Responsive Industries: Luxury Flooring Brand?

Responsive Industries Limited (RIL) is a leading manufacturer of PVC Products with the following product verticals –

  1. Sheet Vinyl Flooring
  2. Synthetic Leather
  3. Luxury Vinyl Tile (LVT)
  4. Synthetic ropes
  5. Waterproof Membrane

It is the largest Indian producer of PVC flooring and synthetic leather cloth and caters to healthcare, hospitality, transportation, retail, sports 6 infrastructure and real estate sectors. It is amongst the top 4 producers of vinyl flooring globally.

The promoters have extensive experience in the PVC (Poly Vinyl Chloride) flooring products and shipping ropes industry. It has been almost four decades since the company began in the -verified tiles and Indian flooring market, which was dominated by mosaics or conventional materials like carpets. Now they are in the period of evolution. Over time, they have seen a rapid pace of development in the flooring industry and the preferences of flooring have migrated from hardwood to ceramic, then to laminate and now from laminate to resilient or vinyl flooring. Luxury Vinyl Tile (LVT), Stone Plastic Composite (SPC) besides this the company has entered into waterproofing membranes, which has sparked the industry and is expected to be the next biggest evolution in flooring.

Manufacturing Facility and Subsidiaries:

It has a state-of-the-art factory and infrastructure set-up at Boisar in Palghar district in Thane, spread across 52 acres of land, having 15 manufacturing lines. The Company has 1 Indian subsidiary - Axiom Cordages Limited, 3 wholly owned foreign subsidiaries - Responsive Industries Limited (Hong Kong), Responsive Industries Limited LLC USA and Responsive Industries Limited (Singapore) and 1 foreign step-down subsidiary - Axiom Cordages Limited (Hong Kong). It has a presence in the shipping ropes business through its subsidiary Axiom Cordages Limited.

HK subsidiary has manufacturing operations in China with an additional 5 million SFT / month capacity for Luxury Vinyl Plank

Luxury Vinyl Planks:

  • Luxury Vinyl Plank is a 100% waterproof wooden and tile visual that replaces laminate, hardwoods, engineered woods, carpet, and ceramic tiles.

  • Among the flooring products, Luxury Vinyl Tiles (LVT) is gaining prominence across the globe, due to its superior qualities.

  • The Company has introduced a new type of IMPACT flooring which is hard layer interlocking flooring in wide range of looks substituting wooden flooring, marble, granite and tiles.

  • It is very easy to use and fast to lay, environment friendly as well as good in cost and looks. It is so easy and fast to install, full large area can be covered in hours where it would take days to do so.

  • LVP’s click system is so easy that it is marketed as DIY (do-it-yourself) installation in Western countries.

  • 80% of LVP is residential with 20% commercial split between offices, retail and hospitality

  • In 2022, LVP outsold Ceramic Tile in the USA. Vinyl Flooring has tripled in market size in the last 15 years. Outsold traditional hardwoods and engineered flooring last 5 years

  • US market prediction for LVP at 72 Billion $ by FY 2027

Comparison of LVP with other options:

Financials:

QoQ sales are profits are rising rapidly. The company has shifted from loss to Profit. Maybe their new LVT product is getting acceptance in the export market.

Investment Rationale:

  1. Margins are increasing indicating the high margin product sales to B2C.
  2. Residential (B2C) sales are steadily becoming a larger part of Responsive’s sales mix.
  3. The company has moved from loss-making to profit.
  4. In Sept 2022, management increased their stake by 10% and FIIs by 30%.
  5. Export sales are also increasing YoY.
  6. The company is investing heavily in marketing its products in the US. They are tied up with a lot of distributors across the US.
  7. 72 Billion$ projected LVP market by FY 2027

Risks:

  1. The raw material costs used in manufacturing vinyl flooring components like limestone, glass fibre and vinyl are highly cyclical.
  2. Extremely elongated cash conversion cycle at 200 days.
  3. Heavily dependent on the infrastructure boom and real estate cycle.
  4. Expensive at 80 PE.
  5. Only 2% of the public float is available for the public.

Current Price: 321
Market Cap: 8500 cr.
Disclosure: Not invested

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