ASTRAL POLYTECHNIK LTD

ASTRAL POLYTECHNIK

One of the famous quotes of Buffet is “Leaving the question of price aside, the best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return”

As can be seen from the capex done over the years by Astral along with the high rates of return, Astral Poly looks like a company worth looking into.

Cmp 125 -- FV Rs 5 , market cap 274  crores.

Astral Polytechnik is a focussed player in the space of PVC and CPVC pipes and fittings among other plumbing products with excellent pan India reach and strong management. The company has a wide range of brands like CORZAN (industrial pipe fittings) , FLOWGUARD (pipes and fittings),  BLAZEMASTER (fire sprinkler systems), FOAMCORE (underground systems) , ULTRADRAIN (conventional system) , AQUARIUS (outer loop lines),  AQUATEK(high impact ABS plumbing system) , ASTRAL UNDERGROUND, DWV (drain,waste and vent), BENDABLE (composite pipe),  AQUASAFE etc and has over 60% market share in India.

Over the years the company has kept expanding the capacities in line with increased demand from 4000 MT in 2004 to 30867 MT in FY 10 and currently in Jan 2011 the capacity stands increased to 35000 MT. All this has been done without any stretching of the balance sheet or dilution of equity.  The capacity is expected to reach around 60000 MT by FY 12.

CAPACITY AND UTILISATION

YEAR	06	07	08	09	10	9m FY 11
CAPACITY	4000	9074	11800	25968	30867
UTILISATION	2417	5090	6895	11164	19411	18328
Cash used in investing	7	11.52	26	40	18

FINANCIAL RESULTS FOR LAST FIVE YEARS

YEAR	06	07	08	09	10	9MFY11	9MFY10
SALES	56	101	144	205	304	269	187
PBIDT	7.9	14	24	35	44	26.7	22.15
NP	4	9	17	14.6	28	20.6	16.3
LOAN	17.8	24	32	39	40
ROACE*	24.51	18.6	22.44	26.09	25.5

*DENOTES PBIT/AVG CAPITAL EMPLOYED

9M SALES AT 269 CRORES AND NET PROFITS AT 20.6 CRORES.  EPS FOR 9M FY 11 IS 9.15.

OUTSTANDING SHARES 2.24 CRORES.

HIGHLIGHTS AT END OF Q3 FY 11

Astral Poly Technik Ltd., leaders in manufacturing of CPVC pipes & fittings announced the financial results for the Quarter ended on 31st December , 2010. 

Overview of Q3 FY 2010 v/s Q3 FY 2009 

• Company’s sales from operations has increased by 45%, to Rs.98.49 Crore for the FY 2010 (Q-3) as against Rs. 67.81 Crore in FY 2009 (Q-3). 
• PBT has increased by 32% to Rs. 9.94 Crore for FY 2010 (Q-3) as against Rs. 7.55 Crore in FY 2009 (Q-3). 
• Cash Profit has increased by 32% to Rs. 11.14 Crore for FY 2010 (Q-3) as against Rs. 8.47 Crore in FY 2009 (Q-3). 
• Profit After Tax (PAT) has increased by 34% to Rs. 8.38 Crore for FY 2010 (Q-3) as against Rs. 6.27 Crore in FY 2009 (Q-3). 
• The Company has delivered an Earning Per Share (EPS) of Rs. 3.73 for the current quarter (On Rs.5 Paid up Shares). 

As usual, the company has been able to maintain its growth momentum and delivered a topline growth of 45% during the quarter. However, the EBITA margin has dropped compared to Q-2 quarter which was mainly because of reduction of PVC-Resin price during the last quarter. The drop in PVC price during the last quarter was appx. 7% to 8%. During the quarter other income has increased substantially mainly because of writing back of provision of earlier year and income on investments. However, on a consolidated basis the overall profitability has increased by 34% from Rs. 6.27 Crores to 8.38 Crores. Since long, the company has been able to maintain its 40% + CAGR growth and during the current quarter also company has been able to maintain 45% topline growth. The last Quarter is always bullish in our industry and the company is  quite confident that company will do better (Q-4). 

The new products launched by company such as SWR/ FOAMCORE/ MANHOLE etc are getting very good response in the market besides the existing products. 

During the quarter, the company has utilized its capacity to the tune of 6,856 MT, Further the capacity utilization during the first nine months of the last year was 13,160 MT against that current year first nine months is 18,328 MT which shows a growth of 39%. During the last quarter company has utilized its capacity to the tune of 89% (Total Capacity as on closing of Q-3 was 30,867 MT). However, the company has already increased its capacity to the tune of 4,500 MT in the month of January and few machines are in pipeline which will be installed in the month of February to make the total capacity Appx. 45,000 MT. 

During the quarter rupee was comparatively stable and moving on an average between Rs. 44.40 to Rs. 45.40 hence the company was able to gain Rs. 0.36 Crores in foreign exchange. However on Liabilities paid during the quarter company has incurred a loss of Rs. 0.90 Crores and on unpaid liabilities company has gained Rs. 1.26 Crores. Hence the net effect is Rs. 0.36 Crores during the quarter. 

 Kenya joint venture company will start production from January. 

POSITIVES:

THE COMPANY HAS EXCLUSIVE ARRANGEMENT TO SOURCE ITS RAW MATERIALS FROM LUBRIZOL US.  LUBRIZOL IS UNLIKELY TO PROVIDE SUCH ARRANGEMENT TO OTHER PLAYERS IN INDIA.  THIS PROVIDES A SORT OF ENTRY BARRIER FOR THE COMPANY.

THE COMPANY KEEPS ON LAUNCHING NEW PRODUCTS E.G IN Q1 FY 11 IT LAUNCHED MANHOLES/INSPECTION CHAMBERS AND IS LIKELY TO LAUNCH CPVC BASED FIRE SPRINKLER SYSTEMS—FIRST OF ITS KIND IN INDIA.

CONSISTENT GROWTH OVER THE YEARS SHOWN BY THE COMPANY AIDED BY REGULAR  AND TIMELY CAPACITY EXPANSIONS

EXCELLENT BALANCE SHEET INSPITE OF REGULAR CAPACITY EXPANSIONS.

EXPORTS TO NEIGHBOURING COUNTRIES LIKE SRILANKA, BANGLADESH, AND NEPAL COULD BE GROWTH DRIVERS. KENYA PLANT EXPECTED TO BE OPERATIONAL SHORTLY WILL ALSO AID GROWTH.

VERY GOOD RETURN RATIOS WITH ROE IN EXCESS OF 20 OVER THE YEARS

NEGATIVES:

RAW MATERIAL PRICE LINKED TO CRUDE DERIVATIVES AND HENCE  PROFITABILITY MIGHT BE AFFECTED DUE TO SHARP SPIKE IN CRUDE PRICES.

SINCE IT SOURCES A MAJOR PART OF ITS RAW MATERIALS FROM OVERSEAS, IT IS EXPOSED TO CURRENCY FLUCTUATIONS.

THE TIE UP THE COMPANY HAS GOT FOR RAW MATERIAL SOURCING AND FOR  AVAILING  MANUFACTURING TECHNOLOGY  WITH ITS FOREIGN PARTNERS COULD GO SOUR LEADING TO PROBLEMS GOING FORWARD.