the end of the year."