Astral turning ex-bonus this week, FIIs stake plummets in Q3: Buy?
Large-cap company Astral Ltd operates in the industrial sector. The company recorded a market worth of ₹38,373.85 Cr on Friday and closed with a downside gap on the exchanges. The company is involved in the production and installation of CPVC pipes. The firm announced bonus shares in a 1:3 ratio with the release of its Q3FY23 results report, and it has set Tuesday, March 14, 2023 as the record date for the purpose of determining the eligibility of shareholders entitled to the issue of bonus equity shares. Due to the T+1 settlement mechanism of India, the stock is turning ex-bonus on the same date, i.e. on Tuesday.
The firm recorded revenue from operations of ₹1267.8 crore on a consolidated basis in Q3FY23 as opposed to ₹1102.7 crore in Q3FY22, a growth of 15.0%. Astral said that its EBITDA plummeted by 9.5% YoY to ₹184.4 crore in the quarter ended December 2022 from ₹203.8 crore in the same quarter of FY22. In comparison to Q3FY22, when PBT was ₹169.7 Cr, the firm reported PBT of ₹129.5 Cr in Q3FY23, a loss of 23.7% YoY. The company’s profit after tax (PAT) or net profit plummeted by 25.8% to ₹94.9 crore in Q3FY23 from ₹127.9 crore in the corresponding period last year. Astral’s EPS was ₹4.62 in Q3FY23, a fall of 27.1% YoY from ₹6.34 in the same period the previous year.
During Q3FY23, the company recorded a promoter shareholding of 55.85%, FIIs stake of 14.88%, DIIs stake of 15.23% and a public stake of 14.04%. FII/FPI holdings declined from 16.26% in the September 2022 quarter to 14.88% in the December 2022 quarter, mutual funds elevated shareholding from 7.95% in the Q2FY23 to 8.66% in the Q3FY23, and institutional investors lowered holdings from 30.63% in the Q2FY23 to 30.11% in the Q3FY23, according to Trendlyne data. Promoter shareholding remained stable at 55.85% in the December 2022 quarter.
Commenting on the fundamental outlook of Astral, Rahul Ghose, Founder & CEO–Hedged said “One of the main reasons for the fall in the Astral stock from its peak at ₹2600 is the fall in PVC prices. The most important raw material for companies like Astral is Polyvinyl chloride (PVC). PVC resins cost forms almost 60-70% of a pipe manufacturer’s revenue. Now the companies will have to sell the existing level of inventory (that was manufactured at high PVC prices) at lower prices, as market participants would demand the benefits of these falling prices. Further, since PVC forms a major part of the cost, selling at low prices would reduce the company’s profit margins as well. Thus, this leads to companies having huge inventory losses. Now, if the PVC prices fall further, the margin is expected to get trimmed even further.”
Commenting on the technical outlook of the stock, Rahul Ghose said “Technically, the Astral stock has been trading in a sideways range for the last 4 months with 1820 being the bottom end of the range and 2150 being the higher end of it. The 2150 level is also a good resistance for the stock and the second tranche of buying should come about only once prices close above this level, For the near term, one can initiate a buy once it crosses and closes above the 1975 level as the stock on the daily chart has touched its lower bollinger band and is moving up. The Momentum indicators on the weekly chart are also suggesting that the stock might catch momentum soon through signs of a divergence. Further confirmation on the buy will be established if the Bollinger bands indicator starts to drift apart from the very narrow range that it is in currently.”
Sayyam Agarwal, Head of Academics, ANG (Aspire Now Global) commented on fundamental outlook for Astral and said “Astral Poly Technik Ltd was established in 1996, with the aim to manufacture pro-India plumbing and drainage systems in the country. It has also forayed into adhesive business over the years. Astral Ltd. has bonus in the ratio 1:3 with ex-date of 14 Mar 2023. On the fundamental side it can be seen QOQ sales growth for the company is not linear. In some quarters it is positive and in some, it has even gone to a negative growth rate.”
“Compared to the peers, PE of the company is very high. Industry PE is 26 and the company’s is almost 100, which makes the company highly overvalued. Also, the long-term growth rate is on the diminishing side. Though the company is recovering from it, it is still lagging. The cash flow of the company is positive, which is a good sign,” further added Sayyam Agarwal.
Commenting on the technical outlook of the stock Sayyam Agarwal said “Seeing the fundamentals, it seems that the company is overvalued, and the prices should correct a little more in the near future. On the technical front, prices have broken the trend line and are sustaining below the level of 1972. The next strong support for the price is at 1770 and then at 1610. One should see these points to accumulate because prices can see some correction in near future.”
On Friday, the shares of Astral Limited closed on the NSE at ₹1,905.10 apiece level, down by 0.89% from the previous close of ₹1,922.20. The stock touched a 52-week-high of ₹2,654.80 on (09-Sep-2022) and a 52-week-low of ₹1,581.55 on (20-Jun-2022).
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