Analyst Meet / AGM - Analyst Meet

06-Jun-2017, 02:19
The company held analyst meet to discuss quarter and year ended March 2017 result. It was addressed by Mr. Sandeep Engineer MD and the CFO Mr. Hiranand Savlani

Key Highlights

Q4 consolidated revenue came in at Rs 580 crore registering a healthy growth of 12% YoY,. Growth was supported by both Pipes and Adhesives businesses which grew 11% and 9% YoY respectively. The company Improved profitability in both segments, Pipes by 380 bps YoY to 16.4% and Adhesives by 202 bps YoY to 13.7%

Pipes volume at 29000 MT was up 12.5% YoY. The strong volume growth along with the lower cost of CPVC compound led to Pipes segment EBITDA margin improving 380 bps YoY to 16.4%

Adhesives business recovered well during Q4 after a slight hiccup in performance during the previous quarter. Q4 revenue came in at Rs 130 crore, up by 18.9% YoY

In the previous quarter, the company's Seal-IT (US) business lost a month's revenue as the company shifted its plant from Miami to North Carolina leading to operating level losses in ASTRA's international adhesives business. The North Carolina facility is expected to be ramped up by Q2FY18.

During Q4, the company increased its pipes production capacity by 9,946 MT, taking its total annual production capacity to 137,708 MT. The company expects increase its capacity to 170,000 MTPA during FY18. The company is doubling its Hosur (Karnataka) pipes capacity to 36,000 MTPA while its new Gehlot (Rajasthan) facility would start with an initial capacity of 20,000 MTPA. The company is also scouting for a suitable location to set up a pipes factory in East India.

In the Adhesives business, the company's Santej plant has commenced production of Resinova branded products.

This year closing receivable days shot up unexpectedly as post demon demand picked up in March, and since then the receivable days have normalized back as of April/May.

Payables days has gone down mainly because of utilization of surplus cash for payment to creditors to avail the forex benefit

Piping business

Backward integration of CPVC compounding facility - The company has also set up a CPVC compounding plant in Gujarat at an investment of Rs 50 crore and signed an agreement with Japan's Sekisui Chemical Company (Sekisui) for supply of CPVC resin (raw material for CPVC compound).a

Introduction of new product like high density low noise drainage system called Astral Silencio. Next 2-3 months major export of this product will be start. In world, there are only 3-4 companies which is making similar product.

Introduction of CPVC pipes for Industrial use and Casing pipe for submersible pumps

Substantial ramp up in the capacity in Hosur facility will give an edge in southern Market

New facility in Rajasthan will be in operation before end of FY 18 which will help in increasing market share in North and North-East region

Huge potential in agricultural piping business which is more than Rs 7000 crore Market wherein it is new entrant and getting very good response. FY17 agri pipe business had revenue of just Rs 150 crore.

Post GST, organized players will get level playing field compared to unorganized players. Because of strong distribution network and widespread geographical presence, the company is set to increase market share.

Adhesive business

Last 2 quarters, adhesive business has grown by 30% plus. From FY19, will see good growth in adhesive business. Also, with help of backward integration, margin will improve for adhesive products.

Expansion of existing capacities is on the verge of completion which was bottleneck for growth

Production of few products already started at Santej facility, Gujarat. All the products of Kanpur facility will be made here also.

With full capacity, India's Adhesive business has potential to achieve revenue of more than Rs 600 crore.

Silicone Sealant has become fastest growing product for Resinov.

US plant has been shifted from Miami to North Carolina and has already started production at new location. Capacity expansion will take place at 2^nd quarter of FY 18 which will further boost revenue and margins

Increase in realization, operational efficiency and economies of scale is helping improving margins

Production from Santej facility is giving an edge in western and southern market

Aggressive branding and introduction of Mr. Salman Khan as brand ambassador for Astral Adhesive will help in achieving healthy topline growt

UK operations - Achieved 15% growth in revenue on constant currency in FY 17, The company has seen volume growth. Volatility in Pound has stabilize. It has transfer 4 new product technology to India.

UK facility is going for major expansion.

Demand in US operation has gone up. US product likely to be introduced in UK & Indian market in Q4 FY18. Introduction of UK & US products in Indian market and vis-a-versa will add to the growth and margin. Going forward, with contribution from US business, UK business is expected to show double digit EBIDTA growth.

Adhesive has tax rate of 32% in pre GST, which will come down to 18% in GST. As a result, unorganized players will be affect alot.

Other Highlights

Hosur plant will have ample power from November for next 5-7 years.

For FY17, pipe business contributed was 75% to top-line while adhesive contribution was 25%. In pipe business, CPVC contribution was 55% and PVC was 45%.

As per report by ICICI Sec and CLSA, Present size of plastic piping is around Rs 21500 crore which is expected to grow @ 14% CAGR during FY17-24. Present size of adhesive, sealants and building chemicals is around Rs 10000 crore which is expected to grow @ 13-15% CAGR over next 5 years. Demand for adhesive and building chemicals is expected to grow considerably because of GOI's initiative of Housing for All and growth in the net disposable income of household due to GDP expansion

GST rates are expected to remain neutral for plastic piping & fittings. GST will give an edge to organized players compared to others. Share of Unorganized players is estimated to be around 40%. It is estimated that organized player's share will increase post GST

In last 6 months, CPVC grown faster than PVC.

Next 2 years, capex will be Rs 150 crore.

Piping and adhesive business EBIDTA growth will be faster than top-line growth.

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