Astral’s July pipe recovery and CPVC project underpin FY27 outlook

Investment View and Valuation

In its August 13, 2026 result update, Anand Rathi Research maintained its HOLD rating on Astral, describing Q1 FY27 as broadly in line and management’s FY27 outlook as robust. The broker considers the valuation relatively full despite a strong expected earnings trajectory and sees limited upside.

Anand Rathi’s unchanged Rs1,650 target price uses a sum-of-the-parts valuation. It assigns 50 times FY28E P/E to the plumbing division, implying Rs1,413 per share, and 30 times FY28E P/E to the chemical division, implying Rs237 per share. After Q1 FY27, the broker increased its FY27E and FY28E EPS estimates by 0.5 per cent and 0.4 per cent, respectively.

Q1 FY27 Financial Performance

Astral reported Q1 FY27 consolidated operating income of Rs15,780m, up 15.9 per cent year on year but 5.2 per cent below Anand Rathi’s estimate. The shortfall was primarily due to pipe volume growth of only 0.1 per cent year on year, compared with the broker’s expectation of 7 per cent.

Plumbing and Bathware: Recovery and Capacity Expansion

Plumbing and bathware revenue rose 10.1 per cent year on year to Rs10,505m in Q1 FY27, while EBITDA margin expanded by 248 basis points to 17.3 per cent. Astral’s pipe volumes were flat even as the plumbing industry declined 10 per cent. Management attributed the performance partly to weak April 2026 demand and a 10-day dispatch disruption during the SAP HANA implementation.

Demand recovered from May 2026, and July 2026 pipe volume growth reached 40 per cent year on year. The recovery was aided by stronger end-user demand and channel restocking after PVC-price-driven destocking. CPVC volumes grew at a high-single-digit rate in Q1 FY27. New plants at Kanpur and Hyderabad supported share gains in newer geographies, while muted low-margin agri-product demand improved the product mix.

Management reiterated its FY27 guidance for at least double-digit pipe-volume growth and a plumbing EBITDA margin of 16-18 per cent. It expects value growth to exceed volume growth by about 10 per cent. The backward-integrated 40,000 MTPA Phase-I CPVC resin project remains on track for commissioning in Q3 FY27, with trial runs expected in Q4 FY27. Management expects the project to support growth and margin expansion in FY28.

Channel inventory was normal by early August 2026 after substantial July restocking, with strong secondary sales consuming much of this inventory.

Adhesives and Paint Businesses

Other businesses showed mixed but improving operating trends. Resinova domestic adhesives revenue increased 24.9 per cent year on year, supported by rural, urban and online demand. However, EBITDA margin declined by 182 basis points to 12.2 per cent because commodity-cost inflation of 15-16 per cent could not be passed through immediately. With raw-material prices easing and 6-8 per cent price increases implemented, management targets 15-20 per cent FY27 revenue growth and a 15 per cent EBITDA margin for Resinova.

SEAL IT overseas adhesives revenue rose 26 per cent, including an 8-10 per cent currency benefit. Its EBITDA margin improved by 469 basis points to 4.9 per cent. Management guides for more than 10 per cent growth and an 8-10 per cent margin in FY27.

Paint revenue increased 48.7 per cent, supported by 30-35 per cent volume growth and price increases, and reached EBITDA breakeven. Management targets 20-25 per cent paint revenue growth and a low-single-digit EBITDA margin in FY27.

Capex and Chemical-Business Demerger

Astral raised its FY27 capex guidance to Rs3,000-3,500m from Rs3,000m after spending Rs1,400m in Q1 FY27.

Management said the chemical-business demerger was called off after shareholder and adviser feedback that the timing was unsuitable. The demerger may be reconsidered at a more substantial scale, but there is no fixed trigger or timeline. Anand Rathi notes that chemical revenue was Rs18,899m in FY26 and considers a Rs50,000m revenue threshold unlikely within at least five years.

The broker expects the market to continue valuing Astral on a sum-of-the-parts basis and to apply a lower chemical multiple because of the chemical business’s weaker return-on-equity profile compared with the pipe business.

Key Risks and Potential Upside

• Downside risks: Market-share loss in pipes or adhesives and steep resin-price volatility.
• Upside risk: A sharp upturn in the real-estate sector.