Astral Ltd (BOM:532830) (Q1 2027) Earnings Call Highlights: Robust 15. ...

Q & A Highlights

Q: Can you provide more color on the recent demand trends and the guidance for the plumbing business, given the flat volume growth in Q1? A: Hiranand Savlani (CFO) explained that April was weak due to the implementation of a new SAP HANA system, which halted dispatches for 10 days. However, from May onward, growth accelerated significantly, with July registering a 40% volume growth. On a 4.5-month basis, the company is seeing double-digit growth. The management maintains its guidance of minimum double-digit volume growth and 16%-18% EBITDA margins for the full year, but is waiting for Q2 results before potentially upgrading guidance.

Q: What is driving the strong margin improvement in the plumbing business, and is there potential for further upside? A: Hiranand Savlani (CFO) attributed the margin improvement to better economies of scale at the new Kanpur and Hyderabad plants, which are ramping up utilization. Additionally, the product mix improved as agri-demand was muted, and agri products carry lower margins. While the company guides for 16%-18% EBITDA margins, it acknowledged that if the current positive market conditions (rising polymer prices, MIP implementation) continue, there is potential to exceed this range.

Q: How is the implementation of Minimum Import Price (MIP) on PVC impacting the industry and Astral's outlook? A: Hiranand Savlani (CFO) stated that MIP is a significant positive for the industry as it reduces polymer price volatility, which has been a major challenge. It gives dealers and distributors confidence that prices won't fall sharply, encouraging them to restock. This has led to a sharp demand pickup from July onward. The company expects the value growth to outpace volume growth by around 10% for the full year, as realizations are now higher.

Q: Can you elaborate on the strong performance of the Adhesive business (India and UK) and its margin outlook? A: Sandeep Engineer (CMD) noted that the Adhesive India business delivered robust growth of 24.9%, driven by good response in rural and online segments. While Q1 margins were under pressure (12.2%) due to high-cost inventory from the previous quarter, the company is confident of achieving its guided margins of around 15% by year-end. The UK business is recovering well, with 26% growth and EBITDA margins improving to 4.9%, targeting 8%-10% for the full year.

Q: What is driving the record 48.7% growth in the Paint business, and what are the margin expectations? A: Sandeep Engineer (CMD) explained that the paint business achieved its highest-ever growth post the Gem Paints acquisition, reaching EBITDA breakeven. The growth is driven by consolidation in existing states (six states) rather than new expansions, with volume growth of 35%-40% and the rest from price increases. The company maintains its guidance of 20%-25% top-line growth and lower single-digit EBITDA margins for the full year.

Q: How is the newly acquired specialty chemical company (DSS) performing? A: Sandeep Engineer (CMD) shared that DSS delivered revenue of INR6.7 crore with an excellent EBITDA margin of 12.9% in its very first quarter. The company expects this vertical to deliver good value growth and excellent margins in the coming times, contributing positively to the consolidated performance.

Q: What is the status of the CPVC resin plant and other capacity expansions? A: Sandeep Engineer (CMD) confirmed that the CPVC resin plant construction is on schedule, with completion expected by December end. Trial runs and product stabilization will happen in Q4. The new valve production facility is fully operational, and new aluminum PEX machines are being installed, with commercial production expected by end of September. These additions are expected to contribute to top and bottom lines from Q3 onward.

Q: Can you provide details on the CapEx spending and the rationale behind calling off the demerger of the chemical business? A: Hiranand Savlani (CFO) stated that Q1 CapEx was INR137 crore, with a full-year budget of INR300-350 crore. Regarding the demerger, the company decided to call it off after considering shareholder feedback and advice from independent advisors. The consensus was that the chemical business is still too small (around INR2,000 crore revenue) for a demerger. The management indicated it would reconsider only when the business reaches a scale of INR5,000-6,000 crore, which is at least 4-5 years away.

Q: How is the demand scenario across different segments, and is the recent uptick driven by restocking or genuine end-user demand? A: Hiranand Savlani (CFO) and Kairav Engineer (Whole Time Director) clarified that end-user demand is robust across all verticals. While there was some restocking in July after a period of destocking, secondary and tertiary sales are also strong, indicating genuine demand pickup. The channel inventory is currently at healthy levels, not excessively high, which supports the sustainability of the growth trend.

Q: What is the outlook for the Bathware business, and how is the company approaching this segment? A: Hiranand Savlani (CFO) mentioned that the Bathware business grew 18.1% in Q1, reaching INR28.7 crore. The company is entering new territories through both project and retail channels. While the business is currently at EBITDA breakeven, the management expects to deliver a 20%-25% CAGR in this segment over the next 4-5 years, given the low base and increasing market acceptance of the Astral brand.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .