Astral gains piping market share as adhesives margins set to recover

Investment View and Valuation

In its August 12, 2026 Q1 FY27 result update, PL Research retained its BUY rating on Astral Ltd and revised its DCF-based target price to Rs 1,684 from Rs 1,779 earlier. Against the CMP of Rs 1,464, the broker views Astral’s resilience through polymer volatility, continued plumbing market-share gains, demand recovery and improving adhesives profitability as important supports for the investment case.

PL Research expects a 13.5 per cent volume CAGR in the pipes and fittings business during FY26-28 and estimates sales, EBITDA and PAT CAGR of 18.4 per cent, 22.1 per cent and 33.8 per cent, respectively, over FY26-28E.

Q1 FY27 Financial Performance

Astral reported Q1 FY27 revenue of Rs 15,780 million, up 15.9 per cent year-on-year and broadly in line with PL Research’s estimate of Rs 15,705 million. Gross margin expanded 120 basis points year-on-year to 40.6 per cent. EBITDA increased 25.0 per cent year-on-year to Rs 2,312 million, 5.0 per cent above the broker’s estimate, while EBITDA margin rose 110 basis points to 14.7 per cent versus the estimate of 14.0 per cent. PAT was Rs 1,202 million, up 51.8 per cent year-on-year and 10.0 per cent ahead of the estimate.

Plumbing Market-Share Gains and Outlook

The plastic piping industry declined an estimated 9-10 per cent year-on-year, but Astral delivered flat plumbing volumes and 10.1 per cent value growth. PL Research interprets this performance as evidence of continued market-share gains. Plumbing revenue was Rs 10,500 million, up 10.1 per cent year-on-year, while plastic-pipe EBITDA per kg, including other income, improved to Rs 35.3 from Rs 27.9 in Q1 FY26. Plumbing EBITDA margin expanded by about 250 basis points to 18.9 per cent.

Management retained FY27 plumbing guidance of about 10-15 per cent volume growth and an EBITDA margin of about 16-18 per cent. Plumbing volumes grew about 40 per cent year-on-year in July and remained at double-digit growth in August, aided by channel restocking and improving end-user demand.

New geographies, wider distribution, product additions and capacity expansion are supporting market-share gains. The Kanpur plant is at high utilisation and largely sold out, while the Hyderabad plant is at about 50 per cent utilisation and has land for future expansion. Management expects the Minimum Import Price on PVC to reduce polymer-price volatility and improve dealer inventory visibility. Further polymer-price improvement could support margins and inventory gains.

Adhesives Business: Margin Recovery Expected

The adhesives business reported Q1 FY27 revenue of Rs 4,500 million, up 26.8 per cent year-on-year, including 24.9 per cent growth in domestic adhesives. Segment EBITDA margin declined by about 20 basis points year-on-year to 10.1 per cent as delayed price increases left the business carrying higher-cost raw-material inventory.

Management expects normalisation from Q2 FY27 as lower raw-material costs and the benefit of average 6-8 per cent price increases become more visible. It guides for domestic adhesives revenue growth of about 15-20 per cent and EBITDA margin recovery towards 15-17 per cent in FY27. The UK adhesives business is expected to deliver double-digit revenue growth and an 8-10 per cent EBITDA margin.

Paints, Acquisition and Capital Expenditure

Paint revenue grew 48.7 per cent year-on-year to Rs 745 million. Astral Chemie acquired a 60 per cent stake in DSS for Rs 391 million; DSS contributed Rs 67 million of revenue and Rs 9 million of EBITDA in Q1 FY27. Management targets FY27 paint revenue growth of 22-25 per cent but expects lower-single-digit EBITDA margins.

Astral spent Rs 1,370 million on capex in Q1 FY27 and expects FY27 capex of Rs 3,000-3,500 million. Construction of the CPVC resin plant remains on schedule for completion by December 2026, followed by trials and stabilisation in Q4 FY27. The project is expected to strengthen longer-term backward integration and resin availability.

Estimates and Key Monitorables

PL Research trimmed its FY27E and FY28E sales and EBITDA estimates by 0.6 per cent and its EPS estimates by 1.4 per cent and 0.8 per cent, respectively.

Key factors to monitor include:

• PVC and raw-material price volatility.
• Sustained end-user demand after channel restocking.
• Realisation of adhesives price increases.
• Recovery in adhesives margins.
• Execution of the CPVC resin project.