Synopsis: Citi initiated coverage on India’s plastic pipes sector, rating Astral as a ‘buy’ (target Rs. 1,800, 27% upside) due to structural advantages, while recommending ‘sell’ for Supreme (target Rs. 2,950, 12% downside) amid normalised industry growth.
Citi has initiated formal coverage on India’s plastic pipes sector, offering investment ratings and target prices for two major companies in the industry, which are Astral and Supreme. The brokerage believes the sector has undergone noticeable shifts in recent times, driven largely by changing market dynamics and normalising demand after a period of exceptional growth.
With a market capitalisation of Rs. 38,153 cr, the shares of Astral Ltd closed at Rs. 1,420.20 per share, from its previous close of Rs. 1,409.10 per share. With a market capitalisation of Rs. 42,680 cr, the shares of Supreme Industries Ltd closed at Rs. 3,359.95 per share, from its previous close of Rs. 3,344.50 per share.
Citi’s Coverage on India’s Plastic Pipes stocks
Citi has initiated coverage on Astral with a ‘buy’ rating, assigning the stock a target price of Rs. 1,800, 27% upside. This indicates the firm’s belief that Astral has strong potential for price appreciation from current levels. In contrast, Citi has initiated coverage on Supreme with a ‘sell’ rating, setting a target price of Rs. 2,950, 12% downside from the current levels.
According to Citi, the overall dynamics of the plastic pipes industry have deteriorated over the last 18 months. This slowdown is reflected in the performance of companies, where Astral’s stock has declined by 20%, while Supreme’s stock has fallen by 33% over the past year.
The brokerage suggests that the period of rapid growth seen between FY22 and FY24 was likely an outlier, and the sector is now returning to a normalised growth trajectory. Citi does not expect the industry to bounce back to the exceptionally high growth rates recorded during those years.
Citi’s preference for Astral is rooted in several structural advantages. One key factor is Astral’s backward integration into CPVC (Chlorinated Polyvinyl Chloride), which enhances cost efficiencies and supply chain control. Additionally, Astral is expected to benefit from expansion into new geographies, which could open fresh revenue streams. The brokerage also highlights stronger growth prospects in Astral’s non-pipes businesses, further supporting its bullish stance.
In terms of valuation, Citi assigns Astral a multiple of 35 times EV/EBITDA for March 2027 estimates, reflecting the company’s perceived strength and future potential. Supreme, on the other hand, is valued at 20 times, indicating a more conservative expectation of its forward performance.
Financials of the companies
Astral Ltd delivered a healthy year-on-year performance in Q2FY26, with sales rising 15% to Rs. 1,577 crore from Rs. 1,370 crore in Q2FY25. EBITDA grew 22% to Rs. 257 crore from Rs. 210 crore, while net profit increased 23% to Rs. 135 crore from Rs. 109 crore. Earnings per share (EPS) also rose 23% to Rs. 5.02 compared to Rs. 4.09 a year ago.
Supreme Industries Ltd reported modest year-on-year growth in Q2FY26, with sales rising 5% to Rs. 2,394 crore from Rs. 2,273 crore in Q2FY25. Profitability declined, with EBITDA falling 7% to Rs. 297 crore from Rs. 319 crore, while net profit dropped 20% to Rs. 165 crore from Rs. 207 crore. Earnings per share also declined 20% to Rs. 12.97 compared to Rs. 16.26 a year ago.
Written by Manideep Appana
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