Astral’s proposed business restructuring could sharpen execution across its plumbing and chemicals businesses while setting the stage for faster earnings growth, according to Motilal Oswal Oswal. The brokerage reiterated its ‘Buy’ rating on the stock with a revised target price of Rs 1,710, implying an upside of about 15%, even as it trimmed the target price after moderating its valuation multiple.
Motilal Oswal said the separation of Astral’s plumbing and chemical businesses should allow each entity to pursue a more focused growth strategy. The brokerage expects the demerger process to take 9-12 months and believes the company’s large capital expenditure cycle is largely behind it, with future investments likely to be funded through internal accruals.
“We estimate a CAGR of 16%/20%/25% in revenue/EBITDA/APAT over FY26-28, with its RoE and RoCE (pre-tax) reaching around 17% and 24%, respectively, in FY28,” Motilal Oswal said.
Motilal Oswal on Astral: ‘Buy’
Motilal Oswal maintained its ‘Buy’ rating on Astral and revised its target price to Rs 1,710, implying an upside of about 15%.
The brokerage said Astral’s board has approved a restructuring plan under which the plumbing and chemical businesses will operate as separate entities. It believes the move should reduce related-party transactions, improve strategic focus and support faster growth across both businesses. Separate financials for the businesses are expected after the first quarter of FY27, while the demerger process is likely to be completed over the next 9-12 months.
Chemical business seen as the next growth engine
Motilal Oswal expects the chemicals business to generate revenue of Rs 2,300-2,400 crore and EBITDA of about Rs 250 crore in FY27. The brokerage said the business is targeting revenue of Rs 5,000 crore over the next five years, led primarily by growth in India adhesives.
It added that the Dahej solvent cement plant is nearing completion, the UK and US adhesive businesses are witnessing healthy growth with improving margins, and the paints business now has capacity in place for the next three to five years. The newly acquired DSS business is expected to contribute revenue of Rs 150 crore by FY28.
Plumbing business to benefit from new capacity
Motilal Oswal said the plumbing business remains well placed for further market share gains, supported by capacity expansion and new product launches.
The brokerage expects the CPVC resin plant to be commissioned in the first quarter of FY28, which should aid margin expansion. It also highlighted that products such as OPVC and PPR are scaling up steadily, strengthening the company’s plumbing portfolio.
Earnings growth expected to accelerate
Motilal Oswal expects Astral to deliver a revenue, EBITDA and adjusted profit CAGR of 16%, 20% and 25%, respectively, over FY26-28. It also forecasts return on equity of about 17% and pre-tax return on capital employed of around 24% by FY28.
The brokerage noted that Astral delivered a comparatively modest revenue, EBITDA and adjusted profit CAGR of 16%, 11% and 7%, respectively, during FY21-26. It expects earnings growth to improve as the restructuring progresses and operational efficiencies begin to reflect in the financials.
Key monitorables
Motilal Oswal said execution in the India and overseas adhesives businesses, along with scaling up the newly added paints business, will remain the key factors determining Astral’s earnings trajectory after the restructuring.
The brokerage also expects the simplified corporate structure and focused management teams to support long-term growth across both businesses.
Conclusion
Motilal Oswal believes Astral is entering a new phase with its proposed demerger, supported by a completed capex cycle, improving product mix and stronger execution across its core businesses.
While it has trimmed its target price following a moderation in valuation multiples, the brokerage continues to see scope for earnings acceleration over the next two years and has retained its ‘Buy’ rating on the stock.
Disclaimer: The institutional equity research ratings, valuation multiples, and multi-year financial projections (including revenue, EBITDA, and PAT CAGRs) outlined in this summary of Motilal Oswal’s report on Astral are for informational and educational purposes only. They do not constitute financial advice, an endorsement, or an offer or solicitation to buy, sell, or hold equity shares or participate in any restructuring schemes.
Investments in the building materials, plumbing, and industrial chemicals sectors involve substantial risks, including corporate restructuring and demerger execution timelines, raw material cost fluctuations (such as PVC resin and chemical inputs), intense market competition, and sensitivity to domestic real estate cycles. Readers are strongly urged to conduct independent analysis and consult a SEBI-registered investment advisor or a qualified financial consultant before making financial choices or investing capital based on these targets.
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