The story looks quite interesting, as its 4 largest manufacturer of granite sink in world and still doesn't have 100 cr in sales.The top 3 have 70% market share. So looks like winner takes it all.
Opportunity size is pegged in company AR at 1 crore granite sinks/year and company has paltry 1.8 L granite sinks in FY13, market share of around 1.8% of world.
Growth rate of segment domestically will be high which will be catered by Acrysil and internationally Acrysil can benefit by snatching market share from smaller players or penetrating into top 3's pie. The growth in domestic market of both stainless steel and granite sinks look sustainable, a little hard to predict their international business.
Average realisation per sink was low around 4000 Rs for FY13, this seems contradictory to observations by Ankit where he mentioned the cheapest being 5200 Rs and are much higher for export segment. This is one place where numbers don't add up. Even stainless steel are more expensive than 4000 Rs. There may be some dealer commission which might reflect in here but still realisation is too low and has led to margin being surprisingly low in a premium segment. This is one point on which we can question the company representative.
Company has mentioned capacity of 2,75,000 granite sinks and as mentioned by Company secretary total capacity is of 3,25,000 sinks. My guess is the rest 50,000 units might be of stainless steel sink produced by Acrysil steel.
Utilisation rate of 80% might make sense if we consider companies performance in FY14.
On a utilisation rate of 80% on 3,25,000 units, and average realisation of ~4047 Rs/sink (9% stainless sink and 91% granite), we get yearly revenue of around 105 cr and half year revenue of 52.5 crore which is close to actual figure of 52.39 crore.
Even if we consider the total capacity to be 2,75,000 and utilisation rate to be 80%, it will give higher realisation around 4870 Rs (at 52.5 crore half year revenue) which may explain higher margins of the company in Q1 and Q2 FY14. We need to confirm the actual capacity for both the segments which will give us better picture.
For Company to have 1000 Cr of revenue by 2020, it will have to increase its market share to around 15%, which looks possible due to lack of competition in Asian market. But the capacity required to produce such results would also be around 20 lac units. So capacity addition at brisk pace need to continue for that.
As Raj mentioned, company is constantly reinvesting to create more fixed assets, which I can attribute to reaching higher capacity in the futures and management aggression. They might be committed to 1000 Cr sales by FY20, which may have led to unoptimal usage of existing capacity before committing for further capacities. I guess we need to watch FY14 capacity utilisation and demand scenario before accusing managers of being overly aggressive.