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Up 4,600% in 10 years! Why ICICI Securities sees further upside in multibagger Astral Ltd

Up 4,600% in 10 years! Why ICICI Securities sees further upside in multibagger Astral Ltd

On Monday (January 23, 2023), the stock ended 1.37 per cent higher than the previous day's close at Rs 2021.70 on BSE. The market cap of the firm rose to Rs 40,728.90 crore

Up 4,600% in 10 years! Why ICICI Securities sees further upside in multibagger Astral Ltd Up 4,600% in 10 years! Why ICICI Securities sees further upside in multibagger Astral Ltd

Shares of Astral Ltd have delivered over 4,600 per cent return to its long-term shareholders in the last 10 years. The stock has also zoomed over 300 per cent in the last 5 years.

Notably, the mid-cap stock, which used to hover around Rs 50 odd level in mid-2013 is now trading well over Rs 2,000. On Monday (January 23, 2023), the stock ended 1.37 per cent higher than the previous day's close at Rs 2021.70 on BSE. The market cap of the firm rose to Rs 40,728.90 crore.

Shares of Astral Ltd hit its 52-week high of Rs 2,654 on September 9, 2022, and a 52-week low of Rs 1,584 on June 20, 2022. The stock took less than three months to move from its 52-week low to its 52-week high in 2022.

ICICI Securities has maintained its bullish stance on this company and believes that Astral stock appears well positioned to gain (in absolute term) in the immediate near term as volumes are expected to pick up in the pipe segment (from Q3) and also margins are likely to normalise (in Q4FY23E) as PVC prices have stabilised. Additionally, with corrections in adhesive input prices like VAM, the margin in this business should also normalise.

The brokerage firm has a 'Buy' rating on the stock with a target price of Rs 2295 per share. "Pipe margin, which got adversely affected in the first half of FY23 due to inventory losses, is expected to normalise in Q4FY23E as PVC resin prices have stabilised from Dec’22," it noted. Also, higher volumes in a seasonally strong quarter (Q4) should result in operating leverage and thus, margins may surprise on the positive side. 

Adhesive margin, too, is expected to normalise in Q4FY23E as raw material prices have come down and most of the high-cost inventory will be consumed in the third quarter of FY23.

ICICI Securities believes the company is on track to achieve its targeted 500 showrooms/display centres as of end-FY23. The clarity on traction in this business will give visibility to future earnings from this segment for the company.

However, a slowdown in the housing market, a sharp fall in PVC prices and an increase in raw material prices for adhesives can impact the profitability and demand, it said.

The September quarter numbers of the firm were not so encouraging. Net profit was down 50 per cent to Rs 70 crore in the September quarter against a profit of Rs 141 crore in the same quarter of the previous fiscal. Sales rose marginally to Rs 1171.60 crore in Q2 against Rs 1154 crore in the September 2021 quarter.


 

Published on: Jan 23, 2023, 3:43 PM IST
Posted by: Tanya Aneja, Jan 23, 2023, 3:39 PM IST