Jefferies bets big on Astral, Finolex and Supreme Industries

Expects these players to benefit the most from transition to organised segment.

Jefferies is betting on Indian pipes industry citing a gradual shift to organised players. It expects players such as Astral Poly, Supreme Industries and Finolex Industries to benefit the most from this transition.

Along with it, companies are also diversifying their products to enhance profitability, the global research firm observed. Based on these reasons, it has initiated coverage on these stocks with a buy call.

Moreover, the recent market crash is a good opportunity for entering such quality names.

“While mid and smallcap indices corrected by 15-20% month-on-month, Astral, Finolex and Supreme Industries declined 25%, 13% and 16%, respectively. This has left them within 5-10% of their five-year average and 30-40% lower than YTD peaks.

The key trigger is diversification into value-added sales streams (adhesives, packaging, consumer products, CPVC pipes etc.) which command premium valuations over pure-play PVC pipes, analysts at the firm wrote in their report.

Additionally, superior growth prospects with financial discipline (high return ratios, and robust free cash flow, among others) should support multiples, they further wrote.

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