Six digit HTS 6810.xx will have lot of noise. Screenshot in your post indicates eight digit HTS 6810.99.00 is used for analysis. Glad you narrowed. However, still it has noise of cement and concrete in it. Suggest using 10 digit HTS 6810.99.0010. US is pretty good at normalizing HTS code at import point.
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Global production capacity number (approximate) of top cos/brands using Bretonstone technology.
Note: Pokarna number includes Vizag and new Hyderabad manufacturing plant.
Source: Breton site, google, scuttlebutt (teamwork)
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Team VP Discussions on Pokarna Limited on 26 Jan, 2021
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Some information on Marudhar rocks which have come up with a Breton line recently:
Marudhar Rocks International Private Limited is a company that has setup a breton line last year which has come on stream in Jan 2020. The size of line is similar to Pokarna. The report also carries information regarding Marudhar’s order book
Some info from rating report:
Previous India ratings report.
New rating report from infomerics
The calculations done in the indiaratings report could be based on lower capacity utilization for the next two years or an incorrect no. Even at the lower end of quartz price ($5 per sft) the no. at 100% capacity utilization would stand at $5 x 76 lac sft = $38mn x 75 = Rs 285 cr.
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Isn’t order book of 160 Cr for 2 years a low number when compared to revenues of Pokarna?
Another application we are starting to see is different cladding on the hood over the cooktop. There have been a lot of beautiful hoods that have come on the scene. But we recently launched a 6mm product where you can wrap up on a hood so you can match your hood to your countertop or complement it in a different Cambria design.
Cladding on a hood over cooktop to match with counter-top. Never imagined something like this could happen. This is amazing. I would definitely be a customer of this application. Let’s see what other applications 6mm opens up.
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US ITC Import Monitoring website is updated with Q4,2020 data. Below is updated snapshot of import contribution by country for HTS 6810.99.00 based on import value:
| Country | Vietnam | India | Spain | China | Malaysia | Mexico | Canada | South Korea |
|---|---|---|---|---|---|---|---|---|
| Q4 2020 | 13% | 12% | 12% | 12% | 9% | 9% | 8% | 4% |
| Q3 2020 | 13% | 10% | 15% | 11% | 9% | 10% | 8% | 4% |
| Q2 2020 | 15% | 8% | 14% | 10% | 6% | 9% | 11% | 5% |
| Q1 2020 | 13% | 7% | 14% | 12% | 9% | 9% | 8% | 4% |
| Q4 2019 | 13% | 9% | 17% | 14% | 6% | 7% | 8% | 3% |
| Q3 2019 | 11% | 18% | 16% | 12% | 3% | 8% | 9% | 1% |
| Q2 2019 | 8% | 15% | 15% | 22% | 1% | 8% | 9% | 2% |
| Q1 2019 | 9% | 14% | 14% | 21% | 0% | 10% | 10% | 2% |
Some of the key inferences:
- Vietnam and Malaysia were the two big beneficiaries of China ADD issue. They have been able to continue maintaining the market share at 13% and 9% respectively for Q4 as well.
- India has filled the market share lost by Spain.
- In absolute dollar terms, India export has grown ~38% Q-o-Q value gain followed. Other significant player with good growth has been Taiwan.
- On flip slide, Spain and Italy has shown double digit de-growth Q-o-Q.
- Below is the tabulated view of growth/de-growth by country"
| Country | Total | Vietnam | India | Spain | China | Malaysia | Mexico | Canada | South Korea |
|---|---|---|---|---|---|---|---|---|---|
| Change (%) | 7.83 | 11.42 | 38.84 | -14.29 | 13.79 | 11.21 | -1.47 | 6.22 | 21.39 |
Thanks,
Tarun
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ASI industries commissioned the Engineered stone plant (Quartz). Link.
As per previous investor presentations, this Bretonstone tech facility will have 6.50M Sq.ft. capacity. Some call-out from ASI Investor presentation:
Expect the segment to contribute ~₹1,660 million to top line and ~₹181
million to profit in FY2021. Revenues to grow at 20% CAGR and PAT to grow at
25% CAGR over the next 5 years
Although the commencement of production got delayed by ~ a year.
Thanks,
Tarun
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Went through con-call transcript of 3 top US home builders. One common denominator was “strong demand” across the board for entire industry.
Housing starts in Q1 CY2021 have been very strong for all builders. A single-family home that gets started in the US takes on an average 6 months to complete and close. If we compare Q1 starts with 2020 closings then there is good chance that each will close more houses in 2021 than 2020 which should be good for building material players.
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Ben Carlson wrote a beautiful post on US Housing supply history. Below is the link:
Sharing few charts which were eye openers for me, make me believe that housing demand is here to stay for a while:
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I think some of us (at least I have) missed this significant development - Customs has initiated a formal proceeding on circumventing of Chinese Quartz via Malaysia and has already imposed interim measures.
Based on Customs notification, from Malaysia side there are two entities ‘Stone Direct’ and MEDA ZZ who are playing smart here. Custom Notification listing 15 US imports under investigation:
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In its Allegations, the Alleger asserts that the Importers evaded the AD/CVD orders on QSP from China through transshipment of Chinese-origin QSP through Malaysia.
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The purpose of this notice is to inform you that U.S. Customs and Border Protection (CBP) has commenced a formal investigation under Title IV, Section 421 of the Trade Facilitation and Trade Enforcement Act of 2015, commonly referred to as the Enforce and Protect Act (EAPA).
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CBP has imposed interim measures because evidence supports a reasonable suspicion that the Importers entered merchandise covered by the AD/CVD orders into the customs territory of the United States through evasion.
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Alleger points to the aggregate trade data which indicates that Chinese exports of QSP to the United States plummeted since the imposition of the preliminary AD/CVD orders in September/November 2018. Alleger also submitted trade data suggesting that Malaysian exports of QSP to the United States increased substantially during the same
period.
Enactment of Interim Measures:
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As explained below, CBP is imposing interim measures because there is a reasonable suspicion that the Importers entered covered merchandise into the United States through evasion by means of transshipment.
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Based on the record evidence described above, CBP determines that reasonable suspicion exists that the Importers imported QSP into the United States from Malaysia that was, in fact, from China and should have been subject to AD/CVD orders A-570-084 and C-570-085. Therefore, CBP is imposing interim measures pursuant to this investigation.298 Specifically, in accordance with 19 USC 1517(e)(1-3).
Could be further positive (significant actually) for Indian Quartz players specially Pokarna if the final outcome is in favor of Cambria. Lets wait for the judgment to come out (likely by Sep/Oct).
Regards,
Tarun
Disc: Invested
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Pokarna’s ad of basin, sinks, wall cladding, shower tray in latest StoneWorld magazine August edition. Snippets from magazine below:
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Lots of products are listed on their revamped website:
https://quantra.in/product-category/shower-tray/
All these are customizable by color tones and other options.
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Just want to add a post which should be interesting to look back 9-12 months down to see how things panned out from here on. Let’s take a look at few important data points.
Demand
House prices at an all time high confirming that demand has been very strong post pandemic.
Total construction spending is stronger than ever. This would include both residential and commercial spend.
US New Homes Sales have been very strong post COVID confirming that demand from new homes is still RED HOT.
Supply
US total housing inventory is at decadal low levels which show that supply of existing homes has been very limited. Current inventory is about 1.7mn less than of what it was before the 2008 housing crash.
US Housing starts have been increasing well since 2008 recession. There is good chance that bulk of these housing starts is done only after the builders have signed contract (with some deposit) from the buyer to take over the house once fully finished. But still there would be some portion of houses that builders would be building even without a contract knowing that they should be able to sell a finished home fast given current good demand conditions.
But supply from new housing starts is still some distance away from 2006-2007 peaks with current inventory at decadal low levels. I feel since demand is so strong, industry can still absorb at least 2mn new homes annually for next 1-2 years assuming that there will not be crazy supply coming from existing houses.
There are two possibilities from here on:
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Fed is not able to control current out of whack inflation environment. It goes on hike spree with few knee jerk rate increases and economy goes into very weak demand environment.
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Fed is able to control current out of whack inflation with steady rate increases for rest of 2022 and some part of 2023 - and economy continues to chug along albeit at slower pace.
Pokarna and its investors should be hoping for scenario #2 to play out.
Now let’s look at the recent change in 30 year fixed mortgage rates in the US as follows:
There has been a spike in 30-Y mortgage rates lately. Let’s see how this impacts the affordability of home ownership.
The same house that was available at $350k before covid has now gone up by ~30% to $455k. Similar rates as pre-pandemic but your mortgage payment has moved up from $1500 to $2000. If the Fed increases rates as guided for next 1-1.5 years than we are looking at 30-Y fixed mortage rates moving to north of 5% where EMI reaches 1.5x of pre-pandemic levels for the same house assuming prices still remain firm. If that happens, there is good chance that demand shall cool off.
Bottom-line:
We all have seen a tremendous US housing boom post Covid-19. Recent spike in 30 Y mortgage rates have been very steep. With the change in Fed’s stance on tightening the rates to control the inflation - the journey from here on may not be as smooth as what it was post pandemic so far. And if the Fed is able to control inflation and moves forward with gradual rate hikes, the party shall continue. See you all on the other side in 9-12 months to see where/how we land.
Disc: continue to remain invested however trimmed a portion last week for position sizing and not due to any strong views on the business
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Sharing some notes on how the quartz market is evolving from a key competitor of Pokarna’s - Caesarstone recent filings:
- On a comparative level, there is still room for penetration of Quartz in the US market. Interestingly, quartz is losing out market share in Israel to porcelain countertops.
- Caesarstone is also positioning itself with porcelain countertops offerings with its recent acquisition of Lioli in India. Caesarstone is roughly 5% of global quartz market share. At Quantra’s level, it’s still sub 1% of the American quartz market, with big box channels yet to be tapped.
- Primary drivers of sales are home renovation and remodeling and new residential construction, and to a lesser extent, commercial construction. Approximately 60%-70% of revenue in main markets (U.S., Australia, Canada) is related to residential renovations and remodeling activities, while 30%-40% is related to new residential construction.
- Caesarstone’s gross margins have been trending down in the 26-27% range compared to ~65% for Pokarna.
- Quartz is one of the principal raw materials. In 2021, approximately 62% of our total quartz was from several suppliers in Turkey, with the major part acquired from Mikroman and Polat. Accordingly, our cost of sales and overall results of operations are impacted significantly by fluctuations in quartz prices. The increase in 2021 was primarily due to an increase in shipping costs.
- The cost of sales and overall results of operations are impacted significantly by fluctuations in polyester prices, which generally correlate with benzine prices. In 2021, our average polyester costs increased by approximately 54.1% as a result of market conditions.
- Experiencing an increase in cost, something we are intending to mitigate with the price increase we issued effective on January 3. And it will manifest itself to the P&Ls quarter-after-quarter with gradual improvements until year-end.
- There’s an ambitious target in place to reach about a billion dollars in revenue by 2025 from the current 644 mn dollars, driven by multi-material growth (quartz and porcelain countertops), big box channel growth, acquisitions.
- One interesting change between the previous two ARs is no mention of Ikea in the current AR. Looks like the exclusivity agreement has not been renewed.
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As per the preliminary results of US anti-dumping duty review, Pokarna did not make sales at less than normal value and hence will be subject to 0% anti-dumping duty. In comparison, Antique Marbonite/Prism Johnson will be imposed a anti-dumping duty of 323% and the rest of the companies (as per the list attached in the link) will be imposed an average duty of 161%. This should give a significant edge to Pokarna over competition.
Cheers
Yachna
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Thanks. 161% on one hand and 0% on one hand should give a significant edge to Pokarna. This should enable to them increase prices significantly and is very very +ve. Am I missing something here?
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