POKARNA LTD ( Stock opportunities )


(Capsule91) #470

@rupaniamit on #7… they have done the purchase…take a look at q3 inv ppt …

#10…my view is limited to management comment…
But as far as my understanding they cater to big realty interior designers , no offense please…I too raised eye brows how laminates are going to lose share, may be they meant a certain portion of laminate customers…

Disc… not invested, researching still…


(rupaniamit) #471

Thank you @Capsule91 for your prompt response!

Good to see that they have completed the purchase.

I did some scuttlebutt work here on granite/quartz industry. My understanding is that big manufacturers from all over the world sell their product to very few large national distributors and then these national distributors sell it to their regional distributors then to local mom&pop players. Big size stores work directly with national distributors.

Pokarna’s direct customers are these few large national distributors who have the warehouse capacity to hold bulk consignments and deal with regional players. End of the day - it is small and big consumers all buy quartz/granite helping the growth of quartz/granite market in the US. I believe similar model in all developed parts of the world.


(Capsule91) #472

Thank you i have not come to the model of business and market oulook portion of my equity research on this stock…still stuck with the last 5 years balance sheet and other financial structure
Thank you for introduction…


(aashu24ahuja) #473

http://www.pokarna.com Website design is bit weird, any views why they have kept the pictures of male/female models ? What’s the relevance with their business ?


(Capsule91) #474

Haha… i was also wondering…
Maybe the glamour factor of quartz shown or may i say the seductive appeal of quartz and granite may have been expressed …


(aashu24ahuja) #475

Well, good that nothing of such sort is shown on the Annual Report, the report is pretty decent and everything has been written clearly.

Management looks honest, and they are also planning to sell the Apparel business and focus on the core business.

Once the capex is done and Quartz revenues kicks in, it can create good wealth for the share holders.

These are my views.

Disclosure:- Not Holding, planning to initiate a position.


(Capsule91) #476

thankfully…

Also the present crude and resin cost and strong rupee is adding pressure, once those correct, we can unlock good amount of margins…

The company is finally moving onto a brand …thats good if establishes…

I have rarely heard managements say we are focusing on the margins rather than topline…! as in todays concall to my question…


(Capsule91) #477

The weekly charts of pokarna is not healthy at present…
1.A week head and shoulder
2.Did reverse out of a descending triangle, but caught in another and another huge triangle is waiting to catch it again…
3.The first triangle upbreak out was not enough even to counter the weak head and shoulder pattern


The daily charts shows the stock is constantly being rejected by the ichimoku coulds, but once a breakout happened recently , but was poorly sustained due to the weekly negative trends , and 2 weeks back another rejection happened…

Yes a very long time support is formed by continuation of the neckline of the head and shoulder which is in 190-197 zone…
It will be of prime importance to watch this support and if the weak head and shoulder is stong enough to break it, recently in the first week of february this support was not broken, so its highly unlikely to break…
The longest downtrendline is another watch , successful break with volumes may start a uprun…

I am planning to invest small amount at neckline support region of it ever comes or will wait for the longest downtrend line to be convincingly broken…

Not a scrip for lumpsome now…

Disclaimer…Not invested, watching


(aashu24ahuja) #478

Thanks for sharing the technicals here, after doing the FA, technicals helps to enter in the scrip.

DISC:- Not Holding, planning to initiate a position.


(sjain_13) #479

Hi, Have been looking for a US based Indian investor to discuss this :wink:

Can you share what was the cost of quartz vs laminate (and if possible granite) on per sq ft basis ? Does this includes fitting charges ? Is it possible to disect fitting charges and material costs ? Is fitting/installation cost same for Quartz and Granite ?


(rupaniamit) #480

Hi @sjain_13 - I paid $40 per sq ft for 11’x1’ quartz which included fabrication and installation. The guy came at my place first to take the measurement for fabrication. It was a remnant piece. Full size slab would have costed me $70 per sq ft for that kind of quartz but my requirement was for a small size. Here retailers generally give full service which includes stone, design, fabrication, and installation. Laminate costed me about $12 per sq ft.

I visited regional dealers for granite in my city. Granite price depends on the natural waves and beauty of the stone. Higher natural waves - higher the price. Granite extra large and large slabs were ranging from $20 to $150 per sq ft. There were stones from Brazil, Italy, China, India, etc. Remember end of the day, stone/quartz is just a commodity. No one is going to walk-in asking for Black Pearl granite with Pokarna’s silverish waves. It’s just that one doesn’t get the natural waves of Indian granite in Italian granite. And vice-versa Brazilian special waves are not available in Indian granite. It is pure nature’s creation in granite.

Disc: holding Pokarna since early 2016


#481

An acquittance of mine is a wholesaler of granite. I asked him about quartz and he said there’s too much supply and large scale dumping . He said all you need to make quartz is a bunch of machines from Breton.

Natural stone on the other hard has constant supply challenges. There a lot of old granite colours where supply is finished because quarry has run out. The market constantly evolves and theres a struggle to replace old quarries with similar looks.

There’s an overseas engineered stone company called Caesarstone which was a growth stock and they did a big marketing push to popularise quartz in America. Now however if you look at the stock you get an idea of how it’s become more of a commodity than natural stone.
https://finviz.com/quote.ashx?t=CSTE

Natural stone can never be replaced. The rich want the rarest stone they can get and will at times personally select the slab from the stockyard. There can be big variations in quality like waves you mentioned. Quartz is completely uniform with no natural variation.
Carrara marble quarries which is the most famous marble for example is owned by the Bin Laden family


(Mridul) #482

Taking all inputs into account (limitations that Pokarna mgmt have shared in concalls, debt reduction plans, credit rating improvements, lower interest outgo), here is what i think will be the performance in steady state -

85-90 cr revenue per qtr (340-360cr)
@32-33% EBITDA margins ~112 cr EBITDA
20 cr depreciation (no impact on CFO)
20 cr interest outgo (as debt will be close to 180cr and interest rate will be much better on outside debt of 82 cr)
5 cr other income
~75 cr PBT

So 2017 was indeed the peak year with everything going well for them (demand, RM, realizations)

Higher resin costs would be normalized due to lower interest outgo. Management was non-committal on 10-15% topline improvement despite being asked multiple times. So this will be the state of affairs for next 2 years. Cash flows in the next 2 years will be close to 75-100 cr which will be used for quartz capex (75cr) and some more debt repayment (30-50 cr).

These are rough calculation assuming granite division keeps performing as is, and margins are maintained in quartz segment.


(Capsule91) #483

@anni23

I am not getting enough time to reseach pokarna as yet but i hv been attending their concalls, and solely based on that i would like to mention some points…
1.There is a awefull lot of supply in the granite segment from brazil which has become compititive now, even there are queries but not enough production lines , which is actually come up…
2.Although there is a lot of dumping in the US market in the quartz segment, the management , mentions there is not only a difference in the superficial look of it but also there is a lot of quality differences…
3.the management is focusing on a brand strategy and is trying to establish sided by side supplying to oems, which i believe they will stop once they get adequate exposure…Central to this change of business strategy, they have been continuously expenrinenting with several designs in the quartz segment, as an example 21 new different look has been lunched and old ones replaced, so i dont believe its totally commodity and pokarna might have a pricing power in the future
4. Then mentioned a demand growth of the quartz industry is 25percent cagr and projected to continue for many years , at the face of that there is increased compitition from chinese quartz and other non breton quartz, but not breton quartz as yet…

These are just my impressions , just on the back of concall talks…

Disclaimer… Interested, waiting to make entry…


(Yogansh) #484

Interesting Video- Helps you understand how the trends in kitchen counter tops has changed in the US market over the years.

Regards,
Yogansh Jeswani
Disclosure: Invested


(axiskumar) #485

Hi Varadha…

Two main points

  1. Land acquisition completed
  2. They discontinued their operations for retail

I think both are in line with thier talk…yes…they took lot of time ( Weak execution)…but they arrived to a point where inflection will start…

Next 18 months they promised for expansion …Is it good at valuation now?


(SMondal15) #487

Increased tariff on cheap Chinese export to US of Quartz.Department of Commerce and International Trade commission is putting extra tariff on Chinese quartz import to US. Pokarna exactly operate in this setup in US and feel will be beneficial.Go through the article US trading houses opposing the increased tariff.Not sure how much the company can rampup due to extra demand of Quartz from US trading house before the new plant come up online.This is couterveiling/antidumping duty on top of this Trump adminstration has put 10% new tariff very recently part of 200 bn usd Chinese import.Significant damage to cause to Chinese supplier by end of this year.

http://www.stoneupdate.com/news-info/latest-stuff/1554-china-quartz-surfaces-to-face-new-tariffs


(Harshit Goel) #488

Latest Credit Rating report of Pokarna.
https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/Pokarna_Limited_July_31_2018_RR.html

Key Points:

  • 80% of sales is from exports, out of total exports 87% is to US and China.
  • PSEL is the only domestic quartz surface manufacturer to use Bretonstone technology.
  • Pokarna is the largest exporter of quartz surface and finished granite in India.

(Nikhil Goyal) #489

Hi -

Annual results for 2018 are not yet out.

2017 borrowings were around 270 Cr, as per screener. Even on Q4 results, the consolidated long term borrowings have gone down from 182 Cr, to 161 Cr.

The 250 Cr additional funding as mentioned for the second plant: Is it yet to happen, and is additional to the land purchase cost? Does this also means that the borrowing will essentially double from here?

Second question I have is on the current capacity utilization of the existing Quartz capacity Pokarna has?

Please help if anyone has inputs.

Thank You.


(Mridul) #490

Both questions (debt and utilization) have already been answered in above posts. Plz check.