IDirect AstralPoly IC

Initiating Coverage
June 5, 2017
Rating Matrix Astral Poly Technik Ltd (ASTPOL)

Rating : Buy
Target : | 685 | 606
Target Period
Potential Upside
:
:
12 months
13%
Gearing up for future...
YoY Growth (%) Astral Poly Technik (APTL), a leader in CPVC piping, has 25% market share
FY16 FY17 FY18E FY19E with total pipe manufacturing capacity of ~1.4 lakh tonnes. Over the years,
Net Sales 17.3 12.6 21.8 21.0 APTL created a strong brand in Indian plumbing market registering healthy
EBITDA 23.3 27.1 23.8 27.0 piping volume CAGR of 32% in FY09-16. We believe it will continue
EBIT 25.7 28.9 22.8 28.5 recording strong piping volume CAGR of 17% in FY17-19E supported by
Net Profit 34.3 41.8 19.6 36.1 demand staying intact from various government social schemes &
implementation of GST. Further, addition of adhesive business in the kitty is
Current & target multiple a step to de-risk business from concentration of one product. We expect
FY16 FY17 FY18E FY19E doubling of capacity of adhesive business to drive segment revenue CAGR
P/E 71.7 50.5 42.2 31.0 of 22% in FY17-19E. Strong volume growth, saving in raw material cost and
Target P/E 80.9 57.1 47.7 35.1
higher credit limit from new outsourcing partner (Sekesui) would translate
EV / EBITDA 35.6 28.2 22.6 17.6
P/BV 10.3 8.6 6.8 5.6
to higher EBITDA margin and efficient working capital management. We
RoNW 14.5 17.2 16.0 18.0 expect consolidated sales, earnings CAGR of ~21%, ~28%, respectively, in
RoCE 19.2 21.3 21.7 23.8 FY17-19E. We initiate coverage on APTL with BUY rating.
Aggressive capacity addition to drive piping and adhesive revenue
Stock Data
Particulars
APTL has expanded pipe manufacturing capacity by ~3x in FY09-16 mainly
Bloomberg/Reuters code ASTRA:IN/ASPT.NS to serve rising demand for plastic piping/plumbing products from housing
Nifty 9661.2 and agriculture. The plants at Gujarat and Tamil Nadu are strategically
Average Volume (Year) 48715 located near its selling markets. Looking at the upcoming demand, APTL
Market Capitalization | 7305 Crore plans to increase its piping capacity to 1.7 Lakh tonnes by FY19E. This
Total Debt (FY17) | 156.9 Crore would lead strong piping revenue CAGR of 21% (led by volume CAGR of
Cash and Investments (FY17) | 16.4 Crore 17%) in FY17-19E while doubling the capacity of adhesive segment would
EV | 7445 Crore lead to strong segment revenue CAGR of 22% in FY17-19E.
52 week H/L (|) 625/367
Equity capital | 12.0 Crore
Backward integration to drive profitability and cashflow
Face value |1 APTL has set up a CPVC compounding plant in Gujarat with an investment
MF Holding (%) 6.2 of | 50 crore. It has signed an agreement with Japan’s Sekisui for supply of
FII Holding (%) 17.2 CPVC resin. This move helped Astral launch its own CPVC brand with an
Comparative return matrix (%) EBITDA margin expansion to tune of 100 bps. We model EBITDA margin
Return % 1M 3M 6M 12M expansion of 100 bps in FY17-19E, which would drive PAT CAGR of 28% in
Supreme Ind 6.5 17.0 30.1 24.7 FY17-19E. Further, extended credit days from outsourcing partner would
Astral Polytec 12.0 38.7 56.8 37.4 translate into lower working capital requirement. Going forward, that would
Finolex Ind 9.6 15.9 43.7 59.9 help bring back the return ratios to elevated level.
Price movement Strong fundamentals justify premium valuations

We reckon that a revival of the plastic piping industry is on the cards. Major
700 12000 government infrastructure push, implementation of GST as well as
600 10000 continued replacement demand from tier II and tier III cities will be key
500
400
8000 catalysts. Moreover, strong PAT CAGR (~28% FY17-19E) and improving
6000 return ratios would lead to a further re-rating of the stock. We value the
300
200 4000 company on a PE basis by ascribing PE multiple of 35x FY19E earnings with
100 2000 a target price of | 685 and BUY recommendation.
0 0
Exhibit 1: Financial summery
Jun-14
Oct-14
Feb-15
Jun-15
Oct-15
Feb-16
Jun-16
Oct-16
Feb-17
(| Crore) FY15 FY16 FY17 FY18E FY19E

Net Sales 1,429.9 1,677.8 1,888.8 2,301.2 2,785.5
ASTPOL Nifty
EBITDA 168.3 207.6 263.8 326.7 415.0
Net Profit 75.9 101.9 144.6 172.9 235.3
P/E (x) 96.2 71.7 50.5 42.2 31.0
Research Analyst
Price / Book (x) 11.8 10.3 8.6 6.8 5.6
Sanjay Manyal EPS (|) 6.3 8.5 12.1 14.4 19.7
sanjay.manayal@icicisecurites.com EV/EBITDA (x) 44.2 35.6 28.2 22.6 17.6
RoCE (%) 17.0 19.2 21.3 21.7 23.8
Hitesh Taunk RoE (%) 12.3 14.5 17.2 16.0 18.0
hitesh.taunk@icicisecurites.com Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research

Shareholding pattern (Q4FY17) Company background
Shareholding Pattern Holdings (%) Astral Poly Technik (APTL) was established in 1996 to manufacture
Promoters 59.3
plumbing and drainage systems in India. It was the first company to receive
Institutional investors 24.3
a license for manufacturing a chlorinated polyvinyl chloride (CPVC) piping
Others 16.4
system in India. APTL’s plumbing & drainage systems include both
residential and commercial applications, CPVC piping systems for industrial
applications, column and pressure piping system for agriculture
applications and also conduit pipes for residential and commercial
Institutional holding trend (%)
applications. The company has a presence in both CPVC (compatible with
both hot & cold water) and PVC (used for cold water flow) product
segments with topline contribution of 41% and 33%, respectively.
17.8 18.6 18
20.0 17.5 APTL operates with three pipe manufacturing plants (total capacity of
1,37,000 TPA) and over 25,000 strong dealer network across India. As part
15.0
of diversification, APTL also entered the adhesives and sealants segments
10.0
(~26% of topline) with the acquisition of Resinova Chemie (India) and Seal
(%)
5.6 5.0 5.3 6.2 IT Services (UK). With this acquisition, APTL now has a presence in
5.0 construction chemicals, sealants, industrial maintenance products,
hardware & sanitary adhesives, electrical insulators, automobile adhesives
0.0 etc. It also formed a subsidiary in the US and acquired the silicone tape
Q1FY17 Q2FY17 Q3FY17 Q4FY17 business of Rowe Industries Inc during FY16. The company’s adhesive
FII DII products are available at 4.5 lakh outlets in India. APTL’s piping division
recorded strong sales CAGR of ~32% in FY09-16 entirely driven by volume
growth. This was led by addition of piping capacity (~1,00,000 TPA during
FY09-16) to serve rising demand from housing segments. Despite
substantial capex (average annual capex of ~| 100 crore in last seven
years), debt/equity ratio has improved from 0.7x to 0.2x in FY09-16 as APTL
generated strong cash flow from operations during the same period.
Exhibit 2: Corporate Structure Exhibit 3: Revenue break-up of Astral Poly Technik
ASTRAL POLY
TECHNIK
Adhesive
PVC 26%
33%
RESINOVA SEAL IT - UK APL - KENYA
ABPL (100%)
(97.45%) (80%) (37.5%)
SEAL IT - USA
CPVC
(100%)
41%
Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research, FY16
Exhibit 4: Global partnership to build competent products for global market under piping and adhesive segment
Commencing business in 1947, Sekisui group is one of the largest chemical groups based in Japan. As on March 31, 2016 Sekisui group has a
turnover of over US$ 10 billion with global presence in Europe, Asia and America. Astral Poly joined hands with Sekisui to source Cholinated Poly
Vinyl Chloride (CPVC) resin for hot and cold water plumbing system
US based 'Spears’ product line inlcudes selection of 1/8” through 12” injection molded fittings and fabricated fittings through 48”, specialty
products, and manual and mechanically actuated thermoplastic valves in a variety of types, sizes and configurations
Established in 1954 as the original inventor of solvent cement for PVC pipe applications, IPS® Corporation has operations throughout the US,
Europe, and Asia. Astral Poly entered into a JV with IPS® Corporation to manufacture solvent cement, which is used as glue in PVC/CPVC pipes in
FY12
Italy based 'First Plast' is skilled in manufacturing building plastics and produces drainage systems such as drainage channels, ground accessories,
rainwater gutter and solvent cement fittings made of PVC
AlcaPlast is one of the largest manufacturers of sanitary ware in Central and Eastern Europe. Besides its traditional product range of fill and flush
valves, it also produces concealed WC installation systems, plastic cisterns, bath siphons and shower-basin siphons
ICICI Securities Ltd | Retail Equity Research Page 2

Exhibit 5: Company’s milestone
1. Acquired 80% stake in UK based 1. Purchases land in Rajasthan to start
Enters into secondary market Seal It Services Ltd
and raises | 34 crore manufacturing of pipe
2. Acquired 76% Stake in Resinova 2. Enters US market by acquiring Silicone
through IPO route Chemie Ltd (India) Tape business of Row Industries
Established with aim of Signs agreement with IPS (US)

manufacturing plumbing for manufacturing Solvent Acquired balance 24% stake
and drainage system Cement in India in Resinova Chemie Limited
1996 1999 2007 2008 2011 2014 2015 2016
First to receive license for 3. Commences operations at 3.Discontinues raw material sourcing tie up
CPVC piping system Enters into Kenya plumbing agreement with Lubrizol and joins hands
Hosur (Tamil Nadu) with initial
for India market by forming a JV with with Skisui Chemical Co Ltd. Launches its
capacity of 7000 TPA
Kenya based group own brand Astral CPVC PRO
Source: ICICIdirect.com Research
Exhibit 6: Presence across plumbing and drainage system through various product categories
Category Product Specification Target Customer Segment
Compatible with both hot and cold water, corrosion resistant, lower bacterial
Astral CPVC Pro
Plumbing System growth, tough, rigid material, unaffected by chlorine in water, chemical Residential, Hotels, Hospitals
(Plumbing for Hot and cold water)
resistance, low thermal expansion
Manufactured using un-plasticised PVC (uPVC), which is non-toxic and,
hence, favoured for applications including potable water (cold/normal) pipes.
Plumbing System Astral Aquarius (PVC) Residential, Hotels, Hospitals
The product is light weight and very strong for use in building and
construction property
Sewerage, Waste & Rain Recommended for use in ventilation and rain water, soil and waste discharge
Astral Drainmaster, Ultradrain, DMV Residential, industrials
water (SWR) applications
Astral Silencio is low noise piping system with temparature resistance from -
Multistorey apartment, commercial,
Low noise SWR (Sewerage, 20 °C to 90° C.
Astral Silencio hotel, sport stadium, education
waste & rain water)
institutes, hospitals, entertainments
Multiplayer pipes with outer and inner layers of conventional PVC and middle Residential complexes,
Astral Foamcore, Underground,
Underground Application layer of foamed PVC. Used primarily for underground applications commercial/office space, resorts,
Drain Hulk
hospitals
Chemical and corrosion resistant, odourless & hygienic with a smooth bore
Use in agriculture for water supply,
Agriculture pressure pipe Astral Aquasafe (PVC) giving a high flow rate, light welded & economical, with low maintenance
drip irrigation and sprinkler lines
requirements
Use in chemical manufacturing plants, pulp and paper plants, waste water
treatment plants, metal treating/electroplating plants, water purification
Industrial Application Astral Chem Pro Industrial
plants, and food processing plants where excellent resistance to corrosion
from a wide range of chemical
Piping systems for submersible pumps with fast and easy installation, Heavy Residential, agriculture, commercial,
Submersible Pump Astral Bore-well (Column Pipe) metal & lead free and hence, absolutely safe for drinking water industrial
Smooth interior walls helping in easy wiring, Fire resistance, Light weight &
Astral Wire guard (Conduit pipes &
Electrical Pipes high mechanical strength, Corrosion resistance, No maintenance & last for a Residential, commercial, industrial
Fittings) (PVC)
lifetime
Accessories Alcaplast Channel drains used for indoor and outdoor bathroom fittings Residential, commercial, industrial
Solvent cements, ceramic tile adhesives, construction adhesives, tapes,
Adhesive & Sealants Weld-On, BONDSET super glues, silicone, automobile adhesives, brushmaking industry, hardware Retail and institutional clients
& sanitary adhesives, rust removers, etc

Exhibit 7: Geographical spreads - Pipes Exhibit 8: Geographical spreads - Adhesives
Source: Company, ICICIdirect.com, Research Source: Company, ICICIdirect.com, Research
Overseas manufacturing facilities

Exhibit 9: Plant location & product specifications
Plant Location Products
Piping plant
CPVC piping system for plumbing, industrial & fire protection, UPVC
Santej (Gujarat)
piping system for plumbing, UPVC column pipes, manholes/chambers
PVC piping system for drainage, UPVC agriculture pressure pipes,

Dholka (Gujarat)
electrical conduit pipes
CPVC piping system for plumbing, PVC piping system for drainage,
Hosur (Tamil Nadu)
UPVC agriculture pressure pipes
Nairobi (Kenya)* Plumbing & drainage systems
Adhesive manfucturing facilities
Cyanoacrylate, solvent cements, tile adhesives, silicone sealant, tapes,
Rania(Kanpur, Uttar Pradesh)
putty
Unnao (Kanpur, Uttar Pradesh) Epoxy, PVA, construction chemicals
Solvent cement, cyno, putty, silicone sealants, Epoxy, PVA,
Santej (Gujarat)
construction chemicals, tile adhesive
Seal IT Services Ltd
Bitumen, hybrid MS polymer, Polyurethane, acrylics, silicone sealants,
U.K.
PVA, tile adhesives, waterproofing solutions
U.S. Silicone tapes
Source: Company, ICICIdirect.com, Research *APTL has a stake of 37.5% in the JV Company while 37.5% is held by the local partners RAMCO Group and balance
25% is held by Allied Plumbers Ltd

Investment Rationale
Pioneer in product launches Strengthening presence in building material category
Year Pioneered
1999 First to receive license for CPVC piping system APTL, a pioneer in CPVC piping industry, had put up a strong historical
2004 First to launch lead free uPVC piping system performance with revenue, earnings CAGR of 37%, 33%, respectively, in
2012 First to launch lead free uPVC column pipes FY09-16. Over the years, it has launched various new products in the CPVC
2013 First to launch CPVC - AL - CPVC bendable pipes piping segment and gradually added PVC products in the portfolio, as part
Source: Company, ICICIdirect.com, Research of diversification. Strong demand for plastic piping products was driven by
replacement of metal/cement pipes and pent up demand from housing,
agriculture and industrial segments. This coupled with addition of new
capacity helped APTL drive piping division revenue CAGR of 32% in FY09-
16. Further, addition of adhesive business in the kitty with two back-to-back
acquisitions in UK (Seal IT) and India (Resinova Chemie) in FY15 was a step
to de-risk business from concentration of one product.
Acquisitions to foray into the adhesive business coupled with global
partnership helped APL achieve 1) scalability, 2) strong R&D, 3) launch of
quality/premium products, 4) opportunity of cross-selling various products
and 5) addition of a dealer network. We believe APL’s strong branding
(~4% of sales) coupled with deep rooted dealer networks (piping division:
~25,000 touch points, adhesive division: ~5,00,000 touch points) helped
APTL increase its retail contribution in sales to 50% from 30% a few years
back. This, in turn, helped the company improve its EBITDA margin. We
believe APTL will post revenue earning CAGR of 21%, 28%, respectively, in
FY17-19E supported by 1) capacity addition (in both piping and adhesive
and sealant) 2) replacement demand (of metal pipe), 3) implementation of
GST to increase the pie of organised players and 4) rising government
expenditure towards industrial, agriculture and housing segment.
Exhibit 10: Revenue growth largely to be driven by volume growth Exhibit 11: Strong PAT growth supported by higher margin and sales
3000.0 250.0
235.3
2785.5
2500.0 CAGR 21% 200.0

CAGR 28%
2301.2
2000.0
172.9
150.0
(| crore)
(| crore)
1888.8
1500.0 CAGR 37%
144.6
1677.8
100.0 CAGR 32.5%

1429.9
1000.0
101.9
1079.6
78.9
75.9
50.0
825.4
500.0
411.3
582.7
60.6
32.8
39.5
0.0 0.0
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18E
FY19E
FY18E
FY19E
Exhibit 12: Concentration on single product: Revenue break-up FY14 Exhibit 13: De-risk business by diversifying: Revenue break-up FY16
1%
26%
74%
99%
Piping Adhesive & Sealants Piping Adhesive & Sealants
Source: Company, ICICIdirect.com, Research Source: Company, ICICIdirect.com, Research,

Aggressive capacity addition to drive piping revenue FY17-19E
In the last six years, the company has expanded its pipe manufacturing
capacity by ~3x to 1.4 lakh MT mainly to serve the rising demand for plastic
piping/plumbing products from housing and agriculture. The plants at
Gujarat (Santej, Dholka) and Tamil Nadu (Hosur) are strategically located
near its selling markets. According to Ficci, strong pent up demand from
the housing and agriculture segment would drive demand for plastic piping
and plumbing products the industry at a CAGR of 12-15% in FY17-19E.
Eyeing the upcoming demand, APTL plans to increase its Hosur plant
capacity by 57% in the next two years (largely to serve agriculture product).
New pipe and fittings plant at Rajasthan is expected to In addition to this, the company’s new pipe and fittings plant at Rajasthan is
commence production by H2FY18. We believe the also expected to commence production by H2FY18. We believe the
company’s pipe manufacturing capacity will record a CAGR company’s pipe manufacturing capacity will record a CAGR of 12% in FY17-
of 12% in FY17-19E, which will drive the volume CAGR by 19E, which will drive the volume CAGR by 17% in FY17-19E.
17% during FY17-19E Exhibit 14: Addition of new capacity to drive piping revenue at CAGR of 21% in FY17-19E
180000 80
160000 70
140000 60
120000
50
100000
40
MT
(%)
80000
30
60000
40000 20
20000 10
0 0
FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
Capacity Utilisation
Exhibit 15: Range of products introduced by APTL in piping & fitting segments
Hot and Cold Water Multilayer Composite Lead Free uPVC Piping Conventional Drainage Leak-proof Drain Waste
Plumbing System Pipes System System and Vent System
Superior Push-Fit Drainage Strong and Light Weight Ultra-Modern Underground uPVC Pipes for Protection of
Lead Free uPVC Column Pipes for
System Drainage System Drainage System Concealed Wiring
Submersible Pumps
uPVC Pipes For Agriculture and CPVC Fire Sprinkler System Support System for Pipes and Industrial Piping System
Water Transportation Fittings :Clamps & Hangers

Global PVC Industry: Developing nations to drive growth
Globally, PVC resins are generally the main raw material to manufacture
PVC pipes and fittings. Fundamentally, PVC is a synthetic resin derived from
Global PVC industry is pegged at US$56 billion (bn) and is
the polymerisation of vinyl chloride. The key feature of PVC is that it can be
expected to cross US$65 bn by 2019 at a CAGR of 3.9%
combined with various additives to form a variety of products such as pipes
supported by continuous demand from developing nations
and fittings, profiles and tubes, windows and doors, sidings, wire and
cables, film and sheets, toys and other moulded products and floorings.
This coupled with features such as durability, self extinguishing property,
resistance to most chemicals and oils, mechanical strength and ease of
processing made PVC an attractive option for many end uses (for
construction and infrastructure, agriculture, electrical products and
healthcare). As a result, global PVC demand recorded notable growth with
an increase in production capacity from a few thousand tonnes in the 1930s
to ~50 million tonne today. Today, the global PVC industry is pegged at
US$56 billion (bn) and is expected to cross US$65 bn by 2019 at a CAGR of
3.9% supported by continuous demand from developing nations.
Exhibit 16: Global PVC capacity break-up Exhibit 17: Global PVC demand break-up
India India Others NE Asia
subcontinent subcontinent 46%
Middle East 4% NE Asia 7%
2% Africa 54% Middle East
1% 6%
Africa
Central Europe 3%
4%
Western
Central Europe
Europe Western
2% SE Asia
12% Europe
5%
10% South America North America
South America North America SE Asia
5% 13%
3% 16% 4%
Source: Ficci, Industry report, ICICIdirect.com, Research Source: Ficci, Industry report, ICICIdirect.com, Research, global PVC in 2014 was
estimated at 40 mn tones.
According to Ficci, growth in demand for PVC is expected to be

concentrated in developing countries in Asia, Africa and Latin America
mainly due to rising expenditure in construction, agriculture and healthcare
industries. In the last 10 years, the use of PVC has increased notably in
various industries due to its unique and diverse blending properties.
Despite PVC increasingly becoming a material of choice of widespread
consumption, the current per capita consumption in India (in kg/person) is
still relatively low (2 kg) vs. other nations like the US, China and Brazil.
In the last 10 years, the use of PVC has increased notably Exhibit 18: India per capita consumption of PVC much lower than global peers
in various industries due to its unique and diverse blending
properties 14 12.7
12
10.3
10 8.8
7.6
(kg/person)
8
5.6
6
4
2
2
0
India Brazil Malaysia Thailand China USA
Source: Ficci, Industry report, ICICIdirect.com Research

India: Rising infrastructure expenditure to drive future demand
The PVC industry in India (valued at | 20,000 crore) has historically been
driven by the agriculture sector. However, post 2000, heavy infra spending
pushed demand for PVC to a new high. According to Ficci, total demand for
PVC in India recorded a CAGR of 8.7% in 2002-15. However, lack of PVC
manufacturing capacity pushed India’s dependency more towards import.
As a result, import of PVC that was less than 5% of the country’s demand
10 year ago, is now ~50%. During 2002-15, domestic PVC production
recorded a CAGR of 3.7% whereas import grew at a CAGR of 32.5%.
Housing and agriculture remained key drivers of PVC consumption in India.
India’s PVC demand is likely to record a CAGR of 13% in
Currently in India, nearly 73% of PVC is consumed by the pipes & fittings
2015-20 to post a whopping demand of over 5 MT of PVC
industries while other sectors comprise only 27%. Globally, the
from the current 2.5 MT
consumption pattern appears to be the same with a larger pie of PVC
consumption driven by pipes & fittings industries (account for 43% of PVC).
According to an estimate, India’s PVC demand is likely to record 13% CAGR
in FY15-21 to give rise to whopping demand of over 5 MT of PVC from the
current 2.5 MT. Demand for PVC will be largely supported by rising
investment in construction, changing life style and rising urbanisation.
Exhibit 19: Global: break-up of PVC application Exhibit 20: India: break-up of PVC application
Others
Floorings 10% Others
3% 6%
Wires &
Floorings
Cables Pipes &
8%
8% Fittings
43% Wires & Pipes &
Cables Fittings
Films & Sheets 5% 73%
17% Films & Sheets
5%
Profiles Profiles
19% 3%
Source: Ficci, Industry report, ICICIdirect.com Research Source: Ficci, Industry report, ICICIdirect.com Research
Exhibit 21: India’s PVC supply-demand mismatch Exhibit 22: PVC demand to record 13% CAGR in FY15-21E
3000000 6000000
2500000 CAGR 5000000
CAGR 13% 5335000
4722000
2000000 8.7% 4000000

4178000
CAGR
(tpa)
1500000
3698000
(tpa)
3000000
3272000
3.7% CAGR
2896000
1000000
2563000
32.3% 2000000
500000
1000000
0
0
PVC demand PVC supply PVC import
2014- 2015- 2016- 2017- 2018- 2019- 2020-
2002 2015
15 16E 17E 18E 19E 20E 21E
Source: Ficci, Industry report, ICICIdirect.com Research Source: Ficci, Industry report, ICICIdirect.com Research

Plastic piping industry: Structural reform to drive demand
The plastic piping industry (largely PVC), growing at ~12-15% CAGR in
The total piping industry size in India is ~| 27,500 crore
2009-14 in India, has been passing through a volatile phase in pricing terms
largely dominated by the plastic piping industry, which is
due to heavy crude price fluctuations. However, in volume terms, industry
considered to be ~| 21,500 crore while the metal piping
recorded growth of over 10% in FY14-16 (top three players) largely due to
industry is at about | 6000 crore
growth in construction activity in tier-II, tier-III cities, replacement of
conventional piping systems like galvanised iron & cast iron piping systems
and rise in demand for branded agriculture & plumbing piping. Agriculture
accounts for the largest share in terms of application of PVC pipes and
fittings industry in India with share of ~74% of total revenue in India.
The piping industry consists of two segments viz. 1) plastic piping and
2) metal piping. The size of the total piping industry in India is ~| 27,500
crore largely dominated by the plastic piping industry, which is considered
to be ~| 21,500 crore while the metal piping industry is about | 6000 crore.
Since replacement of metal by plastic has been happening rapidly, the
plastic piping industry is expected to grow at an accelerated pace in the
coming years (we believe at the same historical rate of ~12%). Of this, the
organised category would record ~14% CAGR led by market share gain
from the unorganised category (due to implementation of GST) and gradual
replacement of metal pipes, in the construction and agriculture segment,
going forward.
Exhibit 23: Structure of Indian piping industry
Domestic piping industry
Value: | 27500 crore
Metal pip
Capacity
Plastic piping Metal piping
Finolex
Value: | 21500 crore Value | 6000 crore
Astral
Total
Sales Vol
Organised segment (65%-70%) Unorganised segment (30-35%)
Value: | 13900 crore Value: | 7500 crore Finolex
Astral
Total

Exhibit 24: PVC piping industry (market share of organised players FY16)
Growing brand and quality consciousness – share of

PVC piping industry
organised players to rise further
Cap: ~18,00,000 MT
Organised market Unorganised market

(60%) (40%)
~10,80,000 MT ~7,20,000 MT
Finolex Industries Supreme Industries Astral Poly Others

Cap: 280000 MT Cap: 336000MT Cap: 127760 MT Cap: 336240 MT
Source: Company, ICICIdirect.com Research,
Rising popularity of CPVC pipes

CPVC pipes are expected to register fastest CAGR in terms of production
capacity in FY15-19. The share of CPVC pipes in the market is estimated at
6% (of total volume), which is expected to increase up to 9.7% by FY19.
Rising acceptance of CPVC pipes over galvanised or PVC pipes is expected

to lead to the growth going ahead. Installing CPVC pipes through large
structures is easy and does not require advanced equipments, thus
Rising acceptance of CPVC pipes over galvanised or PVC
facilitating their usage in the plumbing and other industries.
pipes will lead to the growth in the future. Installing CPVC
pipes through large structures is easy and does not require In addition to this, cumulative residential demand in India will be largely
advanced equipment, thus facilitating their usage in the driven by government’s flagship housing programmes such as: 1) “Housing
plumbing and other industries for All” 2) “Real Estate Act” (to protect consumer interest, ensure efficiency
in all property related transactions, improve accountability of developers,
boost transparency and attract more investments to the sector), 3) Smart
Cities, and 4) Atal Mission for Rejuvenation and Urban Transformation
Mission (AMRUT).
Thus, swift growth in the construction sector will eventually create constant
and growing demand for plumbing products like CPVC, PVC, bendable and
other products, thus supporting overall market growth. In the past few
years, a shifting trend towards CPVC pipes has been witnessed in India.
CPVC is obtained by chlorination of polyvinyl chloride. It has better physical
and mechanical properties than PVC, which make it ideal for making pipes
and pipe fittings. CPVC gives pipes unbeatable strength and high corrosive
water and heat resistance. They are widely used in the industries for
transportation of hazardous and highly corrosive chemicals. The CPVC
pipes business has high entry barriers on account of limited number of
quality raw material suppliers like Lubrizol, Sekisui and Kaneka. In India,
after completion of CPVC compounding plant at Gujarat, APTL is a leading
manufacturer of CPVC pipes with integrated facility. It will outsource CPVC
resins from Japan’s Sekisui. APTL has three product lines (one is under
development) in India, which is for CPVC plumbing pipes and fittings, i.e.
CPVC Pro (domestic plumbing for hot & cold water), Chem pro (industrial
pipes), fire pro (sprinkler system). Since CPVC manufacturing requires
quality raw material (that is largely imported), strong R&D and requirement
of high technology, it is difficult for new entrants in the CPVC pipes market
to garner significant market share in the presence of existing players.
Exhibit 25: CPVC/PVC possesses better quality than conventional GI pipes
Properties Galvanized Iron (GI) CPVC PVC
Life (Years) 15-20 30-35 20-25
CPVC gives pipes an unbeatable strength and high 25% cheaper than GI and 15% costlier Cheaper than galvanized iron
corrosive water and heat resistance Cost Costlier than CPVC
than PVC and CPVC
Corrodes faster and No effect due to
Corrosion Have Anti Corrosive properties
deteriorates chemical resistance
Easily catches fire and Does not catch fire or sustain Less resistance (45°C)
Fire Resistant
sustains burning burning, resistance up to 95°C than CPVC
Leakage Vulnerable to leakage Leakage free for lifetime Leakage free
Special Tools Heavy tools to cut Simple cutter Hex Saw Blade
Higher than Copper and
Bacterial Growth Extremely Low Relatively Low
CPVC
Requires more time and No electric or heat source required, Done through cold
Installation
energy done through cold welding welding
Very High thermal

Thermal conductivity Low thermal conductivity reduces
Low thermal
Conductivity and increases heat loss and heat loss and requires reduced
conductivity
Insulation requires high insulation levels
insulation levels
We believe future demand for piping products would largely be driven by

various factors such as:
1. Government’s flagship programme of ‘Housing for all by 2022’
According to Census 2011, India had a population of ~121 crore, out of
Government’s focus on increasing irrigation and housing
which ~38 crore (~31.2%) lived in urban areas. During 2001-11, the urban
will help to keep the industry growth strong over the next
population of India grew at a CAGR of 3.1%, resulting in an increase in the
three to five years
level of urbanisation from 27.8% to 31.2%. This growing urbanisation has

led to problems of land shortage, housing shortfall and congested transit
and also severely stressed existing basic amenities like water, power and
open spaces of the towns and cities. According to Census 2011, the
housing stock in urban India is ~7.8 crore for ~7.9 crore urban households.
Though the gap between household and housing stock is narrowing, the
Technical Group on Urban & Rural Housing Shortage came out with a report
in 2012 saying there was an overall shortage of ~6 crore houses in India
(certain portion of housing stock in Census was not in living condition). It
includes a shortage of 1.9 crore houses in urban areas and ~4 crore houses
in rural areas. To overcome the housing shortage, the government aims to
build 6 crore houses under its twin schemes:-‘Pradhan Mantri Gram Awas
Yojana’ for rural areas – 4 crore houses & ‘Pradhan Mantri Awas Yojana’ for
urban areas – 2 crore houses. According to KPMG, a demographic trend
suggests India is on the verge of large scale urbanisation over the next few
decades. With more than 1 crore people getting added to urban areas,
India’s urban population is expected to reach about 81 crore by 2050.
Exhibit 26: Technical group estimates show housing shortage of 1.9 crore Exhibit 27: Increment in housing stocks
in 2012
30
Rest of UP, 3.07 24.7 24.5
states/Uts, 25
19.2 18.7
4.47 20
15.1 14.7
( crore)
Maharashtra, 15
1.94
10
Gujarat, 0.99 5
West Bengal,
Karnataka, 1.02 1.33 0
MP, 1.1 1991 2001 2011

AP, 1.27
Rajasthan, 1.15 Tamilnadu, 1.25 Households Housing Stocks
Bihar, 1.19
Source: Company, ICICIdirect.com, Research

Source: Company, ICICIdirect.com, Research
Furthermore, a KPMG Naredco study points out shortage even beyond 6

crore houses. As per the study, “Housing for all” vision would require
development of ~11 crore houses and outlay of over US$2 trillion (or about
As per KPMG estimate, the vision would require development US$250-260 billion annual investment until 2022). Most housing
of ~11 crore houses with investment of over US$ 2 trillion (or development would be expected for the economically weak section/low
about US$ 250 to 260 billion annual investment until 2022) income group households (in both rural and urban areas) whose income is
less than | 2 lakh per annum. This also indicates there could be another
phase of Housing for all, which can take this scheme beyond 2022.
Exhibit 28: Number of housing units required under ‘Housing for all by 2022’ programme
Particulars Urban (crore unit) Rural (crore unit) Total (crore unit)
Current housing shortage 1.9 4 5.9
Required housing units by 2022 2.6-2.9 2.3-2.5 4.9-5.4
Total Need 4.4-4.8 6.3-6.5 10.7-11.3
Source: KPMG, ICICIdirect.com Research
We believe the housing shortage coupled with lack of proper water

management system (sewage/drainage) in slums creates ample opportunity
for the piping industry in India. The major application of PVC pipes is in
water management for the housing and agriculture sectors. Since APTL
earns nearly 76% of its piping revenue from the housing segment, we
believe the company would be a direct beneficiary of various government
Source: ICICIdirect.com Research initiatives such as ‘Housing for All by 2022’, 100 smart cities, etc, where
PVC pipes & fittings are used for supply of water in households, removal of
waste water, linking of drainage systems, pipes for micro irrigations, etc.

2. Swachh Bharat Mission: Boost for plastic products
Swachh Bharat Mission (SBM) is another flagship programme of the
government aimed to stop open defecation through construction of
According to Census 2011, over 67% of rural households in individual household latrines (IHHL), cluster toilets and community toilets
India lack access to toilets. In other words, more than 11 (especially via PPP mode). Solid and liquid waste management is also an
crore rural households do not have access to a toilet important component of the programme. According to Census 2011, there
were 16.8 crore household in rural areas, among which ~11 crore (~65%)
rural households do not have access to a toilet. The government’s budget
allocation to SBM recorded a CAGR of 48% in the last three years. Under
the scheme, the government has mandated to provide sanitation and
household (urban) toilet facilities in all 4041 towns with total population of
~38 crore. The estimated cost is | 62,009 crore over five years. Further,
SBM Gramin (rural mission) aims to make village Panchayats free of open
defecation by 2019. Under the scheme, the government plans to build ~11
crore toilets at a cost of ~| 1,34,000 crore. We believe lack of sanitation and
drinking water facility at rural and urban households creates a huge
opportunity for PVC pipe manufacturers like Supreme Industries, Astral
Poly, Ashirvad and Finolex Pipes.
Exhibit 29: Central government Swachh Bharat Mission budget allocation
18000
16000 CAGR ~48%
16248
14000
12000
12800
(| crore)
10000
8000
7469
6000
4000
2000
0
2015-16 2016-17 2017-18E
Source: Budget document, ICICIdirect.com Research
Exhibit 30: Households without sanitation and drinking water facility (in crore)
We believe lack of sanitation and drinking water facility at
Total Households 25
rural and urban households creates a huge opportunity for
Households sources water outside the premises 13
PVC pipe manufacturers like Supreme industries, Astral
Poly, Ashirvad and Finolex Pipes Households have to fetch water from a source located within 500 m in rural areas/100 m in urban areas 9
Fetch drinking water from a source located more than 500 m away in rural areas or 100 m in urban areas 4
Households have no drainage facility (rural + urban) 12
Household without toilets (rural + urban) 12
Source: Census 2011, ICICIdirect.com Research
Exhibit 31: Number of toilets constructed each year for individual rural households
1113
1200
1000
800
(Lakhs)
600
400
200 88.0 45.6 49.8 40.1 57.2
0
2011-12 2012-13 2013-14 2014-15* 4 yr avg Target by 2019
Source: Census 2011, ICICIdirect.com Research

3. AMRUT: Targets 500 cities to raise water supply, sewerage, urban
transport system
The government has also launched its programme Atal Mission for
AMRUT can be considered a remodelled version of Rejuvenation and Urban Transformation (AMRUT) to provide basic services
JNNURM wherein the government has worked on many to household and build amenities in cities. Under the scheme, ~500 cities
flaws present in the earlier programme and towns have been selected on the basis of population i.e. one lakh and
above. The project would help improve existing basic infrastructure
services like extending clean drinking water supply, improve sewerage
networks, develop seepage management, lay storm water drains, improve
public transport services and create green public spaces like parks, etc. The
total project outlay of funds for five years (FY16-20) will be | 50,000 crore
which will be provided by the central government in instalments of
20:40:40. AMRUT, a flagship programme to improve the infrastructure of
the country would be the future growth driver of the plastic piping industry.
Agriculture: Focus to increase irrigated land to piping industry growth
The Government of India has launched various programmes in the
agriculture sector focusing on increasing irrigation, farmer’s income and
production. These schemes and programmes will give an impetus to
demand for pipes & fittings. The Union Budget 17-18 was focused on
boosting the rural economy, by announcing higher spend on the agri sector
to support farmers. In a bid to double farmers’ income in the next five
years, the government has made a total allocation of | 1,87,233 crore. The
government has increased the allocation for irrigation corpus to | 40,000
crore coupled with dedicated micro irrigation fund worth | 5000 crore (to be
set up by Nabard). ‘Pradhan Mantri Krishi Sinchayee Yojana’ will be
implemented in mission mode and 28.5 lakh hectares of land will be
brought under irrigation. This will boost the growth of pipe and fittings for
the next few years.
Exhibit 32: Low irrigation coverage to be bigger opportunity for PVC piping industry
Gross Cropped area (198 mn ha)

Net Cropped area (142 mn ha)
*Uneven distribution of rain

makes irrigation paramount
Net irrigated area (65.3 *Only 46% of net cropped area is
mn ha) under irrigation
Of the 1.8 mn piping industry, operating @65% utilisation Agriculture constitutes a significant ~70% of total PVC pipe demand in
1.2 volume we assume 90% represents PVC pipes (which India. It is pegged at | 7000 crore. Finolex Industries, Jain Irrigation and
is 1.1 MT). Of this 1.1 MT agriculture contributes 70% of Supreme Industries are major players in the agriculture piping segment.
total demand (comes ~0.7 MT). The agri opportunity is Rising government expenditure towards irrigation (only 46% of net cropped
pegged at | 7000 crore (realisation is | 100000/tonne) area is under irrigation) opens up a huge opportunity for PVC pipe
manufacturer in India. APTL, earlier being the largest supplier to CPVC
piping to housing industry, has gradually been increasing its focus towards
the agriculture PVC pipe business. This is clearly evident from the
company’s revenue mix wherein contribution of PVC pipe in the revenue
increased from 37.5% in 2012 to ~48% currently. Focusing on the
agriculture segment would not only benefit the company in terms of

diversifying business, it would also help APTL to achieve notable volume
growth (17% CAGR in FY17-19E).
Backward integration: Step forward to be more competitive in CPVC
APTL was the first company in India to receive a license for outsourcing
CPVC compound from Lubrizol Corp (US) for manufacturing CPVC pipes.
Later on, APTL leveraged its tie-up with Lubrizol by launching various
plumbing products such as Flowguard, Bendable Flowguard, Corzen,
BlazeMaster, etc, which was well accepted by the plumber community.
However, APTL discontinued its tie-up with Lubrizol Corp mainly due to
issues pertaining to raw material prices. Meanwhile, APTL has also set up a
CPVC compounding plant in Gujarat at an investment of | 50 crore and
signed an agreement with Japan’s Sekisui Chemical Company (Sekisui) for
supply of CPVC resin (raw material for CPVC compound).
Benefits of APTL with new supply agreements
1. Launching own brand: New tie-up (with Sekisui) has helped APTL to
replace Astral Flowguard brand (Flowguard associated with Lubrizol)
with its own brand Astral CPVC PRO
2. Higher credit days: Lubrizol Corp reduced the credit limit for its clients
(from 120 days to 60 days) once the company started its new CPVC
compounding plant at Dahej (Gujarat) in January 2016. It has
negatively impacted APTL in terms of higher working capital
requirements. However, APTL has again received credit of 120 days
after signing outsourcing deal with Sekisui (outsourcing of CPVC
resin). We believe higher credit days (from supplier) would translate
into lower working capital requirements and interest outgo
3. To turn EBITDA accretive: Starting its own CPVC compounding unit
reduced APTL’s dependency on the supplier by 70%. Backward
integration would also help the company increase its EBITDA margin
up to 100 bps over the long term by reducing the bargaining power of
limited suppliers of CPVC compound
4. Opportunity for export: APTL can now export its CPVC products to
other countries unlike when it had a tie-up with Lubrizol wherein APTL
was not allowed to export CPVC products to other countries
Exhibit 33: Lower working capital requirement, going forward Exhibit 34: Better EBITDA margin supported by backward integration
8 16
7 14 13.4 14.2 14.0 14.4 14.0 14.2 14.9
6.7 6.4
6 12 11.8 12.4
5 4.9 10
4.5 4.2
4 8
(%)
(%)
3 3.2 3.0 6
2.4 2.5
2 4
1 2
0 0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
Net working capital % sales EBITDA margin

Diversification to adhesive segments for future growth
In 2011, APTL signed a technical collaboration agreement with US based
IPS Corp to form a company Advanced Adhesive (AAL). AAL is engaged in
the cement solvent business (Weld-on), which is mainly used for joining
APTL acquired Resinova Chemie Ltd (Resinova) in two pipes for residential and industrial applications. We believe it was a start
trenches at a total consideration of ~| 286 crore. In the when APTL decided to venture into the adhesive and sealant segment
same year, APTL marked its entry into the international through the inorganic route. Later, APTL acquired a majority stake in two
market by acquiring an 80% stake in Seal IT Services Ltd at companies viz. Resinova Chemie Ltd (India) and Seal It Services Ltd (UK) in
a consideration of | 44 crore. APTL diluted equity by 6.6% FY15. APTL acquired Resinova Chemie Ltd (Resinova) in two trenches at a
during FY15-16 to fund the two acquisitions total consideration of ~| 286 crore. In the same year, APTL marked its entry
into the international market by acquiring an 80% stake in Seal IT Services
at a consideration of | 44 crore. APTL diluted equity by 6.6% in FY15-16 to
fund the two acquisitions. In Q4FY16, the company merged its two
subsidiaries AAL and Resinova Chemie with the approval of the high court.
This amalgamation resulted in consolidation of the business operations of
the two subsidiary companies, enhancing the scale of operations, reducing
its overhead and administrative expenditures resulting in better EBITDA
margin and lowering the tax incidences. Further, as part of the extension
Seal IT Services (UK), acquired the US based Silicone tape business of
Rowe Industries Inc at a consideration of US$3.25 million.
Exhibit 35: Historical performance of Resinova (includes AAL) Exhibit 36: Historical performance of Seal IT
250 10.5 160 8.0

10.2 7.4
140 7.0
234.5
150.1
200 10.0 6.5
120 5.9 6.0
132.9
195.3
9.5
117.1
150 100 5.0
(| crore)
(| crore)
152.4
9.0 80 4.0
(%)
(%)
100 8.7 8.7 60 3.0
8.5
40 2.0
50
14.1
8.0
6.6
20 1.0
8.4
4.8
4.6
10
0 7.5 0 0.0
FY13 FY14 FY15 FY13 FY14 FY15
Revenue PAT EBITDA margin Revenue PAT EBITDA margin
Exhibit 37: Adhesive business performance
500.0 454.5 14.0

450.0 394.0
384.7 12.0
400.0
328.3 10.0
350.0
300.0 269.4
8.0
(| crore)
250.0
(%)
200.0 6.0
150.0 4.0
100.0
2.0
50.0
0.0 0.0
FY13 FY14 FY15 FY16 FY17
Revenue EBITDA margin
Resinova manufactures adhesives, sealants, construction chemicals and

Resinova manufactures adhesives, sealants, construction
industrial maintenance products under several brand names with a wide
chemicals and industrial maintenance products under
marketing network across India. RCL covers various industry segments for
several brand names
its products including the automobile sector, sanitation, paints, plywood,
hardware and building materials. Its product range includes a broad range

of chemical products including epoxy, silicones, cyanoacrylate, solvent
cements, PU sealants, anaerobic, UV care, MS polymers, acrylic, etc. The
company has three manufacturing capacity (two in UP and one in Gujarat)
in India. Resinova sells its products with around 50 brands and 600 SKUs.
Some of the key brands of the company are Bondtite, Resibond, Bondset,
Solvobond, Vetra, Brushbond, Zesta, etc.
Seal It manufactures a range of sealants and adhesives
UK based Seal It manufactures a range of sealants and adhesives under the
under the brand name “Bond-it” as well as a
brand name Bond-it, as well as a comprehensive range of silicones,
comprehensive range of silicones, sealants, cleaning
sealants, cleaning agents, tile adhesives, waterproofing chemicals bitumen,
agents, tile adhesives, waterproofing chemicals bitumen,
polyurethane foams, building & construction chemicals, and silicon tape
polyurethane foams, building & construction chemicals
business. The plant is operating with a capacity of 20895 metric tonnes. Its
primary markets include the UK, Europe and Middle East. Further, APTL
also plans to launch new products and leverage dealer networks (in India
and abroad) for cross-selling higher margin products.
Exhibit 38: Product range of Resinova
Exhibit 39: Seal-IT product range

Adhesive: India exhibits high growth potential
The Indian adhesive, sealants and building chemical industry is pegged at
| 10,000 crore and is growing at a CAGR of 15%. Adhesives can be
classified into four major segments, including water-based adhesives,
solvent-based adhesives, hot-melt adhesives and reactive adhesives.
Among these, water-based adhesives dominated the Indian adhesives
The Indian adhesive, sealants and building chemical
market with about 38% share in volume terms in 2013. Water-based
industry is pegged at | 10,000 crore growing at a CAGR of
adhesives in India are largely dependent on wood and paper for packaging
15%. Adhesives can be classified into four major
and furniture. As water-based adhesives provide maximum adhesion on
segments, including water-based adhesives, solvent-based
porous substances made up of wood, they find major application in the
adhesives, hot-melt adhesives and reactive adhesives
retail market for non-industrial applications. Solvent-based adhesives are
also being widely used in the country despite their high volatile organic
compound (VOC) emissions. The reason can be the absence of stringent
regulations. However, with growing awareness, manufacturers are
switching to less costly and environment-friendly water-based adhesives.
Another advantage is that the same machinery can be used for water-based
adhesives manufacturing, which was initially used for solvent-based
adhesives production. As a result, the share of the solvent based adhesives
market is forecast to grow at a moderate rate and account for around 20%
share in the Indian adhesives market by FY19. Hot-melt and reactive
adhesives technologies are generally the high-priced adhesives available in
the Indian market. The market share of these technologies is expected to be
driven by their use in emerging applications and research efforts in various
fields like automotive, construction, product assembly, etc.
Exhibit 40: India adhesive market share by technology 2013 Exhibit 41: India adhesive market share by technology 2019E
Hot-melt Hot-melt
19% 20%
Reactive
Reactive
16%
18%
water based
water based
38%
42%
Solvent based Solvent based

27% 20%
Low per capita consumption: depicts promising future of industry

The per capita consumption of adhesives is 9.4 kg in Germany and 9.1 kg in
US compared to 1.5 kg in China and just 0.20 kg in India. Similarly, while
the value of per capita consumption of adhesives is | 750 for developed
countries it is just | 50 for India. This shows that India offers good potential
for growth in consumption of adhesives, which is a positive feature of this
Per capita consumption of adhesives is 9.4 kg in Germany,
industry. As adhesives offer strength and versatility for bonding two or
9.1 kg in US compared to 1.5 kg in China and just 0.20 kg
more components, the product has developed a unique position in the
in India
Indian market in both the retail and industrial segment. The adhesive market
in India is diverse in terms of end-use applications, as almost every
manufacturing sector requires some sort of adhesive.
Major end use industries that utilise adhesives are furniture and
woodworking, paperboard & packaging and building & construction.
According to the company, the Indian adhesive, sealant and building
material chemical industry is likely to grow at a CAGR of 15%, going ahead,
supported by dynamic economic development with expanding middle class
population, urbanisation and strengthening of industries like construction
and transpiration (including metro rail and railways).

Exhibit 42: Per capita consumption lowest in India among other developing countries
10 9.4 9.1
9
8
7 6.4
(kg per capita)

6
5
4
2.9
3
2 1.5
1
1 0.2
0
Germany US Japan Russia China Brazil India
APTL has continuously focused on improving the Modernisation, doubling adhesive capacity for scalability
performance and launching new products under the
The recent acquisition of the adhesive and sealant business would
adhesive & sealant division. It has doubled the
synergise APTL in terms of deepening and widening its product offerings.
manufacturing capacity of this division and also
We believe the combined brand development, product innovation skills and
modernised the old capacity at UP
distribution reach of Astral, Seal IT and Resinova will enable building a
robust and valuable adhesive business. Post acquisition, APTL has
continuously focused on improving the performance and launch of new
products under the adhesive & sealant division. APTL has doubled the
manufacturing capacity of adhesive and sealant in India to 31739 metric
tonnes by opening a new manufacturing plant at Ahmedabad (Gujarat). It
has also modernised its Kanpur facility (UP) to increase the production with
saving in cost. Commencement of the new plant in Ahmedabad will not
only help the company scale up the adhesive business, it will also help the
company to capture newer markets with lower logistic cost.
Initial focus on niche categories to strengthen present
The Indian adhesive industry is pegged at | 6000 crore. It is largely
dominated by organised players with a market share of ~60%. Pidilite
Industries, being the largest adhesive player in India, dominates the
APTL is focusing towards niche products categories of industry with ~70% market share followed by Henkel and Sika India. Other
Epoxy adhesive (used in laminates, glass, tiles, etc) solvent major players operating in the market include Atul, 3M, HB Fuller, Bostik,
cement (for joining pipes) and silicon (used in glass to Huntsman India, etc. APTL has largely focused on the Industrial segment
glass and glass to metal bond with product categories including acrylic, epoxy adhesives/sealant and
solvent cements. APTL is focusing on niche product categories of epoxy
adhesive (used in laminates, glass, tiles, etc), solvent cement (for joining
pipes) and silicon (used in glass to glass and glass to metal bond) unlike
Pidilite, which is a market leader in retail like poly vinyl acetate, rubber
adhesive, acrylics and construction chemicals (includes Fevicol, Fevibond,
Fevikwik, M-Seal).
Despite mere 26% contribution to topline, APTL is now focusing on
improving the performance of the adhesive and sealant business. The effort
has been yielding good results. This is evident from the strong performance
of the business wherein business recorded sales CAGR of 14% during
FY12-17, with EBITDA margin improving from 6.5% to ~13% during the
same period. We believe that currently APTL is a small player in this
category and would leverage its strong brand image (of pipe business) to
push up the sales of adhesive and sealant business. Doubling the capacity
and strong brand image would help the company achieve segment sales
CAGR of 22% in FY17-19E. We also believe, at initial level, APTL has to
compromise at lower EBITDA margin of ~12-13% (unlike ~22% EBITDA
margin of Pidilite Industries) mainly due to higher sales & promotion activity
and discount to new dealers. However, APTL has guided that it will increase

We believe, at initial level APTL has to compromise at
EBITDA margin (by 100 bps every year) with the launch of premium
lower EBITDA margin of ~12%-13% (unlike ~22% EBITDA
products and lowering the discounts of dealers, going forwards.
margin of Pidilite Industries) mainly due to higher sales and
promotion activity and discount to new dealers
Exhibit 43: Strong revenue growth for APTL due to capacity expansion Exhibit 44: Scope of margin expansion …
8000.0 25.0 23.2

6967.1
7000.0
20.0 16.9
6000.0
4706.5
5000.0 15.0
(| crore)
4000.0 10.2
(%)
3000.0 10.0 6.5
2000.0
410.3 674.8 5.0
1000.0
0.0 0.0
FY16 FY19E FY12 FY16
Pidilite Ind Astral Pidilite Ind Astral
Source: Company, ICICIdirect.com, Research, Pidilite (standalone revenue) Source: Company, ICICIdirect.com, Research, Pidilite (standalone margin)
APTL to leverage strong dealer network of acquired companies

Over the last few years, the company has ventured into other segments
such as PVC and adhesive segment, which reduced its dependence on the
core CPVC business. Acquisitions of Resinova and Seal It have not only
added a new product portfolio to its kitty but have given APTL access to a
strong dealer network across India and UK, respectively. Under the piping
segment, APTL has access to over 750 distributors and 25000 dealers
across India. For the adhesive segment, the company has 2500 distributors
and over 4,50,000 dealers in India. Seal-It has an over 1800 customer base
(dealing with Seal IT products) in the UK. We believe the company will
utilise the extensive dealer network for cross-selling international products
(higher margin products like silicon tape) to Indian markets. APTL’s
relentless focus on building a strong consumer brand through various ad
Under the piping segment, APTL has access to over 750
campaigns (Introduction of Salman Khan as brand ambassador) makes it
distributors and 25000 dealers across India, while for
different from other piping players. We believe APTL has established a
adhesive segment company has 2500 distributors and over
strong brand name in the building materials industry in India over the last
4,50,000 dealers in India
15 years, particularly for CPVC and PVC piping and plumbing systems and
allied products (last four year average of discounts and promotion
expenses as percentage of sales remained at 3.5%).
Exhibit 45: Higher advertisement and discounts expenses due to diversification

4.7
5.0 4.4
4.2
4.5 3.9 4.0
4.1 3.6
4.0
3.7
3.6 3.8
3.5 3.5
3.4
3.0 2.9
2.5
(%)
2.0 2.1 2.1 2.2

1.9 2.0
1.5 1.4
1.0 1.1
0.7 0.6 0.7 0.8
0.5
0.0
FY11 FY12 FY13 FY14 FY15 FY16
Pidilite Astral Poly Supreme Ind Finolex ind

Exhibit 46: Strong branding activity with introduction of Bollywood celebrity
Continuous investment in increasing capacity, a strengthening dealer

network and maintaining high product quality helped APTL maintain its
leadership position in the CPVC pipe industries. We believe continuous
capacity expansion along with regular addition to the dealer network would
result in overall volume CAGR of ~17% for FY17-19E vs. ~32% during
FY09-16 (capacity addition recorded a CAGR of 26% in FY09-16 while the
company is likely to record a CAGR of 12% in FY17-19E).
Exhibit 47: Leveraging dealer network to help company to increase turnover
Company Distribution Networks
Supreme Industries 2469
Astral Poly technik Ltd 1700
Ashirvad Pipes 1800
Jain Irrigation 3071
Finolex Industries 600
Collaboration with global players to support new product launch

APTL has a proven record of launching new products in the market backed
by strong R&D and tie-ups with global players. Being a market leader, APTL
APTL has a proven record of launching new products in the is concerned about the relevance and quality of the products. The company
the market backed by strong R&D and tie-ups with global has entered into technical tie-ups with various multinational companies
players across the world. The technical collaboration has helped APTL improve the
quality (by adopting new technology) thereby producing international
standard products at minimal operating costs. This has also helped APTL
create strong brand value for its products and helped increase the
contribution of value added products in sales.
Exhibit 48: Global partners to build competent products for global market under piping and adhesive segment
Commencing business in 1947, Sekisui group is one of the largest chemical groups based in Japan. As on March 31, 2016 Sekisui group has a
turnover of over US$ 10 billion with global presence in Europe, Asia and America. Astral Poly joined hands with Sekisui to source Cholinated Poly
Vinyl Chloride (CPVC) resin for hot and cold water plumbing system
US based 'Spears’ product line inlcudes selection of 1/8” through 12” injection molded fittings and fabricated fittings through 48”, specialty
products, and manual and mechanically actuated thermoplastic valves in a variety of types, sizes and configurations
Established in 1954 as the original inventor of solvent cement for PVC pipe applications, IPS® Corporation has operations throughout the US,
Europe, and Asia. Astral Poly entered into a JV with IPS® Corporation to manufacture solvent cement, which is used as glue in PVC/CPVC pipes in
FY12
Italy based 'First Plast' is skilled in manufacturing building plastics and produces drainage systems such as drainage channels, ground accessories,
rainwater gutter and solvent cement fittings made of PVC
AlcaPlast is one of the largest manufacturers of sanitary ware in Central and Eastern Europe. Besides its traditional product range of fill and flush
valves, it also produces concealed WC installation systems, plastic cisterns, bath siphons and shower-basin siphons

Key Financials
Consolidated sales CAGR of 21% in FY17-19E
APTL has recorded sales CAGR of ~37% during FY09-16, driven by the
company’s core business i.e. piping division, which recorded a sales CAGR
of 32% during the same period. Piping division sales were entirely led by
volume growth whereas realisation was muted due to a change in the
The topline is expected to grow at a CAGR of ~21%
product mix (rising proportion of PVC products in the topline). Volume
during FY17-19E to | 2786 crore in FY19E from | 1889
growth of the piping segment came on the back of replacement demand
crore during FY17E led by strong volume growth of 17% in
from the housing segment in both rural and urban India (translated into
the piping segment
regular capacity addition). We have modelled consolidated revenue CAGR
of 21% in FY17-19E to | 2786 crore led by capacity expansion and strong
demand in the piping segment. We believe the piping and drainage
segments will record a strong revenue CAGR of 21% in FY17-19E led by
volume CAGR of 17% supported by continuous demand from various
government schemes and replacement demand (share of metal piping in
the housing segment to reduce gradually). On the other hand, doubling the
capacity coupled with strong branding of adhesive & sealant segment
would lead strong segment revenue CAGR of 22% in FY17-19E.
Exhibit 49: Capacity expansion on the cards …. Exhibit 50: … to drive future volume growth
200000 140000
CAGR 12%
120000 CAGR 17%
123054
CAGR 26%
172708
150000 100000 CAGR 32%

155208
102049
137708
80000
(tonnes)
(tonnes)
89992
127762
100000
77909
60000
40000
25968
50000
11164
20000
0 0
FY09 FY16 FY17 FY18E FY19E FY09 FY16 FY17 FY18E FY19E
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research
Exhibit 51: Revenue growth backed by strong volume growth Exhibit 52: Doubling capacity to drive adhesive & sealant revenue
2500 800
CAGR 21% 700 CAGR 22%
2205
2000
675
600
587
1786
1500 CAGR 32% 500

(| crore)
(| crore)
1506
400
451
1318
410
1000 300
200
500
223
193
100
0 0
FY09 FY16 FY17 FY18E FY19E FY15 FY16 FY17 FY18E FY19E

Backward integration coupled with stabilisation of new units to drive margin
The major raw material for piping and adhesive & sealant are derivatives of
crude oil and APTL had CPVC compound outsourcing tie-up with Lubrizol
We believe raw material (largely derivative of crude oil Corp. Despite a decline in raw material prices (PVC prices declined ~6%
like PVC) prices will remain subdued in the near term. The YoY and ~11% YoY in FY15 and FY16, respectively) APTL suffered a loss in
commencement of its own CPVC compounding unit in gross margin to the tune of ~300 bps and ~200 bps YoY in FY15 and FY16
Gujarat would translate into a margin improvement to the respectively. This was mainly due to inventory loss on account of no benefit
tune of ~100 bps being passed on by Lubrizol Corp. However, the company has discontinued
its tie up with Lubrizol and commenced its own CPVC compounding plant at
Santej (Gujarat) in FY17. It entered into a joint agreement with Japan’s
Sekesui for outsourcing CPVC resins.
This move resulted in expansion in gross margin by 260 bps YoY during
FY17. Further, addition of new capacity in newer geographies (near selling
markets) would help save freight cost (~50 bps). Further, though we believe
raw material prices (CPVC/PVC resins) will remain benign in the near future,
Astral being a strong brand in the piping business is in a strong position to
pass on adverse price movements of raw material to end customers. In
addition, a gradual improvement in profitability of adhesive and sealant
segment due to better product mix (launch of new products like silicon tape
in the domestic market that has ~40% of EBITDA margin), rising proportion
of retail segments, continuous addition to dealer network would help drive
profitability of the business, going forward. As a result, we believe the
EBITDA margin will increase 100 bps in FY17-19E to ~15%. However,
higher branding and promotional expenses of new products under the
adhesive and sealant categories would keep margins under check.
Exhibit 53: PVC prices Exhibit 54: Saving from lower material cost to drive EBITDA margin
33.1
32.4
31.7
31.1
31.0
90,000 35.0
29.5
29.4
28.4
28.4
28.3
26.6
80,000 30.0
70,000 25.0
20.0
14.9
60,000
14.4
14.4
14.2
14.2
14.0
14.0
13.4
12.4
11.8
(%)
11.3
(|/tonne)
50,000 15.0
40,000 10.0
30,000 5.0
20,000 0.0
FY18E
FY19E
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
10,000
0
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Gross Margin EBITDA margin

Strong sales growth to drive PAT at CAGR 28% in FY17-19E
APTL has recorded strong PAT CAGR of ~33% during FY09-16 led by
piping & drainage systems and disciplined approach towards capital
The company recorded a net profit CAGR of 33% during expenditure (debt to equity ratio declined from 0.7x in FY09 to 0.2x in
FY09-16 led by an increase in sales and EBITDA margin. FY16). We believe a reduction in debt level by 18% would lead to a
We believe the company would continue to record strong significant reduction in interest outgo by ~48% (by FY19E). Despite rising
sales growth (backed by capacity addition) with increase non-cash expenditure (higher depreciation charges due to recent capex),
in EBITDA margin that would drive PAT at 28% CAGR in the company is expected to record strong PAT CAGR of 28% in FY17-19E
FY17-19E led by sales growth and expansion in EBITDA margin.
Exhibit 55: Net profit to grow at ~27% CAGR in FY17-19E
250 235
CAGR 28%
200
173
145
150
CAGR 33%
102
100 79 76
61
33 39
50 28
14
0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
Exhibit 56: Asset turnover to improve gradually with stabilisation of new plants
3.5
3.0 2.9 3.0

2.9 2.9 2.9
2.8 2.7 2.7
Fixed assets turnover of APTL has been strong barring 2.5 2.5 2.6
FY15-16 wherein the company have done significant capex
for both addition of new business and capacity. We believe 2.0 2.0
(x)
the turnover will increase gradually with the stabilisation of 1.5

new units, going forward
1.0
0.5
0.0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E

Better earnings growth to lead to expansion in return ratios
APTL has maintained a disciplined approach for capital expenditure to add
We believe stabilisation of new capacity, improvement in
new capacity or new business by using internal accrual. This has translated
margin and lower working capital requirement would
into decline in debt/equity mix 0.4x in FY12 to 0.2x in FY16. However, the
translate into strong operating cash flow and bring back
company’s cash conversion cycle was stretched due to significant cut in
the return ratios to elevated levels
credit days by Lubrizol Corp (from 120 days to 60 days after starting new
capacity in Gujarat). After joining hands with Sekesui, APTL was assured of
getting extended credit days (of 120 days), which would translate to lower
working capital requirement, going forward. Historically, the company has
recorded strong RoCE, RoE led by a strong performance. We believe
stabilisation of new capacity, improvement in margin and lower working
capital requirement would bring back return ratios to elevated levels.
Exhibit 57: Debt/equity mix at comfort zone despite regular capex Exhibit 58: Return ratios to improve with increase in profitability
31.4 31.8
0.8 35.0 28.7
0.7 0.7 30.0 23.9 23.7 23.8
21.3 21.7
0.6 25.0 19.2
17.0
0.5 20.0 13.6 23.6 25.1 25.0
22.2 21.4
(%)
0.4 15.0
17.2 16.0 18.0
(x)
0.4 0.4
0.3 0.3 10.0 15.1 14.5
0.3 0.3 12.3
0.2 5.0
0.2 0.2 0.2
0.1 0.0
0.1 0.1
FY18E
FY19E
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
0.0
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18E
FY19E
RoCE RoE
Exhibit 59: Higher credit days to translate into lower cash conversion cycle
80
69 69
70
59 61
60 52
50
41
(Days)
40
30
20
10
0
FY13 FY14 FY15 FY16 FY17E FY18E

Risk & concerns
Volatility in raw material prices
Major raw materials consumed by APTL are poly vinyl chloride (PVC)
resins, Chlorinated polyvinyl chloride (CPVC) resins, which are linked to
crude prices. APTL imports 50% of raw materials. Since a significant part of
the raw material is imported, any increase in import price or fluctuations in
foreign currency rates may affect the margins of the company.
Exhibit 60: EBITDA margin movement with respect to PVC price
90000 79265 16
80000 74640 73641
70050 14
66081
70000 62385 12
55244 58084
60000 53631
(|/tonnes) 10
50000
8
(%)
40000
6
30000
20000 4
10000 2
0 0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Price PVC per tonne EBITDA margin
Source: Company, ICICIdirect.com Research, FY17E EBITDA margin is i-direct estimate
Risks arising from foreign exchange rate fluctuations

Depreciation of the rupee against foreign currencies may adversely affect
operations by increasing the cost of financing (debt denominated in foreign
currency) and any proposed capex in foreign currencies.
Delay in capacity expansion and government expenditure
Being a capital intensive business, it is necessary for APTL to continuously
invest in the business to sustain growth. Sales of APTL may get negatively
affected if there is any hurdle (regulatory, environmental) in the expansion
plan. Further, government programmes like Housing for All, Swachh Bharat
and AMRUT would be a strong boost to the plastic piping industry in India,
going forward. However, any delay in execution of such projects could hurt
the demand for plastic products in India.
Limited experience in adhesive and sealant business
APTL is relatively new in the adhesive and sealant business and has limited
experience. The strategy of diversifying its business and expanding product
range into the adhesives and sealants business through the acquisition of
Seal It and RCL may be unsuccessful. This may be possible due to the
aggressive capital expenditure by established strong domestic and
international players.
Entry of other organised players in CPVC segment
The CPVC piping system is increasingly becoming popular in the Indian
housing sector. Hence, established PVC players (such as Finolex Industries,
Supreme Industries) have also decided to move toward CPVC pipe
manufacturing. Competition is, therefore, expected to remain intense in the
foreseeable future. It may hit the margin of APTL.
Systematic risk associated with international business
The company’s international operations (Seal It and Silicon tape) are subject
to political, economic, regulatory and other risks of doing business in those
jurisdictions.

Valuation
Astral is the pioneer in the CPVC piping business with a market share of
~25%, with revenue, earning CAGR of 37%, 33% in FY09-16. In the last six
years, APTL’s pipe manufacturing capacity expended to ~3x to 1.4 Lakh MT
by FY17 mainly to serve rising demand of plastic piping/plumbing products
from housing and agriculture. It also plans to increase the pipe
manufacturing capacity by 25% by FY19E on the back of strong
replacement demand and different government schemes. This would yield
strong piping sales CAGR of 21% backed by volume CAGR of ~17% in
FY17-19E. Further, the strategy to extend the business towards adhesive &
sealant segment through inorganic route, was a step towards de-risking the
business from a single product company (of the piping business).
Doubling the capacity coupled with strong branding of adhesive & sealant
segment would lead strong segment revenue CAGR of 22% in FY17E-19E.
As a result, consolidated revenue would record sales CAGR of 21% in FY17-
19E. Backward integration (of raw material sourcing) coupled with
stabilisation of new capacity would help drive the EBITDA margin from
~14% in FY17 to ~15% in FY19E. Strong sales and EBITDA margin in FY17-
19E would help the company record PAT CAGR of 28% (against Supreme
Industries: CAGR 14%, Finolex Industries: CAGR of 6%). We believe since
there is no major capex in the piping and adhesive & sealant segment the
company would largely focus to leverage its strong brand to increase the
asset turnover, going forward. Higher credit days (as per negotiation with
Sekesui), with strong earning growth would help in the company’s free cash
flow accumulation of | 100 crore in FY18E-19E supported by strong
operating cash flow (expected to record strong CAGR of 38% in FY17-19E).
As a result, return ratios RoCE, RoE would start improving gradually from
17%, 12.3% in FY15 to 24%, 18% by FY19E, respectively.
We reckon a revival of the plastic piping industry is on the cards with a
major government infrastructure push, implementation of GST as well as
continued replacement demand from tier II and tier III cities. Moreover, a
better economic scenario would lead to a further re-rating of the stock. We
have valued the company on a PE basis by ascribing PE multiple of 35x
FY19E earnings. We are initiating coverage on the stock with a BUY rating
and a target price of | 685/share.
Exhibit 61: Historically, APTL has traded at average P/E multiple of 37x Exhibit 62: One year forward P/E (x)
70.0 700 40x

60.0 600 35x
50.0 500 30x
40.0 400 25x
30.0 300
Avg P/E 37x
20.0 200
10.0 100
0.0 0
Jun-13
Sep-13
Dec-13
Jun-14
Sep-14
Dec-14
Jun-15
Sep-15
Dec-15
Jun-16
Sep-16
Dec-16
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Exhibit 63: Competitor’s valuation matrix (in | crore)

Mcap Sales EBITDA Net Profit PE EV/EBITDA ROE
Peer group
(Cr) FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E FY16 FY17E FY18EFY19E FY16 FY17E FY18E FY19E
Supreme Ind 14545 2947 4462 5451 6173 446 762 849 994 222 428 465 555 65 34 31 26 33 19 17 15 17 25 27 28
Finolex Ind 8028 2843 2988 3058 3352 400 571 528 540 258 355 345 366 31 23 23 22 20 14 15 15 16 15 22 22
Astral Polytec 7305 1678 1889 2301 2785 208 264 327 415 102 145 173 235 72 51 42 31 36 28 23 18 14 17 16 18
Source: Bloomberg, ICICIdirect.com Research

Exhibit 64: Income statement (| crore)
Year end March FY15 FY16 FY17 FY18E FY19E
Net Sales 1429.9 1677.8 1888.8 2301.2 2785.5
Other income 3.1 2.3 9.1 10.2 11.0
The consolidated topline of the company is expected to Total Revenue 1433.0 1680.1 1898.0 2311.4 2796.5
grow at a CAGR of ~21% during FY17-19E to led by
Expenditure
strong piping and adhesive & sealant segment
Cons of raw material 1011.5 1152.5 1263.2 1521.9 1835.7
performance Pur of traded goods 38.0 48.8 40.3 34.2 28.3
Employee cost 48.1 75.0 88.7 107.7 130.5
Other expenses 164.1 194.0 232.9 310.7 376.0
Total expenses 1261.6 1470.2 1625.0 1974.4 2370.5
EBITDA 168.3 207.6 263.8 326.7 415.0

Interest 25.5 30.2 18.4 19.5 14.0
PBDT 145.9 179.7 254.5 317.4 412.0
Depreciation 36.4 41.8 50.2 64.4 78.0
Profit before tax 109.5 137.9 204.3 252.9 334.0
Total Tax 31.3 29.6 56.2 77.4 96.0
PAT before MI 78.2 107.5 147.2 175.5 238.0
Minority Interest 2.3 0.0 0.0 0.0 0.0
PAT after MI 75.9 107.5 147.2 175.5 238.0
Profit from Associates 0.0 -5.6 -2.6 -2.6 -2.6
PAT 75.9 101.9 144.6 172.9 235.3
Exhibit 65: Balance sheet

Equity Capital 11.8 12.0 12.0 12.0 12.0
Reserve and Surplus 606.9 696.4 834.9 1068.1 1291.9
APTL has maintained a disciplined approach towards Total Shareholders funds 618.8 708.4 846.8 1080.1 1303.9
capital expenditure to add new capacity or new business Total Debt 139.1 130.6 156.9 136.9 116.9
by using internal accrual. This has translated into decline Other Non Current Liabilities 68.4 72.9 80.5 83.1 85.1
in debt/equity mix 0.4x in FY12 to 0.2x in FY16 Total Liability 792.0 875.7 1044.0 1258.5 1463.3
Fixed Assets
Gross Block 482.6 610.9 738.8 838.8 968.8
Accumulated Depreciation 140.2 179.5 229.7 294.1 372.1
Net Block 342.4 431.4 509.1 544.7 596.7
Capital WIP 26.8 15.0 25.0 25.0 25.0
Total Fixed Assets 369.3 446.4 534.1 569.7 621.7
Goodwill on Consolidation 214.4 213.7 232.2 232.2 232.2
Sub Total 214.4 213.9 232.3 232.3 232.3
Current Assets
Inventory 265.6 277.3 272.1 353.1 427.4
Debtors 232.7 227.1 338.6 441.3 534.2
Loans and Advances 70.2 4.5 1.7 2.1 2.5
Other Current Assets 1.7 58.8 42.9 52.3 63.3
Cash 11.5 49.8 16.4 58.9 105.1
Total Current Assets 581.6 617.6 671.7 907.7 1132.5
Current Liabilities
Creditors 265.7 316.3 293.1 357.1 432.2
Provisions 9.0 1.8 2.1 2.5 3.1
Other current liabilities 98.6 110.1 122.5 115.1 111.4
Total Current Liabilities 373.3 428.1 417.7 474.7 546.7
Net Current Assets 208.3 189.5 254.0 433.0 585.8
Deferred Tax Assets 0.0 2.3 1.6 1.6 1.6
X
Total Asset 792.0 875.7 1044.0 1258.5 1463.3

Exhibit 66: Cash flow statement
Profit/(Loss) after taxation 75.9 101.9 144.6 172.9 235.3
Add: Depreciation & Amortization 36.4 41.8 50.2 64.4 78.0
Add: Interest Paid 25.5 30.2 18.4 19.5 14.0
C/F bef working capital chg. 137.8 174.0 213.2 256.9 327.3
Net Increase in Current Assets -174.2 2.3 -87.6 -193.4 -178.6
Net Increase in Current Liabilities 105.1 54.8 -10.4 57.0 72.1
APTL to record strong operating cashflow in FY17E-19E Net CF from operating act 68.7 231.1 115.2 120.5 220.7
supported by healthy profitability and efficient working
capital management (Inc)/Dec in Goodwill on Cons -213.9 0.7 -18.4 0.0 0.0
(Purchase)/Sale of Fixed Assets -108.7 -118.9 -138.0 -100.0 -130.0
Others 21.6 2.0 4.0 1.3 1.0
Net Cf from Investing Act -300.9 -141.8 -150.4 -98.7 -129.0
Pro/(Rept) of/from Loan 40.7 -8.4 26.3 -20.0 -20.0

(Payment) of Div & Div Tax -5.2 -5.8 -4.3 -7.9 -11.5
Others 207.3 -36.8 -20.1 48.7 -14.0
Net Cf from Financing Act 242.8 -51.0 1.8 20.8 -45.5
Net Cash flow 10.5 38.3 -33.5 42.6 46.2

Cash and Cash Equi at the beg 1.0 11.5 49.8 16.4 58.9
Cash and Cash Equi at the end 11.5 49.8 16.4 58.9 105.1
Exhibit 67: Ratio analysis

Per share Data

EPS 6.3 8.5 12.1 14.4 19.7
Cash EPS 9.4 12.0 16.3 19.8 26.2
Dividend per share 0.4 0.5 0.4 0.7 1.0
BV per share 51.7 59.2 70.7 90.2 108.9
Profitability Ratio
EBITDA margin 11.8 12.4 14.0 14.2 14.9
We expect the company to maintain high RoE and RoCE PAT margin 5.3 6.1 7.7 7.5 8.4
considering 1) Healthy topline growth backed by capacity Return Ratios
expansion plan 2) recovery in operating margin 3) RoCE 17.0 19.2 21.3 21.7 23.8
RoNW 12.3 14.5 17.2 16.0 18.0
Efficient working capital management turning lower
RoIC 20.7 24.3 24.6 25.4 28.3
debt/equity ratio
Valuation Ratios
P/E 96.2 71.7 50.5 42.2 31.0
EV / EBITDA 44.2 35.6 28.2 22.6 17.6
Market Cap / Sales 5.1 4.4 3.9 3.2 2.6
Price to Book Value 11.8 10.3 8.6 6.8 5.6
Activity Ratios
Inventory Days 67.8 60.3 52.6 56.0 56.0
Debtor Days 59.4 49.4 65.4 70.0 70.0
Creditor Days 67.8 68.8 56.6 56.6 56.6
Gross Block Turnover 3.0 2.7 2.6 2.7 2.9
Solvency Ratio
Debt / Equity 0.2 0.2 0.2 0.1 0.1
Debt / EBITDA 0.8 0.6 0.6 0.4 0.3
Current Ratio 2.1 1.8 2.2 2.4 2.4
Quick Ratio 1.1 0.9 1.3 1.4 1.4

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ANALYST CERTIFICATION
We /I, Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance); Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research
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loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment
in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned
in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any
compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts
and their relatives have any material conflict of interest at the time of publication of this report.
It is confirmed that Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance); Research Analysts of this report have not received any compensation from the companies mentioned in the report in
the preceding twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month
preceding the publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.
It is confirmed that Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance); Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.

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Initiating Coverage

Rating Matrix Astral Poly Technik Ltd (ASTPOL)

Price movement Strong fundamentals justify premium valuations

(| Crore) FY15 FY16 FY17 FY18E FY19E

ICICI Securities Ltd | Retail Equity Research

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 2

Established with aim of Signs agreement with IPS (US)

1996 1999 2007 2008 2011 2014 2015 2016

Source: ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 3

Source: Company, ICICIdirect.com, Research Source: Company, ICICIdirect.com, Research

Overseas manufacturing facilities

PVC piping system for drainage, UPVC agriculture pressure pipes,

ICICI Securities Ltd | Retail Equity Research Page 4

2500.0 CAGR 21% 200.0

1500.0 CAGR 37%

100.0 CAGR 32.5%

Source: Company, ICICIdirect.com, Research Source: Company, ICICIdirect.com, Research

Piping Adhesive & Sealants Piping Adhesive & Sealants

Source: Company, ICICIdirect.com, Research Source: Company, ICICIdirect.com, Research,

ICICI Securities Ltd | Retail Equity Research Page 5

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 6

According to Ficci, growth in demand for PVC is expected to be

Source: Ficci, Industry report, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 7

2000000 8.7% 4000000

ICICI Securities Ltd | Retail Equity Research Page 8

Source: ICICIdirect.com Research

Growing brand and quality consciousness – share of

Organised market Unorganised market

Finolex Industries Supreme Industries Astral Poly Others

Source: Company, ICICIdirect.com Research,

Rising popularity of CPVC pipes

ICICI Securities Ltd | Retail Equity Research Page 9

Very High thermal

We believe future demand for piping products would largely be driven by

ICICI Securities Ltd | Retail Equity Research Page 10

MP, 1.1 1991 2001 2011

Source: Company, ICICIdirect.com, Research

Furthermore, a KPMG Naredco study points out shortage even beyond 6

We believe the housing shortage coupled with lack of proper water

ICICI Securities Ltd | Retail Equity Research Page 11

Source: Budget document, ICICIdirect.com Research

Source: Census 2011, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 12

Gross Cropped area (198 mn ha)

Net Cropped area (142 mn ha)

*Uneven distribution of rain

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 13

Net working capital % sales EBITDA margin

Source: Company, ICICIdirect.com, Research Source: Company, ICICIdirect.com, Research

ICICI Securities Ltd | Retail Equity Research Page 14

250 10.5 160 8.0

Revenue PAT EBITDA margin Revenue PAT EBITDA margin

Source: Company, ICICIdirect.com, Research Source: Company, ICICIdirect.com, Research

Exhibit 37: Adhesive business performance

500.0 454.5 14.0

Revenue EBITDA margin

Source: Company, ICICIdirect.com Research