Per our analysis, over FY15-21, ASTRA's sales per distributor grew faster than peers: +64% in Pipes now in-line with SI & FNXP, and ~3x in Adhesives.
Key takeaway: ASTRA’s FY21 AR details its strategy in a new category, Water Tanks, with market opportunity at ~Rs 50bn. Pipes & Adhesives saw new launches, with focus on Infra vertical (DWC). Distribution has expanded well. Per our analysis, over FY15-21, ASTRA’s sales per distributor grew faster than peers: +64% in Pipes now in-line with SI & FNXP, and ~3x in Adhesives. Over FY20-24e ASTRA could post sales/PAT CAGR of 20%/27%. But, retain Hold on rich valuation. PT Rs 2,040.
Water Tanks – opportunity: ASTRA forayed in Water Tanks a few qtrs back, acquiring the Sarita brand. Market opportunity stands at +`50bn, with historical growth at ~10%. Higher unorganised market (~70%) could entail stronger prospects for organised players. ASTRA commenced production in Gujarat under its own brand Astral from Apr’21 and will start in Rajasthan from Sep’21. One more facility is likely in Tamilnadu. Category is ramping well, with monthly sales now at Rs 40mn (Rs 10mn few quarters back). Product could be available pan-India by Mar’22.
Growing sales per distributor: ASTRA has been consistently expanding its reach in both Pipes and Adhesives. Our analysis indicates that over FY15-21, ASTRA’s Sales per Distributor in Pipes grew faster than peers, at +64% to Rs 29-30mn in FY21 – this is now similar to market leaders SI and FNXP.
New launches aid outlook: ASTRA has launched various products across most verticals in FY21 – 1) Pipes – Astral Multi Pro – technology-advanced multi-layered CPVC product. 2) Water Tanks – ASTRA has two variants – Sarita brand for economy demand and Astral brand for Premium. 3) Infrastructure – Rex Poly is a key player in DWC plastic pipes – mainly used for sewage, rail & road drainage, Ducts and, Underground Cable Ducting. 4) Adhesives – varied range of products added under brand names of SolvoBond, ResiWood, TruBuild and Bond Set.
Hold: We broadly retain FY22-24e EPS. While ASTRA is a strong franchise, the risk-reward appears stretched at its current full valuation – FY22 / 23 PE at 87x / 62x. Thus, we retain ‘hold’ on ASTRA with a revised PT of Rs 2,040 (vs Rs 1,960) post roll-over. Key Risks: 1) Upside risks – faster ramp-up in Rex, new launches, upside from Adhesives. 2) Downside risks – demand slowdown, tepid offtake in new launches, RM volatility, competition, pricing pressures.