Astral Poly Technik’s stock has been on a tear in 2017 having risen 85% so far. Among those who have made the most of this meteoric rise include promoter entity Saumya Polymers which sold a million shares at Rs.643 on August 23 to pocket Rs.64 crore. The transaction reduced Saumya Polymer’s holding from 13.16% to 12.32%. That did not sap any momentum and the stock went on to hit an all-time high of Rs.730, which is where it trades now. Astral is India’s leading plumbing and drainage systems manufacturer and promoter Sandeep Engineer’s success story is the stuff of B-School case studies. Over the past five years, net sales has compounded at 26% and net profit at 30% respectively.
And while there has been a loss of momentum lately, the run up in price suggests that investors believe it to be a blip. The firm’s consolidated Q1FY18 profit reported a yearly decline of 8.7%, in the wake of inventory de-stocking at the dealer level and uncertainty amongst distributors in the wake of the implementation of GST. Profit from the high margin adhesive segment also declined by 27.4% y-o-y, due to GST and was further aggravated by unfavorable movement in the currency. The 3x increase in the expenditure on promotion activities, and increased employee costs has further impacted the margins.
Analysts reckon that the firm’s revenue could grow by 21.6% in FY18. A favourable tax regime, an increased demand due to government schemes and growing popularity of the plastic pipes (versus metal pipes) are expected to further boost Astral’s top-line. Given its strong brand, it currently trades at 32x FY19 estimates. Even after the latest sale, promoter holding continues to be high at 58.5%. As for institutional investors, FII holding has seen a marginal increase over the past one year from 14.5% to 14.8%. That increase can be attributed to Steadview Capital Mauritius increasing its stake from 3.9% in June 2016 to 4.2% in June 2017.
Though the stake of Tree Line Asia Master Fund (Singapore) and DF International Partners remained unchanged, the stake of ABG Capital declined from 2.8% to 2.15% and that of LTR Focus Fund from 2.24% to 1.96%, during the same period. Domestic mutual funds also marginally increased their stake from 5.6% in June 2016 to 6% in June 2017. While Axis MF and UTI MF increased their stake to 2.48% and 1.82%, respectively, Tata Balanced Fund has reduced its stake from 1.5% to 0.25%.