Acrysil Ltd - Research Report

 

Private Client Research

Rating

Buy

Sector

Plastic Products

Company

Acrysil Ltd

Reco Price
Rs. 490
Price Target (1.5 - 2 Years)
Rs. 970
Upside
97.96%

Date

June 12, 2015
Sensex
26425.3
CNX Nifty
7982.9

Exchange

Code

NSE
-
BSE
524091

Stern Hagen’s Performance will be the key trigger for the stock.

Unique Product:
Acrysil is the only company in Asia and one of just a the companies worldwide manufacturing quartz kitchen sinks of global standards. It has no competition in its class in India. It is India’s only indigenous brand of kitchen sinks made of quartz bonded with resin, homogeneously moulded by a unique CNC-controlled polymerization process. That results in a product that is scratch resistance, dent-proof, stain resistant and heat-proof, with a glossy and truly lasting granite finish in several varieties. It has truly international looks and styling, and is available in a range of attractive colors. It is highly functional, easy to clean, and safe in contact with food. Best of all, it remains as good as new even after years of use. Currently company has 375000 units capacity with 300000 units in Granite category and 75000 units in steel category. Under the Granite Sink Range the models offered include Jazz Series, Vivaldi Series, Beethoven Series, Single Series, Swan Series and Tango Entertainment Series. Company's 80% of sales comes from bathroom category.

Stern Hagen:
Company has launched Stern Hagen brand in bathroom category. Stern Hagen is a premium-brand for sanitary ware and bathroom fittings from Germany. Stern Hagen faucets incorporate unique design and innovative technologies for water. Products under this brand are of premium category with price starting from Rs 20000 to Rs 60000 per sink. The brand was recently launched in Las Vegas, USA and will shortly be launched in Singapore, Vietnam and the UK. The product roll out will follow in other countries like China, Thailand and Germany. The Stern hagen range has already earned accolades from the industry for its awe inspiring designs and amazing quality and finish during Acetech 2013 in New Delhi. Company is expecting strong spike in volumes with the launch of this brand. Company is expecting to sell around 6000 units in current financial year on the back of strong branding and advertising expense done abroad. With the launch of this brand company has entered in next level of innovation which will help them to drive the future growth.

Stainless Steel:
Company is very unique in steel category as they manufacture Welded pilot steel sinks, it is very difficult to manufacture and very few manufactures this product. Under the Stainless Steel Range the sinks offered include Quadra, Trend, Vogue, Catwalk, Diva, Glamour and Big Bowl. Further, under VETRO INOX, the range includes Single Big Bowl and Single Small Bowl. Company is doing expansion in stainless steel sinks to tap domestic growth. Current capacity of 25000 sinks will be doubled in next two years. current stainless steel sink sales are at 22000 units. These will help the company to improve its domestic market share.

Exports:
The company exports its products to approximately 30 countries, including the United States, France, the United Kingdom, Greece as well as various European markets, Far East, Gulf countries. The company has been predominantly an exporter with 75% of its revenues coming from exports. Acrysil has extended its penetration into new markets like Israel, Germany, Hungary and Denmark and acquired new high profile customers in several countries like USA. It is doing well in strategic partnerships with major companies in USA, Europe and Russia, and its international subsidiary Acrysil GmbH in Germany is now a trusted and established name in that market. With the launch of Stern Hagen company has strengthen its presence in European companies.

Strong Investor:
Acrysil started manufacturing granite sinks through a technical collaboration with Schock & Co of Germany (it owns 10.15% stake in Acrysil), which is a leading decorative mouldings company in the world. SCHOCK invented the granite sink and has been one of the leading manufacturer worldwide for over 30 years. In addition to its own brand name manufacturing business, the company serves as an original equipment manufacturer (OEM), supplying some of the leading kitchen furniture and stainless steel sink manufacturers. Today, around 75% of the 2 million sinks sold every year globally are produced based on manufacturing procedures developed by SCHOCK. Hence company has strong investor to support its manufacturing facilities at global level if required.

Homestyle Acquistion:
Company acquired 74% stake in UK-based kitchen sink distribution company Homestyle Products Ltd for Rs 20.50 crores in December 2014. It helps company to expand its global footprint and to enter the UK market for kitchen sinks and accessories. Acrysil plans to use the Homestyle Products’ marketing network to introduce other items from its bouquet of products like kitchen chimneys and cook tops in the UK market. The firm will also leverage Homestyle Products’ platform to cater to the European market and accelerate growth of its exports to Europe.In last quarter Homestyle Products reported Rs 5.5 crores sales and PAT of Rs 1.5 crores which is very good performance. Hence company is continuously exploring good opportunities for their geographical expansion.

Fair margins and return ratios:
Acrysil earns decent operating margins at 18.31% recorded during the last year. Its ROCE/RONW is also attractive at 18-20%. Acrysil has grown at CAGR growth rate of 25% in last 3 years compare to global industry growing at 20% p.a. Company is expected to increase its margins with the launch of Stern Hagen products as they are very lucrative in terms of its pricing. Going forward company is expected to double its sales in next 2 years with hardly any capex to be incurred for the same.

Stock Data

CMP (Rs)
490
Face value (Rs)
10
52 Week Range (Rs)
710.45 - 239.50
Market cap (Rs Crores)
240.1
Price To Book Value (x)
5.48
P/E Ratio (x)
25.95
EV/EBIDTA (x)
11.74

One Year indexed Stock Performance

Acrysil LtdSensex
Acrysil Ltd
Performance (%)
1m
6m
12m
Absolute
-4.16
-20.74
92.98
Sensex
-1.68
-3.38
4.16

Shareholders

(in %)
31-Mar
Promoter
47.26
FII
-
DII
-
Others
52.74
Total
100

+91 22 6639 3000
research@stockaxis.com

 

Industry Overview

Granite Sinks
The granite sinks industry largely falls under the lifestyle category globally and the market is dominated by three long established multinational giants who account for nearly 70% of the market. Acrysil is among the select few manufacturers of granite sinks in the world and has the distinction of being the only one from Asia. Acrysil continues to be the dominant player in this segment in India though it does have limited competition from a few major multinationals entering growing domestic market.

Stainless Steel Sinks
The domestic stainless steel sink industry is characterized by a proliferation of players including large, small, multinational, local as well as the unorganized sector. Acrysil continues to focus aggressively on domestic market and has made significant inroads here. It has made some initial forays and currently evaluating opportunities in the export market.

Kitchen Appliances
A large number of multinational brands cater to the premium segment of the domestic market for these products. The market is still evolving and is expected to register high growth in the years ahead.

Globally Market size for Bathroom fittings is Rs 4000 crores and its growing at 20% p.a.

Profile

Acrysil Limited was incorporated in 1987 and is headquartered in Bhavnagar, Gujarat, India. Acrysil Ltd manufactures and sells kitchen sinks/centers (installed capacity of manufacturing 300000 sinks per annum). It sells granite sinks, stainless steel sinks, and Vetro Inox sinks, as well as faucets and food waste disposers. Acrysil is only company in Asia - and one of just a few companies worldwide manufacturing quartz kitchen sinks to global standards of quality, durability and visual appeal. It has no competition in its class in India. It has increased annual production capacity of quartz sinks to 300000 units, and has also set up own manufacturing facilities for high quality stainless steel sinks.

Acrysil constantly enhances the value of its products through innovative R&D and has developed over 50 models of quartz sinks to cater to various segments and markets. The Company has also made significant investments in resource saving technology that promote energy efficient and environment friendly manufacturing, helping to preserve nature and environment for future generation.

Profit & Loss Statement:- (Consolidated)
(Rs Crores)
Particulars
Mar 13
Mar 14
Mar 15
Mar 16E
Mar 17E
Income:-
  • Net Sales
  • Growth (%)
  • Total Expenditure
  • EBITDA
  • % Margin
  • Other Income
  • Operating Profit
  • Interest
  • PBDT
  • Depreciation
  • Profit Before Tax
  • Provision for Tax
  • Tax Rate (%)
  • Profit After Tax
  • % Margin (%)
  • Adjusted EPS
  • 79.58
  • 27.08
  • 65.77
  • 13.80
  • 17.35
  • 0.55
  • 14.36
  • 3.90
  • 10.46
  • 4.37
  • 6.09
  • 1.35
  • 22.13
  • 4.74
  • 5.96
  • 10.84
  • 106.46
  • 33.78
  • 86.69
  • 19.77
  • 18.57
  • 0.64
  • 20.41
  • 4.02
  • 15.15
  • 4.81
  • 10.34
  • 2.62
  • 25.33
  • 7.72
  • 7.25
  • 17.08
  • 125.92
  • 18.28
  • 103.56
  • 22.36
  • 17.76
  • 0.69
  • 23.05
  • 5.61
  • 17.44
  • 4.27
  • 13.17
  • 4.16
  • 31.59
  • 9.01
  • 7.16
  • 18.8
  • 175.00
  • 38.98
  • 143.50
  • 31.50
  • 18.00
  • 0.60
  • 32.10
  • 7.05
  • 25.05
  • 5.05
  • 20.00
  • 6.05
  • 30.25
  • 13.95
  • 7.97
  • 29.23
  • 225.00
  • 28.57
  • 186.50
  • 38.50
  • 17.11
  • 0.60
  • 39.10
  • 7.65
  • 31.45
  • 5.65
  • 25.80
  • 7.75
  • 30.04
  • 18.05
  • 8.02
  • 37.82
Source: Stockaxis Research, Company Data

Valuation

After the recent expansion company has become very competitive compare to its global peers. Stern Hagen launch will boost company’s performance both in terms of volumes and margins as they are high end business products. We strongly believe company has strong potential to move on next level for growth in international markets. Hence we assign the valuation of 25.64x to FY 2016E indicating target price of Rs 970 with long term horizon.

 

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