Astral Poly Technik's numbers for Q2FY19 came in above expectation on Revenue and PAT fronts. The revenue for the quarter grew by 21.7% yoy to Rs629cr, against median consensus estimate of Rs604cr. EBITDA grew by 23.7% yoy to Rs94cr, above median consensus estimate of Rs93cr. EBITDA margin expanded by 25bps yoy to 15%. PAT grew by 15.9% yoy to Rs45cr against median consensus estimate of Rs51cr.
Revenue growth was aided by strong growth across piping and adhesives and also due to consolidation of Rex Poly Extrusion (marginally less than full quarter revenues).
The plastics segment grew by 20.9% yoy and adhesives segment grew by 23.8% yoy. On sequential basis, plastics segment grew by 40.6% qoq and adhesives segment grew by 12.5% qoq. Resinova grew by 18.5% yoy and Seal It grew by 41% yoy during the quarter.
The volume growth for the piping segment was 4.5% yoy to 27,250 MT. The management mentioned that the operating environment was relatively volatile during the quarter. July was impacted by truck strikes (affecting10-15 days), August owing to Kerala floods, and September was muted on expectations of price correction in October.
Price hikes in September in the range of 3-4% were taken and the company took certain measures to maintain payment discipline (like moving smaller distributor to cash and carry model) which also impacted volumes to some extent.
The company is in processes of launching ~250 new products (mostly fixtures and fittings). The management has guided for Adhesives revenue growth of ~20% yoy with 15-17% EBITDA margins. Piping revenue growth was ~15% yoy with EBITDA margins at ~15%.
EBITDA margin expansion was muted despite expected inventory gains. This was on account of (1) higher campaign related cost in Resinova (~Rs4.5cr), (2) some write-offs arising from review of operations of Rex Poly. The management has hinted that there might be some write-offs possible in coming quarters but these are likely to normalize by end of FY19.
As per the management, Rex Poly, which posted EBITDA margin of ~2%, and can witness an improvement in EBITDA margin profile in the range of 10-15%.
PAT growth was lower (vs. EBITDA growth) on account of higher interest cost and currency fluctuations. This was due to increase in debt to part fund the Rex Poly acquisition (having higher cost debt, and increase in interest rate by 50-70bps). The management has suggested that interest expense and currency fluctuation are likely to subside as it has replaced the higher interest debt of Rex Poly with its existing lender and the Foreign currency fluctuation which has MTM provisions will reverse if INR appreciates.
The capex for FY19E and FY20E would be Rs150cr (does not include maintenance capex) with most of the capex happening in FY19E. Of this, Rs40cr will be for Rex Poly. The capex during H1FY19 was Rs50-60cr (including Rex capex ~Rs7cr) and the bulk of the capex will happen in H2FY19E.
Astral Poly Technik Ltd is currently trading at Rs. 1,015.05, up by 52.85 points or 5.49% from its previous closing of Rs. 962.20 on the BSE.
The scrip opened at Rs. 970.15 and has touched a high and low of Rs. 1,037.45 and Rs. 967 respectively. So far 1,20,048 (NSE+BSE) shares were traded on the counter. The stock is currently trading below its 100 DMA.
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