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Astral Poly Technik (APTL), a maker of pipes and fittings, is the pioneer of the CPVC segment in India. The company
expanded its product portfolio to PVC segment to become a one-stop solution provider for plumbing needs.
Considering the growing need for buildings with sanitation (residential & commercial — offices, malls, hospitals) in
India, sustainability is assured. Moreover, replacement of existing pipes (mostly GI/PVC) too is potentially a huge
market. The ongoing capacity addition would enable APTL to play the opportunity. We reiterate Buy recommendation
with a price target of Rs 226 to trade at 8x FY13E earnings.
Investment Rationale
Robust growth: The APTL product range is witnessing strong growth due to
product characteristics, which makes the product superior. The current trend
in construction and real estate will bolster demand. APTL has licences for four
products from Lubrizol, which gives it a competitive advantage. Competitors
have only one such licence – for Flowguard Pipes.
APTL has invested to create visibility for these products, which we believe will
give it a competitive edge in the medium term. The license for the upcoming
product Blaze Master has been given exclusively to APTL for five years —
extendable up to 10 years on fulfilling certain sales covenants.
Network expansion & brand enhancement: APTL is aggressively expanding its
dealer network (300 distributors and 5,000 dealers currently) to increase its
countrywide presence. The brand enhancement program will improve product
perception and ISI certification will further strengthen it.
New product launches: APTL has been continuously developing a product range
in both CPVC and PVC segments. The upcoming product Blaze Master (fire
sprinkler) could be a game changer for APTL. It is awaiting approval from local
authorities. The increased product range enables APTL to act as a one-stop
solution provider for plumbing requirements.
Capacity addition: The continuous capacity addition would enable APTL to cater
the strong growth rate and remain ahead of competition. APTL has increased
the capacity by 57% to 48,432mn tonnes at the end of FY11 from 30,867mn
tones in FY10. Considering the demand potential, APTL is expected to add
capacity on a continuous basis.
Valuation
At CMP of Rs 190, the stock trades at 9.2x FY12E and 6.7x FY13E earnings.
Considering the growth potential, new product launches and capacity additions
will keep APTL on a growth trajectory. We reiterate a Buy recommendation
with a price target of Rs 226 to trade at 8x FY13E earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Astral Poly Technik (APTL), a maker of pipes and fittings, is the pioneer of the CPVC segment in India. The company
expanded its product portfolio to PVC segment to become a one-stop solution provider for plumbing needs.
Considering the growing need for buildings with sanitation (residential & commercial — offices, malls, hospitals) in
India, sustainability is assured. Moreover, replacement of existing pipes (mostly GI/PVC) too is potentially a huge
market. The ongoing capacity addition would enable APTL to play the opportunity. We reiterate Buy recommendation
with a price target of Rs 226 to trade at 8x FY13E earnings.
Investment Rationale
Robust growth: The APTL product range is witnessing strong growth due to
product characteristics, which makes the product superior. The current trend
in construction and real estate will bolster demand. APTL has licences for four
products from Lubrizol, which gives it a competitive advantage. Competitors
have only one such licence – for Flowguard Pipes.
APTL has invested to create visibility for these products, which we believe will
give it a competitive edge in the medium term. The license for the upcoming
product Blaze Master has been given exclusively to APTL for five years —
extendable up to 10 years on fulfilling certain sales covenants.
Network expansion & brand enhancement: APTL is aggressively expanding its
dealer network (300 distributors and 5,000 dealers currently) to increase its
countrywide presence. The brand enhancement program will improve product
perception and ISI certification will further strengthen it.
New product launches: APTL has been continuously developing a product range
in both CPVC and PVC segments. The upcoming product Blaze Master (fire
sprinkler) could be a game changer for APTL. It is awaiting approval from local
authorities. The increased product range enables APTL to act as a one-stop
solution provider for plumbing requirements.
Capacity addition: The continuous capacity addition would enable APTL to cater
the strong growth rate and remain ahead of competition. APTL has increased
the capacity by 57% to 48,432mn tonnes at the end of FY11 from 30,867mn
tones in FY10. Considering the demand potential, APTL is expected to add
capacity on a continuous basis.
Valuation
At CMP of Rs 190, the stock trades at 9.2x FY12E and 6.7x FY13E earnings.
Considering the growth potential, new product launches and capacity additions
will keep APTL on a growth trajectory. We reiterate a Buy recommendation
with a price target of Rs 226 to trade at 8x FY13E earnings.
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