Astral Poly Technik Limited (NSE:ASTRAL): Is Capital Goods Attractive?

Astral Poly Technik Limited (NSE:ASTRAL), a ₹125.28b small-cap, is a building product company operating in an industry which is relatively sensitive to changes in the business cycle. This is because the building sector is predominantly affected by shifts in the housing market, as a result of demand from construction projects. Generally, building product stocks are good buys during the early periods of economic growth due to the anticipated increase in demand. Capital goods analysts are forecasting for the entire industry, a strong double-digit growth of 23.26% in the upcoming year , and a massive growth of 89.98% over the next couple of years. the growth rate of the Indian stock market as a whole. Is the building product industry an attractive sector-play right now? Below, I will examine the sector growth prospects, as well as evaluate whether Astral Poly Technik is lagging or leading its competitors in the industry.

See our latest analysis for Astral Poly Technik

What’s the catalyst for Astral Poly Technik's sector growth?

The building products sector seems to be mainly in the mature life cycle. Companies appear highly competitive with each other and consolidation seems to be a common theme. There are plenty of emerging trends to deal with across the board including the reduction of waste, raw material inflation, and innovation in global supply chain management. In the previous year, the industry saw growth in the twenties, beating the Indian market growth of 17.32%. Astral Poly Technik is neither a lagger nor a leader, and has been growing in-line with its industry peers at around 21.01% in the prior year. However, analysts are expecting the company to accelerate ahead of its peers over the next year, and deliver a 32.60% growth next year. This growth may make Astral Poly Technik a more expensive stock relative to its peers.

Is Astral Poly Technik and the sector relatively cheap?

Building products companies are typically trading at a PE of 28.37x, higher than the rest of the Indian stock market PE of 20.88x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 11.91% compared to the market’s 9.55%, which may be indicative of past tailwinds. On the stock-level, Astral Poly Technik is trading at a higher PE ratio of 71.54x, making it more expensive than the average building products stock. In terms of returns, Astral Poly Technik generated 17.02% in the past year, which is 5.11% over the building products sector.

Next Steps:

Astral Poly Technik’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Astral Poly Technik has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other building products companies. However, before you make a decision on the stock, I suggest you look at Astral Poly Technik's fundamentals in order to build a holistic investment thesis.

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has ASTRAL's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Astral Poly Technik? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.