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ASTRAL Astral Ltd · Specialty / chemicals Q4 FY25 · concall
Pattern: volume guidance fy26 1500

ADD-on-PVC catalyst dropped; CPVC backward-integration plant (40k MT, INR120cr, Dec'26 trial, Q4FY27 commercial, 200bps margin) formalised; Vision 2050 PP pivot + Ranbir Kapoor brand push + FY27 pa…

3 weak · 6 clean — pushback across 3 of 9 Q&A turns

Focused evidence 3 of 9

Ritesh Shah · Investec Capitalweak

Hi I have five question. Ya so first would you like to give any guidance on volume and value for next fiscal? Thats the first question sub part to it is if we just roll back FY22 we had given a number of 1500 crore for new growth inj. Ah so, we have some idea on bathware and paints. Ah but if we had to put this number 1500 crore whos sighted for FY27, ah where are we ah on that road mark?

So, we are not giving the individual number earlier we used to give but because of the competitiveness in the market and lot of players are playing strong practises. So because of that we have stop giving the number. But I can say what we have predicted 1500 we almost we are closer crore today. So we have completed I think three years when we given the guidance three and another two year we are going to target the 1500 what we have said. So it cover its not only restricted to this product which you discuss but it cover silency also drain pro also fire also, Valve also and then another couple of products are there. [Kairav Engineer on volume]: So with regards to I think volume you ask volume guidance see volume guidance largely depends on two things ah when the ATD comes and how much the ATD comes and when the BIS norms are finalized because that will play a very vital role in the channel restocking. Right now the channel is working on very slim inventory levels. So if this both announcements if they come in the end of first quarter or beginning of second quarter then the subsequent quarters the numbers might be in the high double digit also mid double digit also. Ok? But then we are optimally aiming for a lower double digit type of a volume this year if we get aided by this market buncy and market sentiment we can over deliver on what our projections are but again largely depends on PVC price movement.

Ritesh Shah · Investec Capitalweak

second question I want Sandeep ji to specifically answer this sir if you just look at the annual report ah the attrition what it says its 25%. What is that we are doing to retain the employees and if you can reflect on the Esop policy I think we had one long back so as we grow bigger whats a thought process on retaining employees.

so basically the accretion people have nothing to do with this these are on the lower land and there are so many seniors that we will be revising our policies on seniors so basically we have now nine of vice president presidents and many of the have join and also we have four divisions to address we dont have one division to eight so there is no question and discussion on that side but the lower end people we did to accretions we there was a hue and cry we said chicken and egg we need people you need sell we increase the value of the man power everyone shouted your man power cost went high now you say man power has been lower the accretion has gone high so what we have to do I dont understand what your questions come up to run my business but we did do some corrections on the man power at the lower end but certain businesses I am telling you again understand if somebody wants to launch a selfone we are sing the same has I launched a network when you launch something you need man power.

Ritesh Shah · Investec Capitalweak

Third one is also for you Sandeep bhai. If we compare us verses say the larger peers ah and the peers at I think there one comparable peer. Ah if you look at employed cost and other expenses as percentage of sales, ah we are like a way off the charts. So when we decide probably kairav can also answer this on ANP spends and when we are deploying giving money to on the employee side and distribution what are the levers that we have to ensure that we are getting more efficient every year?

So two things first of all ANP spends ANP spends we have not increased ok other expenses include lot of line items its not only ANP since last two years the ANP spends have been what they have been you know they have been stagnant even this year the ANP spend budgeting is not increased. Problem is that your polymer prices have collapsed 18% in a financial year. Last two years the polymer prices have been weak. So it has eroded the top line. If the top line erodes then your other expenses is and employee cost as a percentage is going to ballon. Now if you are comparing to a larger peer what peer you want to compare to because I operate in four segments. You can not compare only a piping peers employee cost verses my employee cost because I am working in adhesive also. Adhesive requires more pain man power.

▸ Other Q&A (6)
Ritesh Shah · Investec Capital

Sandeep bhai thanks for that compliment you you at the start mentioned about the anti-dumping duty event that that is now likely to unfold soon then later. Whatever are your projection have you factor that in and that could be a pleasant surprise completely?

Basically the projections after the anti-dumping beauty have not been factor but we are seeing in this year because PVC has bottom down and the complete channel is try and slowly the PVC will go up a little bit anti-dumping will be addition to that it has not been still implemented by government. the positive thing is the order has been state by the supreme court. So with all the priorities global priorities government has we cannot say when this anti-dumping duty will be in place. But overall if you see the PVC and the polymer will have a positive impact of growth in this fiscal.

Ritesh Shah · Investec Capital

When we started our adhesive business, I remember you had said that we have entered to out of eight or two out of nine segments if I remember correctly five six seven years ago. What is your view now? Are we ready to enter something more of the remaining areas in the paint in the adhesive industry?

I think for the retail space in terms of adhesives and the chemistries we have finished the complete range weather it is wood working adhesives our maintenance and repair adhesives and sealants and sealants and tapes. I think we have completed range but of course we are looking at newer applications and category expansion wherever we feel is required we look into it. [Follow-up on entire adhesive market]: I think in construction chemical space we would still be untap in terms of completing the product range but we would be able to do it in next year max I would say but apart from those adhesives and sealant as of now the range we hold can compete with ah the top players in the Indian market no doubt.

Rahul Agarwal · Ikigai

one question was on CPVC industry. Ah you know we hear that PVC industry now is almost like 4 and half ah million tons of fiscal 25. Just wanted to get some views on CPVC industry size. In terms of volume value whatever you can share?

It is about 2 and half lakh tons now. Its about 5% of PVC industry is a small. See it is a very nish product now if you look at CPC, it is it the application of CPVC currently is for the hot and cold water internal plumbing and the external some loop lines and some plumbing if you want to do. CPVC real value unlocking will happen when the fire products pick up. Fire has shown a steady pickup over the last couple of years.

Keshav Lahoti · HDFC Securities

we are anticipating 10 to 15% volume growth for next year at the same time we feel UK operation will improve paint operation margin can improve but while we have seen Hiranand bhai interview he have mentioned the margin will remain stable in FY26 why are we not expecting some kind of improvement.

I have never ever said margin is going to stable. I said the margin of India operation is going to remain stable. This world whatever the new businesses are there that will be top up to that. So paint we have said that it will be small improvement will be there this year also. UK has not given a single penny this year zero EBITA. So how can be same next year? Historically you see they were delivering 8 to 9% minimum EBITA. So margin on consol basis it is going to improve and secondly never ever see the last quarter number only we have to consider the full year number and we have to account the inventory losses also now next year suppose now more or less PVC is getting bottom out ok that is what our view we may be wrong also so dont dont go with my view only but we are of the view that the PVC is slowly and visually going to bottom out upward journey may take some time also or make take quickly also. It depend on this two outcome of anti dumping NBI. thats why we are giving you a long term range that we will be working between 16 to 18% in the pipe category and adhesives 14 to 16 we have communicated.

Het Chauxi · Deven Chausi

the first question is on the adhesive business we have seen lot of regional companys like MYK Laticut from Hyderabad and Sera Camp from Tamilnadu having significantly large presence in your core markets which is Gujarat. What is your sense on this regional competition?

Ya I understood the question. MYK firstly is not a regional company. Its a big company and very good products. One thing I will say is we have not even entered MYKs domain and this year is when we enter the MYK domain with the construction chemical range. So for us it will be expansion in portfolio and expansion in product range. So they are all doing their business and I think we will we will definitely go into the grouting space as I was tell talking to Mitten bhai also we are planning for grouting space this year so definitely we are working on that product range and we are it ready ah with the colors and everything and we are going into the cementetious range this year.

Het Chauxi · Deven Chausi

the second question is on in the last analyst meet actually you mentioned something on the Mumbai like center having a like you were plying to set up a new marketing and digital team in Mumbai. Can you from some line that initiative and how you plan to scale that up if at all if thats in the work?

We already have a full flej office in Mumbai. Our all seniors for adhesives business now in paint business work out of Mumbai and that office and the setup is well in place growing and we are going to have a another big setup shifting this setup to a new setup with an more seniors coming and working out of Mumbai. [Follow-up on Asian Paints style digital]: so prediction is basically forecasting. So understanding what will happen so right. So not to the maturity of Asian Asian definitely is master in that and it will take us time to actually get to that level and understand how the supply chain works in terms of the paint business but we definitely have ah good systems in place when it comes to supply chain we have a good wear house management software with we are working on auto refilling of our distributors and dealers wear auto order orders will be generated.

▸ Prepared remarks (4 blocks)
So, we welcome you all to this fiscal year-end results discussion, and we'll also talk about the future and scenarios. We'll answer all your questions in person. This year has been a very challenging year. The questions I've been answering since morning, especially about the polymer industry, indicate that everyone faced a big, challenging year and PVC was the most challenging polymer, where price challenges were prominent, followed by growth challenges. But in this scenario, as you can see, across all four quarters, we have delivered very good results. The growth has been modest, but the margins have been well-maintained and improved. From this, you can see many questions were asked about our CPVC growth. We don't want to quantify it people have quantified their numbers in percentages, above a certain percentage but we don't want to quantify the numbers. If you look at the numbers and the margins, obviously, the market share and the growth of value-added products have gone up. CPVC is one of the value-added products, as are the new products. If people have quantified the numbers with huge growth, we don't see any value in quantified numbers that reflect in value addition. As usual, I don't want to go into a presentation or discuss capex cycles because this will be covered in value terms. The Hyderabad plant is fully operational, and this year, we will have the full range of pipe products manufactured from the Hyderabad plant. The Kanpur plant is on the verge of completion in the construction segment, and machines will start arriving from the next quarter. So, in the third quarter, the Kanpur plant will be operational, and by year-end, it will be fully operational. We have started fitting operations in the South and also in Rajasthan. We will shortly start fitting operations in the East, in Orissa. Our new range of valves, especially ball valves, is complete. We are adding butterfly valves and other types of valves used in the plumbing segment. We are also adding machines for our silent pipe production. Our Drain Pro, which is doing well excellently, has also increased capacity. We are the first company in India to receive complete approval for HPVC pipes and fittings for fire applications, which is a big achievement for us. We're also getting our PEX aluminum machine around Diwali, and we will be the first company to start an advanced range of PEX aluminum pipes from India. This is a state-of-the-art, very fast machine that will deliver the best quality composite pipes. In the bathware segment, we achieved a growth of 15% this year, reaching close to 130 crores. We're not yet at break-even, but the growth is encouraging. The market is giving a good response to our products, and most of our distributors have started selling bathware and ceramic ware products, which adds another range of sales from Astral. Coming to adhesives, adhesives have done excellently well in India, both in terms of growth and margins.
epoxy and white glue. We are adding two more plants in Dahaj this fiscal year and the next to complete many of our chemistries. There has been a challenging time in adhesives in the UK, and I know there will be many questions about that. Many questions were asked today about what we would do with the UK and whether we're thinking of exiting the UK. That business has been with us for 10 years. This is the 11th or 12th year since we bought it at a level of 60 to <strong>70 crore</strong> turnover, which has now reached almost 380 crores. In one year, nothing wrong has happened. Let me be very frank there are base corrections that need to take place, from operations to many other corrections. Alterations will come in the next two to three quarters, especially from one quarter onwards. There are cycles. In the past, when we bought the adhesive business, we had a cycle for two years where things dipped and then went up again. We're coming up with a high-tech machine with the help of US and UK technologists and R&D people. It will be the first to produce 100 colours of different cartridges coloured silicone for the first time in India. There will be 100 different colours of silicones offered in the market by us. Coming to the paint segment, because paint is another area with a lot of worries, I understand. But if you look at it another way, we are very small-scale in paint. Last year, the concern was about burning money. Paint has a positive EBITDA, though it's low, and there's nothing negative. We launched paint in the first and second quarters in Gujarat, in many cities. Now Astral Paint has started selling, moving well, growing, and similarly, we have now launched paint in Rajasthan. We've also started doing well in Rajasthan, and phase-wise, we will be opening one state at a time for Astral Paints. The South will continue to sell Gem Paints. Regarding OPVC, many questions came up about OPVC what is your technology? Nobody questions us about it when we went from our own silent pipe to our technology. It is proven. We brought this technology from India, working closely with a machine manufacturer in India. We have actually received a first order of 18 crore for OPVC, which we have started supplying, and we are getting approvals state by state for this product. We just acquired Al Aziz. The rationale behind acquiring Al Aziz was, first, it was at the right value. Second, PEPP, which was not in our product line, and we needed to enter this product line. They had a complete range of fittings. If we were to set up our own plant to make these fittings, it would take us five to six years to manufacture and get approvals. They also have gas fittings approved by German authorities for gas application lines.
Good afternoon, everyone. Welcome to Astral's analyst meet. The results are in front of you, so I won't discuss individual numbers much. We have a few slides to present. This is the consolidated full-year performance. You can see the last five-year revenue growth CAGR is <strong>16.5%</strong>, and similarly, EBITDA growth is 10.48%. PBT is 7.15%. PBT is mainly low because we have taken a lot of hits on the amortization of the new businesses which we acquired. To take the tax advantage, we amortized a lot of things, so because of that, the PBT numbers are low. Otherwise, cash profit, you will see, is more or less similar to the EBITDA level. This is the cash position. Right now, we are sitting on a net cash of ₹464 crore. This is the revenue breakup of our pipe plumbing— it's still the pipe business contributing 72%, and paint and adhesive contributing 28%. In the coming time, you will see this ratio will be a little toward the paint and adhesive side because the base is very low. This is the capacity chart. You can see that the capacity has been continuously growing. Though We might not require that much capacity, but we are still continuously pumping money into capex. The reason is simple that we want to decentralize our units, and we want to be a pan-India operation, considering our vision for the next 10 to 15 years. Because if we don't decentralize our units, with polymer prices coming down day by day, the element of freight cost is increasing in terms of percentage. In that case, the more and more decentralized you are, the more you will get the advantage of logistics costs. Considering that, we are continuously adding capacity. You might see our average utilization in the 55 to 65 range, but once our decentralization is over, you will see a sizable improvement. In the last two years alone, we have pumped in close to ₹1000 crore into this expansion activity, particularly capex. So, capacity building is taking place at a 10.3% CAGR, while sales are happening at a 13.5% CAGR. This is the graph to understand the PVC price trend. You can see that PVC is continuously falling in a one-way journey. Last year alone, the polymer price was down by 18%. Despite a 18% fall, you can see that in this environment, Astral is the only company in the country that has improved its gross profit margin.
We have improved the GP by 1%, and we have maintained our EBITDA. So this is the power of the brand. As far as the adhesive business is concerned, I think we are consistently growing at a 17 t0 18% for the last 11 years from where we have started our journey in 2014 and when we started that time our EBITDA percentage was just 6% now from 6% journey to this year full year number we are close to 17%. So adhesive business of India is continuously doing well. We are of the view that the pricing is going to remain volatile. Just now we were coming to here in between we got the message that the supreme court has given the verdict. That whatever the high court has given the verdict in favor of epigral to stop the few grades in PVC against the anti dumping duty that also they have scraped and they have said that you can put the anti dumping duty on the entire PVC basket. So sooner or later see we are very difficult to predict that date. But I think judiciary is seriously looking into that because lot of injury has taken place to our local manufacturer PVC they are bleeding right now. We already discussed anti-dumping; it has been announced on CPVC, and it has been extended up to FY29. The biggest growth driver we are seeing is that recently we have opened three new plants: one in Guwahati, the second in Bhubaneswar, and the third in Hyderabad. All these three plants are operational now. They are going to give us sizable revenue in the coming time. On the value addition side, we are looking at fire-pro pipes because recently we got the fitting approval. We already had the pipe approval from UL, and now we got the fittings, so that will open up the door for the export market as well as the local market. Similarly, OPVC is another product that also has high margins. Thirdly, we have recently opened our first overseas office in Dubai. So far, we have brought seven to eight products that we introduced for the first time in the country.
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