Matter of Choice ( Astral Poly Technik vs Technofab Engineering)
One is in a convenient position when a choice has to be made amongst two fine alternatives. I am in a similar bind between two such alternatives from infra space. Although in theory the companies are not comparable as one is into services and another into primarily manufacturing.
But they both carry an Infrastructure label, and I know that from experience that it is an area that will continue to be a painful for investors for coming decades simply due to the roller coaster nature of crowd psychology.
Astral Poly Technik vs Technofab Engineering.
Both are nice mid / small (depends on your context) cap companies. It becomes a matter of choice since I don’t want to buy both of them. With that line of thought I would end up with 100 stocks.
Technofab Engineering has a relatively more polished workforce, it ranks way higher. However, in Indian context EPC companies are generally cash flow negative.
I’d liken Astral Poly to a “value migration” leader in Indian context from metal pipes to CPVC and plastic pipes, remember cellphones in 2002 ?
One aspect that did put me off regarding Astral was Lubrizol tie up with Ajay Group (http://www.ajaycorp.com/cpvc-pipes.html) and Ashirwad Group (http://www.ashirvad.com). Vaguely recall having read Buffett talk about mountain of riches for a single company that controls a single pipeline in a state/region, antithetical view is misery for all companies if there are four overlapping pipelines in same region.
There are other companies too in CPVC overseas which are as strong and big as Lubrizol which have not yet entered India as yet in any major way except through distributorship. If the scale of opportunity was not that big (tens of thousands of crores) I would have dismissed Astral Poly right away. So a 40% grower at 5 PE or 12 PE ?
The compound is hard to make, is the secret sauce and proprietary, therefore no other compounder is able to match the price point, as yet not even Reliance is thinking of it although they have other polymer businesses, therefore Chinese cannot be a threat.
In 10-20 Years we will see very little or no GI pipe, the sand is shifting
As per my research Lubrizol has 50%+ market share not just in India but globally in CPVC segment, Chinese imports do not match in price point as per management ( need to be checked from market sources ). Astral is educating over 30,000 plumbers per year, its their mind they have to get into, not in minds of end users.