Astral Poly Technik Ltd - Decent Volume Growth; Margins Disappoint Due to Inventory Losses; Result Update Q3FY15:: Edelweiss

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Astral Poly Technik Ltd. has delivered decent revenue growth in Q3FY15. Revenues grew by 14% YoY from INR 265 crs in Q3FY14 to INR 303crs in Q3FY15. Margin pressure continued this quarter as well. EBITDA witnessed a decline of 26.4% YoY with margins contracting 530 bps YoY on back of decline in gross margins which witnessed a YoY decline of 514 bps. Gross margin decline was primarily on back of inventory losses due to fall in polymer prices. We expect Astral Poly to clock 24% CAGR in revenues and 28% CAGR in PAT for the period FY14-FY16E on the back of greater acceptance of the company’s recently launched products as well as increased distribution reach. At the current price of INR 396, stock trades at PE of 35.6x FY16E EPS of INR 11.1.

Revenue growth at 14.4%

Astral Poly recorded decent revenue growth this quarter, with top-line expanding at a rate of 14.4%. Sales volume growth was reported at 17%. In terms of production, growth stood at 15%. CPVC volumes witnessed a 20% growth whereas PVC witnessed a 13% volume growth. All Astral subsidiaries reported good performance for the quarter. The company has taken a price increase of 3% in the first week of January’15. Going ahead new product lines such as Blaze Master - fire sprinkler product as well as agricultural pipes column pipes and conduit pipes will also provide value addition to the existing product basket of Astral Poly. We are positive on the company’s future growth prospects.

EBITDA declines by 26.4% YoY, led by pressure on gross margin; Reported PAT declines by 47.7% YoY

EBITDA declined by 26.4% to INR 29 crores in the quarter, with EBITDA margins contracting by a 530 bps YoY to 9.6%. Gross margins contracted by 514 bps YoY on the back of inventory loss on account of fall in polymer prices. The inventory losses resulted in a loss of ~INR 10 cr for the company as well as a 4% currency depreciation impact. The price increase undertaken recently would offset this currency led loss. We expect this to be a one-off trend and we do not foresee such pressure gross margins to sustain in the coming quarters.  We expect EBITDA margin for FY15 to be sustained at 13-14% range. Core PAT for the quarter de-grew by 47.7% to INR 11 crs.

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https://www.edelweiss.in/research/Astral-Poly-Technik-Ltd--Decent-Volume-Growth;-Margins-Disappoint-Due-to-Inventory-Losses;-Result-Update-Q3FY15/10005534.html