Astral Q1 FY27 earnings call

Astral Limited reported a resilient Q1 FY27, achieving 10% value growth and flat volume growth despite the polymer industry experiencing approximately 10% degrowth. The company's consolidated EBITDA margin improved to 15.5% from 14.3% in the prior year, demonstrating market share gains. Management highlighted that strong demand has resumed from July, with 40% volume growth in July and double-digit growth continuing into August, indicating a strong start to Q2.

The plumbing business grew 10.1% to INR 1,050 crores, with an EBITDA margin of 18.9%, benefiting from a favorable product mix shift away from lower-margin agri products. Adhesive India recorded a robust 24.8% growth to INR 326 crores, though its EBITDA margin was 12.2% due to prior quarter inventory costs, with recovery expected in Q2. Adhesive UK also saw significant growth of 26% to INR 121 crores, improving its EBITDA to 4.9%. The paint business achieved a record 48.7% growth to INR 74.5 crores, reaching EBITDA breakeven.

Astral spent INR 137 crores on capex in Q1 FY27, contributing to a total of INR 1,500 crores over the last 4-5 years, with a full-year FY27 budget of INR 300-350 crores. Key projects include the CPVC resin plant, on track for completion by December end with Q4 FY27 product stabilization. Additionally, PEX-Aluminum-PEX machines are being installed, with commercial production anticipated by the end of September 2026, expected to contribute high-value, high-margin products.

Management emphasized continuous market share gains across all verticals, attributing this to network expansion and new product introductions. The implementation of Minimum Import Price (MIP) is expected to stabilize polymer prices and sustain the value growth gap over volume. The demand scenario for pipes has been robust since July, with the company experiencing double-digit growth for the past 4.5 months, instilling confidence in achieving full-year double-digit growth.

The company decided to call off the demerger of its chemical business, respecting shareholder sentiment and independent advisor recommendations that the company's top line was not yet sufficiently large. Management indicated that reconsideration might occur when the chemical business reaches a top line of INR 5,000-6,000 crores, emphasizing a long-term perspective and flexibility based on market conditions, with a minimum timeframe of 5 years.

Management noted that the government is actively considering a value-added duty on Chinese products, similar to MIP, which could materialize within 1-2 months. This potential regulatory measure is expected to further support the domestic industry and contribute to inventory gains if polymer prices continue to rise. The overall industry environment is viewed positively, reinforcing confidence in healthy growth for the coming quarters.