Carysil (earlier Acrysil) - Kitchen sinks

[Pragnesh]

Carysil- update( future growth triggers)

Carysil

A…Performace
@17% cagr(2021-2023june)

B…Less growth may be due to =russia-ukraine war- global & EU slowdown

C…Future growth trigger

1…Quartz sinks
=Expanded capacity at 10L units/yr in last 3 yrs

2…Steel sinks
=Commercial production of additional steel sinks capacity, commenced in July’23, bringing the total capacity to
1,80,000 units P.A

3…Domestic appliance
= Domestic appliance manufacturing capacity to be ready in H2. At present, company is trading

=In addition to our strong position
in quartz sinks, we believe that steel sinks and the appliance division will play vital roles in accomplishing objective of 1000cr revenue."

4…Acquired additional land in Bhavnagar for expansion- costed 9 cr

5…Branded business

=Looking to increase presence in B2C space both in domestic & overseas mkts

=Have opened aprox 20 Carysil Showrooms across India on franchisee basis. Aiming to double this yr

6… New geography
=We have expanded to
newer geographies –
Australia, New Zealand,
Gulf countries, Southeast
Asia, China, Singapore,
Turkey, Vietnam
❖ Witnessing huge traction in
business from these
geographies

=Currently catering to 55+ countries strive to spread the wings to 70 countries in next three years by exploring the uncatered geographies

Disc…invested

[Kapur21]

Disc: Invested…

One thing that i like - doubling down on India

One thing that i don’t like - they are spreading themselves too thin… added, turkey, australia, uae in last 12 months only… md said that opening a new geo doesn’t translate into too much effort for them as they go with a distributor… i would be happier if they go deeper in a few and maybe test a few markets… but they have opened up so many new markets - would be good to know what our some of the initial markers they look at before exiting/ going deeper

[Jainammadrecha]

Carysil has acquired new company United Granite LLC, what all views do you have on this how do you see Solid surface segment working out in future for Carysil

[Mohit_Jariwala]

Good Outlook for FY24

• They believe in their steel sink products.

• They plan to achieve sales of INR 1000 cr by FY2025. Right now it is INR 594 cr which means double in 2 years

[Souresh_Pal]

As management told in Q4FY23 concall q1fy24 will be soft due to erp implementation. After that sales will grow. So this is mgmt walking the talk

Rev. up 18%

Ebitda up 50%

Ebitda margin 20.8% vs 16.3%

PAT up 66%
Effect of low base + operating leverage.

Disclosure: Invested.

[mmvravindra]

So some of the orders shifted from Q1 to Q2 and hence good growth in Q2. But over all if we see H1 vs H1 results are flat.

[modiankush]

The management has provided a very bullish view on the growth targets.
The overall tone of the concall was extremely positive
Guidance:-
Target of 1000 Crore revenue by FY25
EBIDTA margins of 20%

Positives

1. Increasing SOM in International/Domestic geographies
   

   
   
   
   

2. Destocking issues over with rising volumes
   

   

3. Strong Order Book for Q3 and Q4
   

   
   
   
   

4. Upbeat on Domestic Market w/ strong Dealer N/w
   

   
   
   
   

5. Strong FY23 guidance w/ performance in H2
   

   

Negatives

1. Geopolitical and Macro issues continue to be a risk
   

   

2. Rising Debt due to multiple acquisitions
   

   

Summary

• The management is extremely bullish on the growth propspects
• One of the few cos. to acknowledge destocking issues are over
• Better cost management gives it and edge over the competitors in EU
• Valuations a tad expensive but can be justified with expected growth in next 2 years with increasing SoM and Operating Leverage
• Rising debt is something to keep a watch on. US acquisition will reflect in B/S only from Q3.

Disc: Invested and holding

[ranvir]

Carysil Q2 concall highlights -

Sales - 164 vs 140 cr, up 18 pc
EBITDA - 33 vs 22 cr (up 50 pc, Margins @ 20 vs 16 pc)
Net Profit - 16 vs 9 cr

Gross Debt @ 210 cr

Sales growth led by increased orders for Quartz sinks from developed markets. UK subsidiary doing well. Additional Stainless Steel sink capacity has been commercialised. Have started building an order book for the same

Expanding dealer networks in India. Domestic business likely to be a key growth driver going forward

Exports revenues @ 129 cr, up 21 pc
Domestic revenues @ 35 cr, up 6 pc

Product wise sales mix -

Quartz sinks - 49 pc
SS sinks - 13 pc
Appliances - 11 pc
Solid surfaces - 26 pc

Quartz sink capacity @ 10 lakh sinks / yr
SS sink capacity @ 1.8 lakh sinks / yr

Kitchen appliances that company is selling under Carysil brand - Chimneys, Wine Chillers, Dish Washers, Hoods, Cook Tops, Built-in Owens, Microwave Owens

Company has also entered bath segment - to sell washbasins, facets, premium sanitary ware

Company purchases Moulds ( imported ) to manufacture over 400 SKUs ( uses over 150 Moulds )
Moulds have an avg life of 15+ yrs

Current Pan India Dealer network @ 3200+, Distributor network @ 82

Expecting domestic business growth likely to see a sharp increase from Q3 onwards. Oct 23 saw good sales volumes in Domestic Mkts

H2 sales likely to be better than H1. EBITDA margins may see some expansion due operating leverage

Company is gaining mkt share from its competitors in the developed markets ( most competitors are from Europe ) due product quality and lower costs - this has been the key for company’s growth despite Developed mkts witnessing broad based slowdown

Inventory liquidation overhang in the developed Mkts is now over

Aim to cross 200 cr sales in domestic Mkts in FY 25

The Ikea business ( supply of SS Sinks ) will commence in Q4. Have a few more customers that are likely to buy good volumes of SS Sinks. This business is also likely to commence in Q4

Company has started its assembly operations of built in appliances in Q3. Expect to see good contribution from this segment as well in Q3

Company in advanced negotiations with big customers for bulk quantities of Quartz sinks. Things likely to materialise by Q4. This should sharply increase company’s Quartz sinks capacity utilisation

Management still maintaining its guidance of Rs 1000 cr topline by end of FY 25 with EBITDA margins of around 20 pc

Company acquired United Granite LLC in US Mkt in Q2. Currently running at 60 pc capacity. At full capacity, this can do a revenue of about 120-130 cr. Company is engaged in fabrication of Kitchen tops for retail, residential and commercial projects. Carysil is confident of turning it around

Domestic business margins should remain in the 17-18 pc kind of band

Looks like Russia-Ukraine has been a huge blessing for the company - making European competition uncompetitive

Overall - good results with bullish commentary

Disc: holding from lower levels (25 pc lower than CMP), biased, not SEBI registered

[Jainammadrecha]

Current numbers look good but I had few questions on margins and working capital front:
1) If we see current numbers the margin expansion has been mainly due to increase in gross margins and for that management has a say that raw material prices have gone down but if we see COGS breakup cost of material consumed has gone down marginally about 0.6% Y-o-Y H1 basis and 0.3% Y-o-Y quarterly basis major impact has been majorly due to very high negative changes in inventories decreasing COGS so I’m unable to get that since management has a say that current margins are going to be stable so, wanted better colour on this
Is there anything I’m missing would appreciate your views

2) Another thing is since company is shifting more and more towards branded sales and B2C segment which requires higher inventories generally and also current H1 inventory as a % of revenue is up 4% has management provided any guidance on this side

3) and last thing on debtor days, current H1 debtor as a % has increased by 9% and management is saying it is on a declining trend when an investor brought up this during concall their say was that in different geographies there are different credit periods but it is on declining trend. I was unable to understand this since both the comments are bit contradictory to each other am I missing out on something over here what are your all comments on this

[Mohit_Jariwala]

• The market for home improvement has been expanding rapidly in recent years

• Well positioned to take advantage of multiple existing market opportunities

• Confident to increase United Granite’s capacity utilization to 90% in the coming quarter

• Estimate to increase United Granite’s EBITDA margin from 7% or 11% to 15% with increased capacity and better material sourcing and operating leverage

• Increase in domestic sales starting from quarter 3

[modiankush]

My understanding for the questions you asked:-

1. The COGS is lower in this quarter and management expects it to stabilise in a similar range. Also, the new customer acquisitions in the export market along with IKEA order should also help the margins to sustain above 20%.
2. I personally did not read about increasing volume inventory. However, they did mention about a strong dealer network and the fact that showrooms have gone up from 10 to 60 in the domestic market. On the back of this, they are targeting 200Cr domestic sales and this should reflect from Q3
3. The management corrected that B/S shows higher debtor days as UK Tap company acquition is integrated this quarter and that reflects in receivables and debtor days.

Disclaimer: This is just my personal understanding from the Company Concall

[rahil_sayta]

My notes on concall

Management has guided for 1000.cr revenue in fy25 and it is on track to achieve that.

Discussion with customers for some big orders for granite sink which should materialize in 1/2 quarter.

Steel sink & tap business should be doing well.

Have lately seen them in action in terms of marketing with “cook with carysil” campaign.

Even with headwinds in europe and other countries they are delievering growth so with some tailwind they should do better.

They already have land and capex for growth . To see when they start to put that to action thats where next leg of growth above 1000 cr will kick in.

To me overall it appears to be directionally positive in terms of business momentum

Margins may remain around 20 % mark for now as guided by management

Disc - Invested no transaction recently.

[rkothuri]

Carysil q2 fy24 concall notes:

• Finanicials

  • Revenue (in crores):
    • Q2 fy24 164 (yoy growth of 18% & qoq growth of 15.5%)
    • Q2 fy23 139
    • Q1 fy24 142
    • H2 fy24 311 (yoy h1 growth of around 2%)
    • H1 fy23 305
  • EBITDA
    • Q2 fy24 34, margins: 20.6% (yoy growth of 48% & qoq growth of 24%)
    • Q2 fy23 23, margins: 16.4%
    • Q1 fy24 27, margins: 19.2%
    • H2 fy24 61, margins: 20% (yoy h1 growth of around 7%)
    • H1 fy23 57, margins: 18.4%
  • Net profit:
    • Q2 fy24 16 (yoy growth of 78% & qoq growth of 33%)
    • Q2 fy23 9
    • Q1 fy24 12
    • H2 fy24 27 (yoy h1 de-growth of 4%)
    • H1 fy23 28
  • Average realizations for granite sinks at around rs. 5630 for the current vs rs. 5270 last year.

• Revenue distribution

	exports	domestic
fy23	78%	22%
H1 fy24	78.4%	21.5%

	Granite sinks	Steel sinks	Appliance & Others	Solid surface sinks
fy23	52%	13%	11%	25%
H1 fy24	49.7%	12.4%	11.1%	26.8%

• Guidance

  • Management is guiding for a 1000 crore revenue by end of fy25.
  • Management expects for the remaining quarters of fy24 (i.e. q3/q4 fy24), they should be doing a run rate of 720-750 crores of revenue, i.e. around 180-190 crores of per quarter revenue.
  • Domestic sales should be growing at a healthy pace for the second part of fy24(~30-40% growth) and expects to cross 200 crores of revenues next year(fy25). They closed on a good October. Dealer network 3200+ and gallery count increased from 10 to 60 in the last 2 years.
  • Company witnessing an inflow of new orders and potential prospects to tap in near future. In the final stages for a large quantity of orders coming in q4 (both in granite sinks & stainless steel sinks).
  • Guidance of overall margins at around 18-20%, domestic sales will have margins at around 17-18%.

• Volumes:

  • Granite sinks volumes q1: 1L, q2: 1.5L, h1: 2.53L (current capacity 10L)
  • Stainless sinks: 54k: h1 fy23 (current capacity 1.8L)
  • Kitchen appliances: 28k: h1 fy23

• Business updates

  • Management sees the market for home improvements increasing rapidly in recent years and carefully aligning strategies to make India the world’s premier manufacturing hub and top alternative destination. They aspire to become the strongest player in the world for sink manufacturing.
  • Company was able to gain market share from competition and acquire new clients. This is because of cost-efficient product offerings.
  • Assembly lines for faucets have started. Currently only 2-3% of the overall revenue. Carysil believes that the technology is critical for growth, and designed a new chimney that will be the best of the class.
  • They are part of a trade show in Mumbai ACETECH exhibition, and received an overwhelming response from the audience. Carysil brand domestically emerging not only in sinks but also in built-in appliances.
  • Management expects to participate in a number of exhibitions in the UAE and the United States to increase brand awareness.
  • Focus is very much on USA & other markets like UAE, South Africa, Australia and new markets like Oman, Saudi & Turkey.
  • Europe is CIF and US is FOB, on an apple to apple basis US business is most profitable.
  • IKEA orders for stainless steel sinks will commence in q4 fy24 and also a large volume for stainless steel sinks from a new customer will commence in q4 as well.
  • Channel inventory overhang is over and management expects the worst is behind for the home improvements space.

• Acquisitions

  • Carysil always looks for acquisitions with strong cash flow and profitability.
  • Company is in a spree of acquisitions, having already acquired 3 in the UK (tap factory and two more), and now acquired United Granites LLC in the US. Company looking for inorganic growth and looking at opportunities which complement their existing basket of products.
  • United Granite LLC is into kitchen tops, faucets etc. and management is planning to sell sink + faucet in a box. They are also planning to bring back the technology to India with this acquisition.
  • The entire team except the promoter are retained. The current senior management will lead the business in the future.
  • Currently, the United Granite’s capacity utilization is ~60%, but will take it to 90% in coming quarters with improved efficiency.
  • The United Granite’s EBITDA has been between 7% and 11% over the past three years. We estimate this to increase to more than 15% in the coming quarters with increased capacity and better material sourcing and operating leverage.
  • At peak utilization it can generate a revenue of 15-16m$ (120-130 crores). Current year expecting sales of 9.5-10m$.

• Things to look for in coming quarters:

  • Domestic sales & brand emergence in India
  • New orders coming in q4 fy24
  • Guidance of 1000 crores by fy25 (guidance of 250 crores per quarter as against current 165 crores per quarter)

• Overall management is very bullish on the prospects for the coming quarters and stock has moved 30% after q2 results. If the narratives match with the numbers in the coming quarters we probably expect good returns.

• References:

1. Q2 fy24 results: https://www.bseindia.com/xml-data/corpfiling/AttachHis/afd273b4-3096-4178-9cbb-e52d9df58af8.pdf
2. Concall transcript: https://www.bseindia.com/xml-data/corpfiling/AttachHis/b6759bfa-a887-42f5-875c-c5c7782d15ae.pdf
3. Presentation: https://www.bseindia.com/xml-data/corpfiling/AttachHis/654cb6e6-4730-49b4-911f-5dff6255d837.pdf

• Disclosure: 5.4% of the overall portfolio, added after q2 results at around 703 before it started to run after the concall.

[Rakesh12]

Geography wise break up of export data has not been made available. So export dependence on one or more countries can not be ascertained. Went through investor presentation of latest two quarters, but could not find it there.
Close to 50% of revenues are generated from the sale of Quartz kitchen sinks although revenues from this product are down from 650K in FY22 to 514k in FY23, presumably due to slump in sales on domestic front. On the other hand the company in its con call has asserted that Quartz is the future in kitchen sink.
Over dependence on one category of products could be a negative for the company.

[rkothuri]

For H1-24 revenue from exports is around 78.4%. There is no individual country specific breakup but based on management commentary it was mostly from Europe and they are focusing on other countries USA, UAE, Turkey, South Africa, Australia going forward. USA is going to be a bigger market for them. We can probably ask management about the region level distribution.

>>Close to 50% of revenues are generated from the sale of Quartz kitchen sinks although revenues from this product are down from 650K in FY22 to 514k in FY23
I think this is volumes and not revenue.

There is a slowdown in demand in FY23 due to the Russia-Ukraine war and slow down in US due to recession caused the volumes to go down. Management talked about this and expecting this number to go up in coming quarters. H124 volumes are 2.53L and this what management says for doing 2L per quarter from now on, they are in advanced stages for getting orders for large volume in q4 fy24.

[murali603]

Its my Question…see the reply from the Chirag about the upcoming deals, this itself explains that 200k volume could be possible in Q4FY24/Q1FY25.

[elesbaanp]

Great results from Carysil

Revenue up 37% YOY
Net Profit up 28% YOY

Premiumisation story continues to play out well

[shyamdsundar]

I am not sure… Weren’t there some pending orders that got pushed from H1 to H2?

When I look at 9 months consolidated results (source), I don’t see much growth.

Revenue: 49662 from 44887
PBT: 5953 from 5185

Not sure if I am missing anything here…

Disc: Invested

[rkothuri]

On the prima facie results look good to me. This is highest ever quarterly revenue and management guidance of 180-190 crs per quarter is achieved. Comparing 9M YOY might not be good idea as the WAR disrupted sales last year. Employee expenses increased 27% 9m yoy causing dent in the profit.

[Kasfur_Dhuniyan]

Carysil

Carysil Nearly after 2 years of Consolidation and 50% Correction stock has Shot up 100% up from the Bottom What Happened?

Company was Badly Impacted because Export Contributes 75% of the Business from Europe, UK and USA region i.e Political Issue and Holding 200000 Capacity expansion of Quartz Sink

Company has Given Guideline of 1000 Cr Revenue BY FY25 But I am Expecting It May Touch in FY26, Since I have been tracking managements Con Call they have been Always over estimating and Delivering Lower

Sink Capacity Doubled That is from 90K To 180K and Quartz Sink Capacity At 10L P.a

Company Fully Utilized existing Capacity expansion, So Company Acquired 60000 Sq.Mt for Future expansion

Acquisition & Cross Selling has always been in Company Favor through Earlier decision like 100% Stake in Homestyle ,Tickford,Tap Factory in Europe ,Uk Resulting in Growth of the Company gradually

Expanding to New Geography from Existing 55+ To 70 in Next 3 Years, As 75% of the Business Comes from Export, so going forward it will help in Top Line

Quartz Sink Contributing 46% of the Business and Currently At 60% Utilization and Guiding for 80% End of FY24 on new Customer Acquisition As Quartz sink in demand in India likely to go up due to luxury lifestyle and Real Estate Performing Well now and Expecting Rs 200 Cr Sales From Domestic Region From Current 100-120 Cr Sales

Company Done Recently Acquisition of Granite LLC as its one the fastest Growing Segment in Home Improvement Space Across the Region and this will Result in 120-130 Cr Top line at 90% Capacity Utilization

Company is Sable to Grow Market share from Competitor due to Quality and Cost of the Product in Europe

Stainless Sink Supply to IKEA Will commence from Q4FY24 Which been Already delay so we need to check on these too.

Company Distribution Network Jump From 1500+ to 3200 Pan India

Q3FY24 Will Update Soon