Carysil renews contract with KARAN INC.USA for supply of Quartz kitchen sink for value of ~550 Cr over the period of 5 years.
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Can we get the earlier contract value which is renewed now?
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Carysil acquired 70% stake in The Tap Factory limited.
Carysil UK Limited (Wholly Owned Subsidiary) of Carysil Ltd, has agreed to acquire 70% equity shares of “The Tap Factory Limited”, based at Yorkshire, UK and have option to acquire balance 30% in 2 tranches of 15% each in next two years.
The Tap factory may help Carysil to further strengthen their products basket.
Disc: No transactions in last 30 days, Biased
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Carysil has agreed to acquire 70% equity shares of “The Tap Factory Limited”, based in UK and has option to acquire balance 30% in 2 tranches of 15% each in next two years. The Company designs and sources bathroom and kitchen products mainly “Instant Boiling Water Tap” that are then packaged and marketed to bathroom and Kitchen industry. This acquisition will help Carysil to develop new products (taps) and strengthen its position further in UK Kitchen and bathroom segment. Neutral
Transaction Details
• Sales for year ending Oct 2022: GBP 1.55 Mn (Rs. 15.8 Cr)
• Cost of Acquiring 70% stake: GBP 1.16 Mn (Rs. 11.8 Cr)
• EV for 100% stake translates to GBP 1.66 Mn (Rs. 16.9 Cr)
• EV/Sales multiple works out to 1.1x
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I believe the reason for acquisition would be the reach of presence of company. Carysil will find it easy to reach dealer / distributor through the brand which has a presence in the market.
Sales / profits does not look that big for company hence I find it they may have used it to increase their reach / presence.
Good developments in last 1 year and foundation for growth.
Next few quarters could be interesting
New land parcel and usage of that would be crucial to track further growth
Disc - Invested for long term opinion personal
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Strategic advantage to CARYSIL by acquiring dominating solid surface player in UK
The acquisition of Sylmar Technology Limited (STL) by Carysil was a strategic decision to leverage the 30 years of STL’s experience in Solid Surface industry with a market share of 35% in a ₹500 Cr. market. The company has 3 brands Minerva, Metis kitchen surface and Maia. Carysil will be expanding its product portfolio in STL by introducing its quartz sink, kitchen faucets and kitchen appliances further launching its bathware segment. The company has plans to launch Sternhagen brand in UK through
this acquisition. The Company also has plans to introduce quartz top which is another ₹1000 Cr. market.
Lets us understand what is a Solid Surface?
- Solid surface is a non-porous low-maintenance material used for surfaces such as countertops. It can mimic the appearance of granite, marble, stone, and other naturally occurring materials, and can be joined nearly invisibly by a trained craftsman.
- Typically manufactured in sheet form for fabrication into finished countertops, solid surface can also be cast into a variety of shapes, including sinks, shower pans and bathtubs. Sheet goods can also be heated and bent into three-dimensional shapes using a process called thermoforming, which adds to the versatility of the product. Color and design flexibility are key factors when choosing engineered composites over natural stone.
Here is the overview of the key differences between a Solid surface vs Granite
- The solid surface is highly fabrication friendly compared to quartz surface and provides better flexibility for Interior designer to get the desired design. The solid surface provides a seamless look without any joints. The sheet can be pre-fabricated as per the client’s requirement which helps companies like Carysil to provide integrated offerings such as sinks, faucets and further expand its offering in the bathware segment.
- The acquisition of the STL is value accretive as the company is into sold surface business which complements Carysil’s business and opens opportunities for Carysil UK to increase its market penetration by getting access to new mega retail channels. The acquisition will help Carysil to provide seamless integration of solid surface and sink with other offerings like faucets and kitchen appliances etc. to other developed markets as well like the US, Europe and Middle East etc.
Sources: Corian Solid Surface vs. Granite Countertops: Cost and Differences – Forbes Home
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Carysil Q4 and FY 23 concall highlights -
FY 23 -
Revenues at 593 vs 492 cr. Domestic revenues - 131 vs 97 cr. Exports - 462 vs 318 cr
EBITDA - 108 vs 114 cr
PAT - 52 vs 65 cr
Volumes -
Quartz sinks - 5.14 vs 6.50 lakh units
SS sinks - 1.09 vs 1.05 lakh units
Kitchen appliance - 55k vs 48k units
25 pc of revenues came from solid surface sinks vs NIL in LY
22 pc of revenues from domestic mkts vs 5 pc LY
Expanded domestic network to 3100 vs 1500 dealers LY
Received double orders from IKEA for quartz sinks
Expanded Quartz and SS sink capacity to 10 and 1.8 lakh units
Dubai based subsidiary for selling kitchen appliances to go live by Q2 FY24
Acquired- ‘Tap Factory’ Ltd in UK
For Q4 FY 23-
Sales- 146 vs 139 cr
EBITDA- 26 vs 28 cr (margins down to 18 vs 20 pc)
PAT- 12 vs 17 cr
Renewed their contract with ‘Karran Inc’ based in US for supply of Quartz Sinks worth $ 68 million over a 5 yr period
Demand from US,UK is descent, Europe has been weak
Gross Debt on 31 Mar at 220 cr
Company likely to gain Mkt share in Europe due high energy prices there
Out of total sales of 5.14 lakh Quartz sinks, 20 pc were sold in India
Carysil Sinks have good brand recall in India. Once a customer asks for it, it becomes easy to sell other built in Kitchen appliances to him/her as the trust factor is pre-existing. This is a big advantage
Without this, Carysil would not have been able to compete easily in the highly competitive built-in appliance segment
Company receiving multiple queries from customers across the globe. Hope to convert some of them into formal contracts shortly
Guiding for a topline growth of 15-20 pc
In that case, EBITDA margins also likely to expand to around 20 pc kind of levels. Plus input costs are also coming down
Aprox Gross Margins -
Quartz Sinks- 48 pc
Steel sinks- 35 pc
Appliances- 40 pc
Aim to sell around 6 lakh Quartz sinks in FY 24
This number may get revised upwards if the company wins a few new contracts / supply agreements
No major Capex planned for FY 24
Company likely to hit a 1000 cr kind of topline runrate in FY 25 or 26 with India sales around 25 pc
Once a builder uses Carysil, they always come back. Company is focussing on setting up a dedicated B2B team to sell to reputed builders/architects. This may fuel domestic growth
‘Tap Factory Ltd’ has great technology and descent Mkt access. That should help Carysil in Europe
Planning to launch completely new range of Sinks, Faucets and Kitchen Hoods in Sep 23
Fall in Quartz Sinks volume due inventory rationalisation by customers post over-stocking during COVID
Disc: Holding, Biased. Management commentary sounds bullish. I am reasonably hopeful
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Management now expecting 1000 Cr runrate by FY25.
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I think they told about hitting 1000 cr in year 2024. Not FY24. anyway in concall q4fy23 they are talking about reaching it in FY26. That stands a cagr of 18% Anyway bottomline will grow faster than that due to operating leverage.
I’m new to the company. can you please tell how is the record of mgmt while doing walking the talk? I’ll be happy even if they don’t reach 1000 cr but close to that.
Thanks
I am also relatively new to the company. Holding it for 8-9 months now
I am inclined to take their guidance with a pinch of salt. I am assuming that they should hit 1000 cr revenue run rate by FY26 end
Even that would be a good outcome. If it happens earlier, I ll take it with both hands !!!
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Guidance is reaching 1000 cr in 2 years . So CAGR will be strong. They have extra land also purchased which can be put to use. Also to my memory they can go upto 12 lac sinks with capacity they have so yes margin can go up by2-3 basis points at full capacity.
What i am closely looking at its growth in domestic market as that was ignored by management earlier but now they are focuisng on it.
With Exports stating to pick up and domestic demand being strong is a time when they will fire with double cylinders .
Disc - Invested since last 2 years
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- Management is confident to achieve INR 1000cr by FY 25.
- Steel Sinks capacity increased from 90k to 180k
- Quartz sinks capex of additional 2 lac was on hold and now under review if demand increased in UK and Europe. (Current Capacity is 10lac)
- Focus to increase the domestic distributors rapidly.
(Carysil's Chirag Parekh On FY24 Growth & Margin Outlook And Capex Plans | Chartbusters | CNBC TV18 - YouTube)
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I was going through all the previous managment interviews and found that he always over guides and always under delivers. He was even bullish last year when there was high interest rate and supply chain disruptions.
However, I like the business model of the company. Also, the fundamental and the TAM seems to be positive.
My question here is what should one do with such kind of companies which delivers a good top and bottom line of around 25-30% but misses what it actuallly says.
Like should we just ignore it and just go by the numbers which are definitely amazing or should we give more importance to what the management says.
Can someone please give their thoughts on this? I hope you understood my question!
Also, I am a learner and trying to gather your opinion so that I can expand my knowledge.
disclaimer : Not invested. Tracking.
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You are right
I was also able to figure out this part, but a little late last year
So such companies, go by numbers and take management bullishness with some discount while doing future valuation part
So if he says 1000cr by fy25…i take a margin of 1 year
If he says ebitda margin 18%…i will take 15%
That way i dont overallocate with optimism
May or may not suit you
Just putting my thoughts
Invested from quite low levels from 2 years and made a mistake of adding more going by management vision at higher levels…and realized this mistake
Views are biased and may not be applicable for all such companies…
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I think what hurt the company, was the curb in capacity expansion of Quartz sink which has to do a lot with the Russia Ukraine war which slowed down the demand in Quartz sink hence they had to halt that and focus on other categories. Even I was very bullish in the company so much so it was 15% of my folio at one point, booked partial profits (meagre 10-15%) in April and added again today, but it’s just 4% of my allocation now.
Hope they build a good domestic portfolio and sale of Quartz sink picks up in Europe and US. Management also suggested some competitors in Europe are facing difficulties and some demand might shift to them. My strategy is to evaluate the results on a quarterly basis and add accordingly over the next 12 months.
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What hurt them was interest rates in US Housing Market which was biggest for them.
One quarter High Crude price i.e shipping cost impacted them that was one off.
Now this Russia Ukraine war might become blessing in disguise since energy cost has increased substantially.
Cherry on the cake is domestic luxury market.
Owner was cryptic and hinted in a way about sudden demand coming from Europe.
One great thing about Carysil is they are in luxury segment and people in that category don’t bother much about the price.
Holding since 2020. Will add more after 730 /.
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EBITDA margin depends on capacity utilization here. If you notice their gross margin is more or less constant but ebitda margin varies with revenue.
This is operating leverage. As revenue grows capacity utilisation increases and margins are bound to go up. This is crystal clear. If you read last 2 concalls the same thing is told by mgmt.
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Hi, where can I find the latest earnings call recordings and presentations ?
The investore relations website only has recordings till September 2022 ?
Is there another link or source where they update this regularly ?
Thanks