BUSINESS
Astral PolyTechnik (APL) is an Ahmedabad-based company manufacturing CPVC (chlorinated polyvinyl chloride) pipes and fitting since 1999. APL is the first licensee of Lubrizol of the US (formerly known as BF Goodrich, a fortune 500 company) and has an equity joint venture with Specialty Process LLC of the US to manufacture and market the most advanced CPVC plumbing system for the first time in India.
The company’s products compete directly with galvanized iron (GI) pipes, but are cheaper and more durable. They not only gained rapid acceptance in new construction projects, but in the replacement market.Starting from merely hot and cold water system, the company has expanded its product portfolio to include industrial piping, lead-free PVC plumbing, ABS pressure pipes, CPVC aluminium bendable pipes, sewage, waste and rain water management systems and underground drainage system, and is planning to launch CPVC-based fire sprinkler system shortly.
APL imports CPVC from Lubrizol, which is the leading manufacturer of this specialized polymer and controls over 80% of the global CPVC production. It has set up a plant in Himachal Pradesh to produce fittings and this facility enjoys full income tax exemption till the end of FY2010.
GROWTH DRIVERS
APL has continuously expanded its production capacity since inception. In the past five years alone, its capacity has gone up at a cumulative annual growth rate (CAGR) of 70.5% to 26000 TPA from 1800 TPA by end FY05. Thanks to strong demand in the past, the company could fully utilize its additional capacity in the subsequent year itself. The latest round of expansion is likely to allow the company to grow in the next two years without any additional capex.
The company is also expanding its distribution network in India, which currently stands at around 200 distributors and nearly 3000 dealers. It is setting up a joint venture in Kenya to enter the African market and has plans to set up another plant in southern India.
FINANCIALS
Over the last five years, the company’s net profits have grown at a CAGR of 45% as against a growth of 39% in its net sales. Despite the expansion spree, the company has improved its debtequity ratio over last five years from 1.48 in FY 2005 to 0.67 in FY 2009.
During FY 2009, APL achieved a 42% topline growth to Rs 193 crore. But its net profit was 17% lower at Rs 14.2 crore. The fall in rupee increased the company’s import costs and repayment liability on foreign currency buyer’s credit. Both put together, the company lost nearly Rs 13 crore during the year. The recent rupee strength is set to boost the company’s future performance.
VALUATIONS
At the current market price of Rs 120, the scrip of APL is trading at 9.5 times its earnings for past 12 months. Going forward, we expect the company to record an EPS of Rs 22.7 for FY2010, which discounts the current price at just 5.3 times.
Source: EconomicTimes
