ValuePickr Forum

Acrysil - Kitchen sinks

Hi Anil,

Yes, the financial ratios etc haven’t been good. Its tough to imagine as to how will they scale up quickly with these ratios.

The competitors in export are some big MNCs like Shcock etc…and they are very big players and the potential is good. Infact if one looks at their prices…their products sell at quite a premium and fancy prices. The interesting thing about Acrysil is the way it is expanding the product range and trying to bring those concepts to India too.

Regards,

Ayush

Some critical questions:

Recently visited Mumbai Showroom in Andheri, asked few questions to the representative there. Based on her reply, here are some key points for Mumbai area. (India’s contribution to total sales is 22%)

  • Most sales come from real estate tie-ups.
  • Walk-in people are very less, around 5-6 a day and sales through them are low
  • Have tie ups with Hiranandani Real Estate Group in Powai. But they supply only Stainless steel sinks, most of which are single bowl sinks which are priced at 9215 Rs. Realisations in case of tie ups would be lower, didn’t have any exact number.(Single bowl,46cm X 38 cm X 20 cm,are preferred due to space shortage in Mumbai flats).
  • Tie-up with RNA real estate group for supplying similar sinks
  • Faucets, hobs, microwave oven, chimney sales, disposer are insignificant.
  • According to her, complementary sales of other products might pick up in new projects.
  • Company doesn’t have any tie up with @home or other companies to showcase their products. They can supply the requirement anywhere if one contacts the area representative

Observations:

  • Ovens & sinks looked reasonably priced to me, everything else, seemed expensive.
  • The area is crowded with many other players from kitchen sinks, home and interior decor segment.
  • Due to lack of timing couldn’t visit Rocera and other competitors in area, but general impression is competition for walk-in customers could be very high and hence tie-up with RE firms should be the major avenue for increasing sales in future.
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Have collected brochure of different products (Granite & SS Sinks, faucets, food disposer).One can gauge the realizations to some extent from prices mentioned in the brochure.

Scanned copy of brochure can be accessed below:

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Probable Acquisition of foreign business:

Acrysil Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on February 25, 2014, inter alia, to consider and review the principal offer for acquisition of overseas business subject to due diligence and compliance of various laws.

Hello

I had visited a CARYSIL dealer here in Cochin few days back. had gone there to check out some other product but managed to talk to the CARYSIL salesman for a few minutes.

Composite quartz sinks are being perceived and marketed as a premium product. athough its priced similar to their own stainless steel sink line ( 14090 rack rate) due to the brittleness there no guarantee for the poduct. The ss sinks last longer.

the GERMAN design and engineering bit was used with elan. a bit of prodding and he said that architects and interior designers recommend it. especially if one has two sinks- one within the kitchen and one in the work area.then there is no rough use in the kitchen sink. On aesthetics the product is extremely good!

it is rare that home owners themselves come asking for this product. asked him what he would like in his kitchen and he said ss sink.

The ss line of CARYSIL also looked good. may be biased but this product is a commodity which is trying to be priced like a brand.

Personally Feel its a high price therefore high quality perception rather than high quality therefore high price situation.

This can be good. but as seniors have pointed out the management is aggressive and earnings quality has deteriorated.

Assuming the product holds, can management scale up significantly to take full advantage of the opportunity?

Views please!

Discl:Not invested

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Hi Ranjith,

What I believed before going was totally different from reality too. SS sinks were much sought after than granite sinks. Totally agree with high price for quality perception and branding of commoditised business. Asset turnover and other ratios has been poor which suggest capital intensive nature.

Most of business comes from exports and further strengthening distribution network outside India may be key to future growth and hence further clarity on recent announcement could make a case for investment if it improves operational parameters.

Recent announcement below:

Acrysil Ltd has informed BSE that the Board of Directors of the Company at its meeting held on February 25, 2014, broadly considered the offer for acquisition of overseas business and authorized Mr. Chirag A. Parekh, Chairman & Managing Director of the Company, to explore proposition further.

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Is this company worth entering at CMP of 415?

Why there are no updates since 1 and half years?
Last quarter was very bad. OPM down to below 10% from 15% a quarter before.
Any insights?

Company growing at good pace over last ten years. Sales and NP CAGR 26 and 35 %. But valuation is on higher side. Need to improve both margins as well as growth rates to justify valuation. Good ROE At 20 to 25 last decade but it is captured more than enough in the P to b ration which stands at 5. All in all high potential stock which is yet to show good business performance. Being in housing sector, expected to do well over next five years as management is the right noises. Hope the capacity built will show up in numbers and stock will fly like cera, kazaria etc.
( Dis- holding small tracking position)

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The story looks exciting here. However since majority of the revenues come from exports currently, has anyone spoken to distributors outside India and compared the quality/pricing of their products vs competitors/unorganized market?

Anybody tracking this script? It came to my attention as one of the stock near / at 52wk Lo. After a good run, it seems company has got into some financial mess. From quarterly and last two year earnings: sales growth and gross margin maintained on yearly basis, while EBITDA/PAT margins have reduced. More importantly, RoA, RoCE and RoE are at lowest in last ten years! The idea is that if overall trend is still intact, and if this is only a temporary blip, this can be a good candidate. Will study and report if I find something of value to all.

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There is a transaction on Acrysil Steel - a private limited entity of promoters of Acrysil. So, to me appears that Acrysil Ltd is funding Acrysil Steel Pvt Ltd to sell back finished product to Acrysil.
Is this approach in the interest of small retail shareholder?

85fd4492-3bbb-48e4-8de0-469e6ceb95d6.pdf (1.7 MB)

Acrysil reports a weak set of numbers. .

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

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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…

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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

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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

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