Astral Pipes has not performed well over the past year, but for long-term investors, this stock has delivered great returns for its shareholders, despite having been heavily divested in the past year. Over the past 10 years, the price of Astral share has risen from Rs 25.75 to Rs 1,632.60 each on NSE, rising more than 6,000 percent over this period.
In the past month, the price of each Astral share has fallen to Rs 1,612 from Rs 1,632.60. In other words, Astral has witnessed a five percent drop in the stock market during that period. In YTD time, the price of Astral stock has fallen from Rs 2,332 to Rs 1,632 levels, dropping about 30 percent over this period. In the past 6 months, this share has fallen from Rs 2,265 to Rs 1,632 levels, dropping about 28 percent during this period. However, in the past year, the price of Astral stock has fallen from about Rs 1,950 to Rs 1,632, down about 16 percent over this period.
Currently, the company is in focus as it has subscribed to optional convertible bonds of Rs 194 crore allotted by Gem Paints, and has appointed majority directors to the board of directors of Gem Paints and Esha Paints. Accordingly, Gem Paints and Esha Paints have become a subsidiary and a retiring subsidiary of the company respectively.
Over the past 5 years, Astral’s share price has risen from approximately Rs 415 to Rs 1,632 levels, showing an increase of approximately 290 percent over this period or CAGR of approximately 31.50 percent for its loyal shareholders who remained in the stock during this period to invest. Similarly, this multi-dredging inventory has increased from about Rs 25.75 to Rs 1,632.60 each on NSE in the past 10 years, with an increase of about 6,000 percent over this period or 51.43 percent CAGR (compound average growth) or annual return on its shareholders who have continued to invest in Astral shares for the past 10 years. So if an investor had invested Rs 1 lakh in this multibagger stock 10 years ago and invested in this stock during this period, his Rs 1 lakh would have risen to more than Rs 63 lakh today.
Why are analysts bullish?
Despite a decline in profitability in the fourth quarter, analysts are optimistic about Astral’s prospects for several reasons. First, the demand for pipes is expected to increase as a result of an upturn in construction activity and the government’s emphasis on infrastructure. Second, EBITDA is expected to improve in 2023-24, supported by a better product mix. Third, the company has also acquired a 51 percent stake in Gem Paints, which has a strong presence in South India. It will help scale Astral’s paint business and enable it to enter other geographic areas. Fourth, the company has invested Rs.1,000 crore in the past five years mainly for increasing production capacity. The stock trades at premium valuations in terms of a 12-month forward PE ratio of 57.1 times compared to the BSE Industrials Index and BSE Sensex at 22.8 and 19.9 times respectively.
Should you invest?
Axis Securities has included Astral Ltd in the ‘Buy’ basket in June’s top stock pick. The report states, “Astral has reported 10 percent volume growth in the pipeline segment, the highest among its competitors in the past 4 years, indicating Astral gaining market share. Astral maintains EBITDA margins of 17.8 percent, despite an increase of realizations, as commodity inflation affects the sector’s profitability.” In addition, Astral’s foray into valves, resins, plumbing and tanks would drive sales growth in the coming years, the report said.
Speaking of financials, Astral reported Q4FY22 consolidated revenue growth of 23.3 percent year-over-year, mainly led by growth in the plastics segments (+22.3 percent year-on-year) and adhesives (+27 percent year-over-year). In the plastics segment, the company reported Q4FY22 and FY22 volume growth of 11 percent year-over-year and 9.5 percent, respectively. Volume growth was ahead of the industry’s growth, with other competitors reporting flat to negative growth, indicating Astral gained market share in FY22.
The brokerage gave the multibagger shares a ‘BUY’ tag at a target price of Rs 1,900.
The expert opinions and investment tips in this News18.com report are their own and not the website’s or its management. Users are advised to contact certified experts before making any investment decisions.
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