Astral

Astral Limited reported a mixed Q1 FY26. The core Plumbing division experienced a 5.85% de-growth in revenue to Rs. 953 crores, with flat pipe volumes attributed to low demand and government spending. In contrast, new business verticals showed strong momentum: Bathware grew by approximately 27% to Rs. 33 crores, and the Paint business saw a 20.72% increase in revenue to Rs. 50 crores. The Adhesive India business recorded a 9.15% growth to Rs. 261 crores, while Adhesive UK grew 7% to Rs. 96 crores. Consolidated EBITDA margin for the quarter stood at 14.25%, a decline from 16.36% in Q1 FY25, primarily impacted by a Rs. 25 crores inventory loss due to polymer price drops.

Astral announced a significant backward integration move with the establishment of a 40,000 metric ton CPVC resin manufacturing plant, slated for commissioning in Q2 FY27. This project, with a total investment of Rs. 150 crores (Astral's share: Rs. 120 crores for 80% equity), follows three years of in-house R&D. The plant is expected to be a 'game-changer,' enabling Astral to grow volumes, increase margins (with other players seeing 25-30% EBITDA margins in CPVC), and ensure product quality consistency. Management anticipates a fast payback period and considers it a 'zero investment' due to substantial working capital benefits from reduced imported CPVC inventory.

The Bathware business demonstrated robust growth of 27% in Q1 FY26, with a healthy and growing project order book. Management aims to maintain this momentum and target crossing Rs. 500-600 crores in top-line in the coming years, acknowledging the long conviction cycle required for B2C products. The Paint business, for the first time post-acquisition, achieved 20.72% growth, driven by Astral brand launches in new territories. However, initial spending on branding and team expansion led to a low EBITDA margin of 1.4% for the Paint segment, which is expected to improve with increasing volumes.

The Adhesive India business grew 9.15% in Q1 FY26, with July numbers indicating it is on track to meet the 15-16% growth guidance for the four-month period, maintaining margins within the 14-16% guided limits. The Adhesive UK business, after facing challenges, stabilized and grew 7% in Q1, achieving an EBITDA margin of 5.4% (adjusted for Forex effects). A new senior leader with over 25 years of industry experience has been appointed to head the UK operations, and management expects a significant turnaround in the coming quarters, aiming for historical EBITDA margins of 8-10%.

Despite a flat pipe volume in Q1 FY26 due to subdued demand, early monsoon, and low government spending, management expressed confidence in achieving double-digit volume growth for the full fiscal year. They noted that volumes started picking up from July onwards and anticipate a strong demand revival from the third week of August, extending through the festive season (Diwali in October). The narrowing price gap between CPVC and PVC is also expected to drive conversion to CPVC, further boosting industry volumes. Potential PVC anti-dumping duties are also seen as a catalyst for volume and value growth.

Astral spent Rs. 50 crores on CAPEX in Q1 FY26 and maintains its FY26 guidance of around Rs. 300 crores, primarily for the Kanpur plant and initial work on the CPVC resin plant. The Rs. 120 crores investment for the CPVC plant will be spread over 12 months. Management clarified that no significant capacity expansion in the pipe category is planned for the next 2-3 years, with future CAPEX being maintenance-related. Addressing concerns about declining ROE, management attributed it to Rs. 1,500 crores of CAPEX over the last three years coinciding with unfavorable market conditions, expecting ROI and ROC to improve as asset utilization increases and CAPEX stabilizes.