Astral Poly Shares Hit Record High On New Business Foray, Expansion Plans
Shares of Astral Poly Technik Ltd. rose in early trade after the company said it plans to enter the business of making and trading of plastic water storage tanks and add new capacity.
The company intends to add 4,800 million tonnes per annum of new capacity at its Ahmedabad plant and 13,500 MTPA at its Aurangabad facility, for which it will not spend more than Rs 75 crore, it said in an exchange filing. It intends to commission production at the new capacity in Gujarat by Q4 FY21.
The company has cited large control by unorganised players, logical extension of the brand among its pan-Indian network, many dealers and distributors already being part of this business as reasons for its foray.
The plumbing systems maker will acquire assets from Shree Prabhu Petrochemicals Pvt. and other parties in Aurangabad, for a total consideration not exceeding Rs 51 crore, according to the filing. “This may undergo change subject to further valuation excercise and other price adjustments as agreed between the parties,” the filing said.
The plastic water storage tank business has an opportunity of Rs 5,000 crore and that the size of the industry will be Rs 8,700 crore by financial year 2021-22, Crisil said in a recent report.
“This business is perfectly fitted to the synergy of ASTRAL to leverage Brand ASTRAL and its huge network of dealers and distributors,” the company’s Chairman and Managing Director Sandeep Engineer was quoted as saying in the press release. “It’s going to be hugely beneficial to all our stake holders such as Dealers/Distributors and Investors at large.”
“We await further details on the company’s strategy and execution approach in this new product category,” Jefferies India analyst Sonali Salgaonkar wrote in a note. “We expect sales and profit after tax Compound annual growth rate of 12% and 21% with 130-basis-point margin expansion, aided by benefits from revamp in adhesives and distribution and rex, premium launches and solid industry opportunity.”
Shares of the company ended at an all-time high with gains of 3.2% at Rs 1,498.4. The stock gained for the third day in a row.
Out of the 23 analysts that track Astral Poly Technik, 11 have a ‘Buy’ recommendation, eight suggest ‘Hold’ while four recommend ‘Sell’. The stock trades 17.8% higher than its 12-month consensus price target of Rs 1,216.4.