Release Date: May 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Astral Ltd (BOM:532830, Financial) reported a 24% growth in its piping business, showcasing strong performance in core operations.
- The company has received UL approval for its fire sprinkler products, enabling it to secure significant international projects, including five-star hotels.
- Astral Ltd (BOM:532830) has fully operational plants in Guwahati and Cuttack, with two new plants under construction in Hyderabad and Kanpur, expected to be operational within the fiscal year.
- The company is expanding its product portfolio with the introduction of OPVC pipes, which are expected to replace ductile iron pipes in infrastructure projects.
- Astral Ltd (BOM:532830) has launched Astral paints and is targeting a revenue of INR 300 crores in the next fiscal year, leveraging its strong brand and distribution network.
Negative Points
- The UK operations faced challenges due to a significant drop in raw material prices, resulting in lower EBITDA margins.
- The adhesive business in the UK did not grow in value terms and faced inventory losses, impacting overall profitability.
- The company experienced increased costs in sales promotion, freight, and power and fuel, which affected EBITDA margins.
- Astral Ltd (BOM:532830) is facing a volatile PVC price scenario, with prices expected to continue rising, potentially impacting cost structures.
- The faucets and ceramic ware business, although showing growth, is still in the stabilization phase and has yet to achieve significant profitability.
Q & A Highlights
Q: Can you provide an update on the paint industry and how Astral plans to navigate the current market dynamics?
A: Sandeep Engineer, Chairman and Managing Director, explained that despite the entry of a major competitor, Astral will not engage in disruptive pricing. Instead, the company will leverage its existing adhesive dealer network, which includes around 200,000 dealers, to grow its paint business steadily. The focus will be on achieving a 25%-30% growth rate without engaging in cash burns or aggressive spending.
Q: What is the outlook for the OPVC pipes market, and how does Astral plan to capitalize on this opportunity?
A: Kairav Engineer, Whole Time Director, mentioned that Astral will initially launch OPVC pipes up to 12 inches, targeting the replacement of ductile iron pipes for freshwater supply. The company sees a promising future for OPVC pipes in India and plans to expand its product range as demand grows.
Q: Can you provide a breakdown of the adhesive business performance for FY24, particularly between international and India operations?
A: Hiranand Savlani, CFO, reported that the India adhesive business generated INR 960 crores in revenue with a 15.7% EBITDA margin. The UK operations, however, faced challenges with inventory losses, resulting in a lower EBITDA of INR 19 crores on INR 355 crores in revenue. The company expects the UK business to achieve a 10% EBITDA margin next year.
Q: What are Astral's CapEx plans for the next two years, and how will the company utilize its INR 500 crores cash reserve?
A: Hiranand Savlani, CFO, stated that Astral has planned a CapEx of INR 300 crores, primarily for the Hyderabad and Kanpur plants. Depending on demand, the company may increase this investment. Additionally, Astral is exploring opportunities for expansion in Central India and potential acquisitions.
Q: How does Astral plan to capture the market for gas piping and insulation piping, and what is the company's strategy for adhesives and sealants?
A: Kairav Engineer, Whole Time Director, explained that Astral is closely monitoring the gas piping market and will enter it once proper standards and acceptance are established. For insulation piping, the company plans to launch CPVC and pex-aluminium composite pipes for hot water supply. Saumya Engineer, CEO of Astral Adhesives & Paints, added that the company is focusing on creating new applications and expanding its retail presence for adhesives and sealants.
Q: What is the expected growth rate for the adhesive business in the next two years, considering the new Dahej plant?
A: Sandeep Engineer, Chairman and Managing Director, indicated that the adhesive business is expected to grow at a much higher pace in volumes, driven by the new Dahej plant and the New Bharat initiative. Hiranand Savlani, CFO, added that the India operations of the adhesive business could see a 20%+ growth rate, while the consolidated growth is expected to be between 15%-20%.
Q: Can you provide details on the financial performance of the paint and bathware businesses?
A: Hiranand Savlani, CFO, reported that the bathware business generated INR 62-63 crores in revenue but incurred a loss of INR 17-18 crores at the EBITDA level. The paint business, on the other hand, achieved INR 185 crores in revenue with an EBITDA margin of around 14.5%-15%.
Q: How does Astral plan to maintain or increase its market share in the piping industry?
A: Sandeep Engineer, Chairman and Managing Director, emphasized that Astral aims to grow at a 15%-20% rate, with a focus on achieving 20%+ growth. The company plans to leverage its strong brand and distribution network to outgrow the industry and gain market share.
Q: What is the company's strategy for managing working capital and maintaining a strong balance sheet?
A: Hiranand Savlani, CFO, highlighted that Astral is very careful about managing working capital and maintaining a strong balance sheet. The company prioritizes sustainable growth and avoids diluting its balance sheet, even if it means achieving slightly lower growth rates.
Q: How does Astral plan to expand its export business, particularly in the Gulf region?
A: Hiranand Savlani, CFO, mentioned that Astral has recently opened an office in Dubai to focus on expanding its export business. The company plans to explore opportunities in the Gulf region for various products, including CPVC, Drain Pro, Silencio, and adhesives.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
