ICICI Securities Sees Multibagger Plastics Sector Stock Fetching Returns, Suggests Buy

ICICI Securities has recommended investors to buy mid cap stock operating in plastics sector, Astral Ltd and assigned a target price of Rs 2295 apiece. The current market price of the stock is Rs 1895 apiece. If you but the shares of Astral Ltd today, you will get 21% upside. Demand trend in pipe has improved QTD and is likely to remain healthy in H2FY23. Check key takeaways below:

1. Astral Ltd Stock Performance & Return

The current market price of the stock is Rs 1896 apiece with an intraday decline of 4%. The stock's 52-week high is Rs 2654 apiece and 52-week low is Rs 1584 apiece, respectively. The company has a market capitalisation of Rs 38123 crore. The stock has rallied 122% in last 3-years and 276% in last 5-years.

2. Astral Ltd Pipe volume to improve

ASTRA management indicated demand for PVC pipes is expected to remain healthy in H2FY23E as PVC resin prices, which had corrected ~38% FY23 TD, have now started stabilising; also see some price increases. The rapid fall in PVC prices had resulted in inventory de-stocking by dealers and also some postponement by end consumers. This trend is likely to reverse going ahead (some signs seen already in Q3 as per our dealer interaction) with PVC resin prices now showing stability.

3. Margins To Have Tailwinds From Both Pipe And Adhesive Segments From Q4FY23

Pipe margins, which got adversely affected in H1FY23 due to inventory losses, are expected to normalise in Q4FY24E as PVC resin prices stabilise. Management believes 17% is sustainable margin in pipe segment.

With PVC resin prices expected to stabilise, volume growth should be higher as dealers re-stock along with Q4 being the peak demand quarter which may result in much better margins.

4. Valuation

We continue to like ASTRAL for its strong brand, comprehensive product portfolio, wide distribution reach and robust balance sheet. We believe ASTRA has near term margin and demand tailwinds in both its major businesses of pipes and adhesives. Maintain BUY with an unchanged Dec'23 target price of Rs2,295.

5. About Astral Ltd

Astral Limited is engaged in the manufacturing of plumbing and drainage systems. It provides plumbing pipes, fittings, insulation tubes, fire sprinklers, water tanks, cable protection, and drainage systems.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.