ValuePickr Forum

Acrysil - Kitchen sinks

Revised earnings as filed yesterday

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/8407181d-db98-4828-b5ed-e6f36c84a1fa.pdf

Kindly check the link…its getting error.

Acrysil again coming into lime light after some biggies entering into it. Ashish Kacholia, S Shyam and Varun daga are entering into this.
My understanding about Acrysil,
Company is leader in Quartz Sink. It is a high working capital intensive biz as @40% of sales are stuck into WC. It has to maintain high inventory due to large number of design, models,colours.
Company having modest cash flow as its adding capacities by funding through debt (New capacity addition, New moulds are being added).
Company is pushing kithchen appliances trading biz for a while but not gettting significant revenue from there.
Company entered into bath segment, it is to be watched in future …

Company is aiming 300,500 and 1000crs reveune in short, medium and long timeframe for that its Kitchen and Bath segmet has to perform very well which seems to be very tough.

Disclosure: Not invested, watching closely

3 Likes
1 Like

thanks a lot for bringing this up and tracking this…
I was tracking Pokarna another Quartz major where ashish kacholia is also invested, and more so than that he has averaged down the whole year of 2017 downtrend in that scrip…
Pokarna is a exporter totally till now in quartz, but recently they have started plans of penetrating indian market through IKEA marketing…
I hadly have time to research a new company now, but i did a quick techincal check and i am simply amazed at the finding…
there is a accumulation going on in this company since 2015 mid…
and the overall trend is great …

Technically very promising scrip…
I would request all boarders to please do fundamental checking in this company…

disclaimer… not invested, interested…

2 Likes

Acrysil fy2018 updates and outlooks…

1.management guidelines on topline targets…
short term-3yrs… 300cr
medium term- 5 to 6 years… 500cr
longer term - 10-12years… 1000cr

product mix in the 500cr medium term target…
Sinks-50%
appliances-20percent
bath segment-30%

fy19 over fy18 growth in topline 20%
ebitda margins to growth to 16 to 17% form the current 14 percent…

key drivers in topline growth…

  1. major contracts with big ticket international companies[who own huge retail chains] , the orders are finally flowing in , in increments[quartz sink section]…
  2. 7 to 8 export countries added to the list
  3. sternhagen which has underperformed will 3x its topline contribution
    4.new products launched in quardo sinks- micro radius and square sinks and capacity of the quadro sinks has been doubled
    5.the capex they did in gy18 in terms of new moulds has been approved by the customers and will generate mor eproduction this year, typically there is a one year lag between capex and conversion into sale figures
    6.new products launched in the appliance segment and several promotion offers like combo offers etc has been put into marketing
    7.traction being received from the market after 2 years of intense advertising

Margin growth…

  1. RAw materials…
    mainly the sharp spike in the resins that are imported [2.5x rise in the past fy]
    this hike has been passed onto the customer side only 30 to 40percent…
    the remaining 60percent they expect to be passed on thin the course of this fy
    2.the advertising expense will be much lower this year, as they feel they have done the adequate part of the job already in the past 2 years…
  2. the high margin sternhagen products generate lower revenue, withthat into the mix with 3x topline, the margins will be tailwinded to small extent

CApacity utilization… quartz sink-83% [in q2 investor ppt, there was a mention of a new plant to be started in fy19, couldnt get the time to verify in concall]

SS sink… 60pecent

Appliance… is a trading business, no in situ production per say

sternhagen… has again manufacturing unit and a trading unit, the Capacity utilization of the former is 20percent at present

export to domestic topline mix is 70pc to 30pc breakup…guided topline growth to be 20percent normalized to both the sections

domestic sales in fy18 is 60cr total…

Sternhagen…
one of the top 3 of the luxury brand in india[ based on product aesthetics and quality]
100% owned subsidiary
the manufacturing division has a margin of 60 yo 70%
the trading unit has 40percent
the mix is 50-50 …
this year, the topline was mere 3cr[demo , gst and pan-delhi show room shut down affected the sales]…
fy19 expectation is 9cr…
although the start of sternhagen was with a premium brand outlook they plan to approach this in a top to bottom fashion… there has been numerous queries from the builder and the realty market space, which cater to the sub premium variety of product demand, where the volume offtake they expect to be massive with time with obviously lesser margins… they are venturing into that… they mention sternhagen which is primarily a bath segment, whose expected topline generation for thsi year is below 10cr, has a multiplier potential with time as they step down and increase their product mix in the high demand areas with lower value addition than the classical sternhagen products as of now which are in the show rooms…

the bath segment, which generates just 3cr out of the 198cr topline, is expected to form 25 to 30pc of the 500cr topline in coming times, within 5years…
the rationale for entering in to the bath segment is , that 90percent of the acrysil deals across products are mainly into bath segment, so it is common sense that, exploring into bath segments will have a natural distribution channel open to them already which they want to exploit…
Bath segment is going tobe marketed in UK from q2 onwards, via homestyl uk

Homestyl UK
Purely a distribution unit
no production line
revenue generated 39cr
of which 30% is quartz sinks , which are 100percent acrysil products
rest they sell third party products
reason for acquisition was to access the distribution channel to the UK market…
Bathroom product to be launched in UK at the middle of the year

Niche play- 3D concrete tiles…
1.acrysil will be the second company in the world to launch this, after a reputed hungarian company who is selling the patent to acrysil…
2.to be launched in india first, under the brand sternhagen
3.composition= quartz+ concrete+ other minerals
4.An existing line up of sternhagen premium quality 3d tiles already exists… but, this are very expensive …
these tiles quote at rs.1000 to 1200 per sq, while the domestic market tiles which are in demand quotes at 200-300rs/sq , these 3d concrete tiles will be quoting at 300 to 500rs/sq, along with a premium look… they expect to enforce good volume offtake, hence the pricing model will be done so that the market absorbs it well…
5.the premium sterhagen tiles which are marketted in US, has a very high input cost also…
the cost of the moulds are 10,000usd per mould, in case of concrete tiles, the cost will be reduced to less than half…
6.very bullish on the initial test marketing results and comments that the market has well received the product…
7. dosent put numbers on the capacity that is planned to be set up…
yet…they mention , this is phase one of the venture
. investment is…3 to 4cr of which 50percent is for the technology provider cost…
annual topline generation 5 to 6 cr as of now…
8. not only the volume possibility in this 3d concrete tiles massive, but also there are significant oem supply opportunities…

Quartz sink market outlook…
Germany and France- quartz sink has surpassed the market share of stainless steel this fy18
Uk and US both are stainless steel dominant markets where the quartz sinks are disrupting the scene , specially in uk the quartz sink is expected to surpass the market share of stainless sink in next 2 to 3 years…
globally now quartz sink forms only 10percent of the market share of the sink space
it is expected to capture 20percent of the share in coming 3 to 5 years…
Only 4 manufacturers remains in the quartz sink production business…
not much capex plans are there from the other 3[unnamed]

the supply demand gap is visible…

plans to ramp up distribution of the stainless steel sinks to replace the market dumping from china

promoters have infused 8.5cr of capital into the business by issue of warrants with final price of 550/- per share

the short term target of 300cr of topline generation., will not require any more capital infusion
debt…
indian- 1.working capital 53cr , term debt- 15cr[ payment term 5 years]
foreign debt- 12.5cr[homestyl uk] [to be paid off in coming 3 years]

plans to maintain debt to equity at 0.8 to 1

capex for fy 19= 12cr

asset turn over ratio to be maintained at 2.5 to 3 times…

free cash flow generated in fy18=24cr

inventories are expected to decrease this financial year

Q1 topline growth in line with expectations of 20%

Disclaimer… invested and averaging…

most recent investor ppt…https://drive.google.com/file/d/1mTtUWWJE1Utu279_2Jcs6Bi1LaIosJAH/view

15 Likes

addition to the last update…

capacity expansion has been planned in the later half of fy19…
addition of 25k to 50k units over and above the existing capacity of 4lakh unit per annum in the quartz sink segment…[as informed by the compliance officer mr.rahul agarwal over the phone today ]

besides acrysil… the other 3 major global competitors in quartz sink business are…
1.Blanco https://www.blanco-germany.com/en/int/kitchen_sinks/product_lines_sinks_int/kitchen-sink-favorites.html

2.Franke https://www.franke.com/gb/en/ks/products/kitchen-sinks.html

3.Schock https://www.schock.de/en/sinks/#fMin=40&fMax=120

the capacity for 3d concrete tile business will be coming online this year, but revenue is expected to contribute from next financial year.[as informed by the compliance officer ms.nirali shah over the phone today ]

disclaimer… completed half of planned investment today

3 Likes

Thanks fr d update. Has d mgmt delivered to its past promises?

Disclosure: initiated tracking posn nd plan to add more on dips

1 Like

In the previous post in this thread back in 2014 times, where there is mention of management targetting 1000cr sales by 2020… Now they target 1000cr by next 10 to 12years…so targets are lagging… But they have delivered commendable performance in the past… a 23.78% cagr growth in the topline in the past 6years…
Considering present commentary,
14.35 to 17.46%cagr growth projection in topline the next 10 to 12years, is achieveable…
And they have consistently incremented their flagship quartz sink capacity, in the past…
This year also they are targetting to increase quartz sink capacity by 6 to 12percent …
Also the growth is expected to pick up from sternhagen and appliance business, not to write off the premium quadro sink, whose capacity has been enhanced in q3 to double and they typically maintain 100percent capacity there…
My expectations from them is not only over 20percent growth in topline, but also significant margin appreciation for this fy… For this , the growth driver should be sternhagen handsdown, where not only the margin is high but also new launch in the uk market… With these maturing in fy20, along with the incremental quartz capacity, 3d.concrete.tiles… Next fy should be the game changing year for the company…

1 Like

https://www.bseindia.com/xml-data/corpfiling/AttachLive/0f7e8e55-c897-4015-a039-ae741826d817.pdf

CApex- 10cr
Capacity hike- from 4lakh sinks/pa to 5lakh sinks/pa
segment-quartz sinks
current capacity utilization- 83% [332000 sinks pa]
Post capex- 66.4%

commentary- “The demand for Quartz Sinks has been growing exponentially. Based on the current order book and expected
future orders, we have decided to expand our production capacity at our existing plant in Bhavnagar (Gujarat)
by further ~25%."

Capital infusion into equity by promoters- 8.5cr
So 1.5cr is the expected debt to be taken…
total debt fy18 ending- 81cr
D/E ratio-0.7
[management has guided to maintain de ratio within 0.8 to 1, for the next few years]

History of capacity addition in quartz segment …
Untitled

This time has been the largest jump in the capacity addition in the past 7 years…

The CO mentioned the incremental capacity to be coming online in the later half of the year, so again, how much will this capacity get absorbed this year is a matter of question mark…
Although he was inaccurate about the capacity addition number back then, but still better to give the benefit of doubt…

Quartz capex + Sternhagen launch in Uk from Q2 onwards + 3d concrete tiles to start marketing - fy20 seems to be an important year for acrysil, with some much of activity culminating this year end…

Disclaimer… completed accumulation yesterday

2 Likes

Q1 financial notes…

operational topline growth- 30.66% yoy and 18.87% qoq

EBITDA- 808.26L [growth yoy-19.85% and growth qoq- 49.31% ]

EBITDA adjusted with forex loss/gain-
growth is 38.63% yoy and 64.6% qoq

PAT growth yoy 16.66% and qoq is 77.14%

Ebitda margin- 13.42% (q1 fy19) ,
14.1% (q1fy18) ,
13.84(q2fy18)
9.39%(q3fy18) ,
10.6%(q4fy18)
11.9%(fy18 annual)

the current ebitda margin is maintained from 14.1% to 13.42% , with a parallel inflation of cost of raw material by 40.39% and additional forex loss of 125.17L in q1fy19 from a gain of 1L in q1fy18…
NO wonder margins got hit in q3 and q4, but essentially they are back on track with the business…
EBITA to sales- 0.14 in q1fy19 compared to 0.12 full year fy18

the other expenditure has been the highest in the past 6 quarters , up 13% since the last quarter… if there is a presence of some one off item there, to be verified in the concall , which might have been incurred while doing the capacity hike…

the growth in the stand alone business was 35% yoy and 17% qoq
ebitda margin stands at 14.2% for q1fy19 vs 13.42% for the consol ebitda
the subsidiaries clocked 9.14% ebitda only…

what is most surprising is some gearshift happened in the business for sure this time…
the standalone ebitda[specially] and topline have jumped up a lot , while the subsidiary ebitda degrew by a huge amount! , the subsidary ebitda margins are at a record low and with this degrown ebitda and margin , there has been a growth in the subsudiary business …
to explain in numbers,
here is my PnL breakup spreadsheet …
Q1 acrysil.pdf (421.0 KB)

the subsidiaries companies are the following taken together…
Acrysil Appliances Limited
Acrysil GmbH - Germany
AcrysilSteelLimited
Acrysil UK Limited - United Kingdom
Homestyle Products Limited - United Kingdom
Sternhagen Bath Private Limited

SO the sink division took the hugely lagging subsidiaries and closed the quarter with good number…
so 2 things from here…

  1. what drove the margins and the topline in the standalone business all of a sudden in this quarter? a 90.5% ebitda growth and a complete turnaround of margins from 8.56% to 14.2% compared to q4fy18!

  2. what happened to the subsidiary business which enjoys 18 to 22 percent margin , suddenly dropped to 9.14% !

in relation to question 1…
the probable things might be as the company mentioned in the concall previously…

so some imput price seems to have been passed on to the customers definitely …
but then again, when they guided for the advertising expenses to be lesser from this fy, why is the other expense high in this quarter…

and i wonder , when a depreciated rupee state can jump up the forex loss on finance cost by 5x qoq,{in the consolidated numbers} , but the loss seems to have decreased in the standalone numbers qoq, so the depreciated rupee might not be a factor here and the same appreciated dollar state might not have played much aiding the topline and margins, in the standalone numbers… another thing to be clarified from the management…

the PnL statement…
https://www.bseindia.com/xml-data/corpfiling/AttachLive/b267493d-f929-4530-97e2-6013c0c0e0e4.pdf

To me, the management has walked the talk and failed again at the same time… the guidance for the bath segment was still optimistic in the q4 call, Ashish kacholia had a disappointed sense during the call when the under performance of sternhagen was highlighted…
it has been 4 quarters, since the street has been expecting traction from the subsidiaries, nothing on it yet and i am kind of disappointed to see the subsidiary under perform as a whole… they did mention they will focus on grabbing form topline and volume from the appliance business and would include combo offers etc, that might have weighed down the earning and margin compared to topline inspite of the growth of later…

But the cyclical play in the sink business seems to be playing out nicely…

if the subsidiary contribute to the ebitda gradually , the outlook would be exciting…

the management guided for a ebita margin of 16percent for the full year and a topline growth of 20percent…
if q1 runrate can be maintained the earnings growth should be near about 40percent, beating the guidance by a good amount…

disclaimer… invested , and averaging

12 Likes

Good Results. Topline up about 20% YoY and PAT up about 40%

1 Like

Good result by acrysil.

Disc - invested

3 Likes

Split FV-10 to FV-2.

2 Likes

2 Likes

Here is a recent report on the overall sink industry which covers all major global manufacturers including Acrysil.
https://www.millioninsights.com/industry-reports/kitchen-sinks-market

I have requested for report sample in the above link but haven’t received it yet. If anyone by chance had already read the report, please share the summary it.

2 Likes

Good quarter as well as a good year for Acrysil

Standalone revenue has increased ~17% in Q4
Consolidated revenue has increased ~26% in Q4
Standalone Profit has increased ~34% in Q4
Consolidated Profit has increased ~72% in Q4 (UK acquisitions must be doing well as forex of pound is steady in Q4, sales figures are not available yet)

Standalone revenue has increased ~26% in 2019
Consolidated revenue has increased ~26% in 2019
Standalone Profit has increased ~83% in 2019
Consolidated Profit has increased ~44% in 2019

Dividend of Rs 1.2 (60%) has been recommended.

7 Likes

New ADD petition in USA potentially affecting Acrysil as well. Not sure what would be the impact for Acrysil though, certainly not a positive one.

1 Like

Carysil is a non existent brand in usa. It has good share in UK market.

3 Likes