Astral sees plumbing volume growth despite raw-material cost pressure on Q2 margins

Investment View and Valuation

Prabhudas Lilladher’s November 06, 2026 result update on Astral Ltd. maintains a BUY rating and raises its sum-of-the-parts-based target price marginally to Rs 1,595 from Rs 1,593.

The broker views Q2FY27 performance as decent, with a recovery in plumbing demand and double-digit volume growth expected to continue through H2FY27. Its positive thesis is supported by volume momentum in pipes and fittings, polymer-price protection from minimum import price implementation, recovery in UK Adhesives and new product opportunities.

Q2FY27 Financial Performance

Astral reported Q2FY27 revenue of Rs 19,883 million, up 26.0 per cent YoY and 4.0 per cent above Prabhudas Lilladher’s estimate of Rs 19,113 million. Plastic pipe volume increased 19.1 per cent YoY. However, profitability fell materially short of the broker’s expectations as raw-material inflation and a lag in passing through higher PVC and CPVC costs compressed margins.

Reported PAT included a Rs 95 million exceptional loss from impairment of goodwill in Seal It Services Inc., USA. H1FY27 revenue grew 21.4 per cent YoY to Rs 35,663 million, while gross margin declined around 180 basis points to 37.7 per cent.

Plumbing Business Outlook

In plumbing, Q2FY27 EBITDA margin declined around 280 basis points YoY to 16.3 per cent. Management attributed the weakness principally to delayed cost pass-through.

Management expects double-digit plumbing volume growth in H2FY27 following record monthly sales in October 2026. It guided for pipes and fittings volume growth of 10-13 per cent in FY27 and expects FY27 plumbing EBITDA of around Rs 10,500 million, compared with Rs 9,200 million in FY26. The FY27 plumbing EBITDA margin guidance of 16-18 per cent was reiterated.

Management said minimum import price implementation offers downside protection to PVC prices, with a minimum PVC base of around Rs 85-90 per kg. Astral has since passed through the full PVC price increase.

New Product Opportunities

The CPVC resin plant is nearing completion, with trials expected in January 2027 and commercial production by March 2027. PEX machinery has been installed and stabilised, with commercial production commencing in Q3FY27.

Management expects PEX, HDPE, PPR, PE and electrofusion fittings to begin contributing to revenue and profitability from Q3FY27. PEX is described as a high-value, high-margin product that can improve the product mix.

Adhesives and Paints

Domestic adhesives revenue grew around 25 per cent in H1FY27, leading management to evaluate an upgrade to its FY27 revenue-growth guidance of 15-20 per cent. However, elevated raw-material costs, high-cost inventory and pass-through delays led management to reduce FY27 adhesives EBITDA margin guidance to 13-14 per cent from 15-17 per cent.

UK Adhesives has returned to growth after operational corrections and is targeted to reach a 9-10 per cent EBITDA margin by FY27-end. Paint revenue-growth guidance was raised to 40-50 per cent for FY27 and around 25 per cent for FY28. EBITDA margin is targeted at 3-4 per cent by FY27-end and 8-10 per cent in FY28.

Estimates and Key Risks

Prabhudas Lilladher forecasts pipes and fittings volume CAGR of 14.3 per cent over FY26-FY29E and sales, EBITDA and PAT CAGR of 18.3 per cent, 20.6 per cent and 29.0 per cent, respectively. The broker raised its FY28E and FY29E estimates by 2.1 per cent.

Key factors that could weaken the outlook include:

• Sustained raw-material inflation.
• Delayed price pass-through.
• Pressure from high-cost inventory.
• Execution against margin targets in adhesives, paints and new products.