Why Astral shares are falling after demerger news; targets as near-term overhang likely

Astral Ltd saw its shares tumbling 8 per cent in Monday's trade after the company announced the demerger of its chemicals business undertaking, which includes adhesives, paints and speciality chemicals, on a going concern basis. Post demerger, all the plumbing-related businesses – pipes and fittings, bathware and CPVC resin, will stay with Astral Ltd, the company said.

The demerger might create a near-term overhang for the stock as investors decide on the multiples for each segment, said Equirus Securities. It said valuations will depend on pace of growth and profitability of each business, with Plumbing business likely to command premium multiple against listed peers due to industry leading operating profitability, growth aggression and backward integration into CPVC Resin manufacturing. 

"Adhesive + Paint business valuations will be the tricky part as how much discount it gets against listed peers is difficult to comprehend because on one hand, the business will see strong growth aggression together with focused profitability improvement drive but on the other hand, at what EV/Ebitda multiple will the business trade at due to business's size is difficult to quantify," it said.

Shares of Astral fell 7.75 per cent to hit a low of Rs 1,371 on Monday. The post-demerger valuation and price discovery are likely to be increasingly skewed towards the higher-margin Plumbing business, JM Financial said.

For Astral Chemie, the key aspects to monitor post-demerger include funding of growth initiatives, profitability improvement and navigating competitive pressures, JM Financial said while maintaining 'ADD' and a target of Rs 1,600 on the stock.

Elara values Astral Chemie at Rs 10,000 crore on 3.7 times estimated March 2028 EV/Sales. It values the plumbing business at Rs 33,200 crore on 5.2 times March 2028E EV/Sales and 27 times March 2028 EV/Ebitda. 

"Assuming 30 times March 2028E EV/Ebitda for the plumbing business, total value of ASTRA (pre-demerger) stands at Rs 44,900 crore. We reiterate Accumulate with a target of Rs 1,660 on 50 times March 2028E P/E. We increase our EPS by 1.6 per cent for FY27E, 1.4 per cent for FY28E, and 3.6 per cent for FY29E," Elara said.

MOFSL said the current valuation of 45 times estimated FY28 earnings per share broadly factors in the expectation of improving financials. Following a 15 per cent correction in the Astral stock price from the recent high in March 2026, it reiterated its 'Buy' rating but reduce its target to Rs 1,710. 

ICICI Securities said the demerger may enable better growth to 100 per cent subsidiary Astral Chemie Ltd. 

"The demerger will likely enable both businesses to grow strongly with an enhanced focus on efficient capital deployment. Shareholders of Astral Ltd shall get shares of Astral Chemie in a 1:1 ratio and this demerger should see completion by end-FY27. Mr Sandeep Engineer (CMD) will continue to helm both companies. We believe this demerger will likely result in greater disclosures from both businesses; thus, enabling investors to value each business better. Retain BUY; SoTP-based Mar’27E TP revised to Rs 1,738," ICICI Securities said.