Sharp India is a Manufacturer of Consumer Electronic Products in India. The company is a subsidiary of Sharp Corporation (Japan). Sharp Corporation is the fifth-largest television manufacturer in the world, after Samsung, LG,Sony and Panasonic. Sharp Corporation has three subsidiaries in India, namely, Sharp India, Sharp Business Systems and Sharp Software Development India Pvt Ltd. Last year, Sharp Corporation decided to restructure their business in india. As a part of this restructuring Sharp India was asked to take care of all the manufacturing related activities (manufacturing of home appliances). The marketing and after sales is being done by Sharp Business Systems.
Till last year, Sharp India was making losses. This was mainly due to additional depreciation on certain machinery, low LCD volume, pressure on prices / margins. Intense competition, increase in input cost and reduction in selling prices , wide & adverse fluctuations in the currency exchange rates was also affecting profitability of the company.
Turnaround:
Indiaâs growing stature in the world economy and stagnant Japan Economy had forced Sharp Corporation to concentrate higher on its Indian Subsidiary. Recent re-structuring was the first step towards it. To bloster profitability, the company last year decided to phase out its âvalue-for-moneyâ range of products and focus only on high-end models across product categories. âWe will focus only on products such as inverter air-conditioners, LED TVs above 32 inches, and frost-free refrigerators, in order to rationalise our product portfolio,â said Sunil K. Sinha, Chief Executive Officer and Regional Head of Sharp India in an interview to Businessline. Furthermore, company has started manufacturing newer products like inverter Air Conditioners (which are extremely efficient and very light on pocket), Air purifiers (which are considered the best in the world). The company has also given a special emphasis on after-sales support. To prove the companyâs commitment to after-sales service, Sinha (Sunil K. Sinha, Chief Executive Officer and Regional Head of Sharp India) has given his direct telephone number in the product guarantee cards and advertisements for customers. This is rare and genuine gesture on the part of company.
Products:
Sharp India is principally engaged in the manufacture and sale of Colour televisions (CRT TVs) and liquid crystal display televisions (LCD TVs) & LED TVs. In May 2013 (ie. Last year) Sharp India, also started to manufacture split Air Conditioners (This facility has an installed capacity of 5 lakh units a year. ). Recently, the company announced that it would start manufacturing Air Purification Systems. For Sharp India, TV and air-conditioner verticals contribute over 70 per cent of the top line.
TVs : No real introduction is needed. Sharp is a well known TV brand in the world. In (India) the 4.5-million-unit LED TV market, Sharp commands 3 per cent share. It hopes to cross 5 per cent this year. The LED television sets of Sharp are offering four colors â one primary color plus the normal red-green-blue â and it is Sharpâs unique selling proposition.
Air Purifier: The air purifiers work by using an electrical discharge to create both positive and negative ions, which are then surrounded in water and then released into the air. The Plasma cluster Ion Air Purifiers is Sharpâs effort to keep supplying the latest in technology products. The product is launched recently. Air Purifiers equipped with Sharp Plasmacluster Ion Technology are used by more than 5 crore families worldwide and is the best Air Purification System available to mankind. Sharp enjoys 56% market share worldwide and is No 1 in 17 countries. They are expecting the market for Air Purification to reach Rs 2000 crores by 2016. Sharp India plans 25% market share and clock a turnover of Rs 500 Crore from Air Purifier business alone. With this Sharp will provide the second growth driver to the stagnant Consumer Durable business, the first being the game changing Inverter ACâs being manufactured at our Pune factory.
Air Conditioner (Inverter Air-Conditioners): With less than 4 per cent share of the 3.4-million-unit room air-conditioner market, Sharp currently lags behind many other brands. However, if we consider only the inverter air-conditioners market, which is around 6 per cent (a little over two lakh units) of the overall market, Sharp India commands over 45 per cent share. In the current year they expect to garner at least 7-8 per cent share of the overall room air-conditioner market, which is expected to cross 4 million units. The customers would be able to save a substantial amount on power bills due to lower power consumption, as inverter technology is being used. The compressor runs on DC (direct current). Roughly, the AC does not consume more than 100 units per month on the aggregate.
Refrigerators: Sharp refrigerators are using two technologies â plasmacluster ion generator and hybrid cooling â preventing dryness, uneven cooling and overcooling of food, fruits and vegetables to keep them fresh. (As a personal disclosure I own a Sharp Refrigerator and its pretty awesome).
Financial Performance:
The following is a yearly snapshot of financial performance of the company:
|
(in Cr.) |
2014 |
2013 |
2012 |
2011 |
2010 |
|
|
Income Statement |
||||||
|
Revenue |
154.29 |
77.78 |
83.76 |
111.62 |
106.96 |
|
|
Other Income |
0.03 |
0.07 |
0.39 |
0.69 |
1.06 |
|
|
Total Income |
154.32 |
77.85 |
84.15 |
112.30 |
108.03 |
|
|
Expenditure |
-144.61 |
-74.06 |
-81.51 |
-109.58 |
-103.91 |
|
|
Interest |
-1.35 |
-0.17 |
-0.95 |
-0.26 |
-0.13 |
|
|
PBDT |
8.35 |
3.61 |
1.69 |
2.46 |
3.99 |
|
|
PBT |
2.77 |
-1.30 |
-0.50 |
0.82 |
1.61 |
|
|
Tax |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
|
|
Net Profit |
2.77 |
-1.30 |
-0.51 |
0.82 |
1.61 |
|
|
OPM % |
6.29 |
4.86 |
3.15 |
2.44 |
3.85 |
|
|
NPM % |
1.80 |
-1.68 |
-0.60 |
0.73 |
1.50 |
|
As evident from the table above the company has managed to turn around this year. Revenues have grown 100% YoY and has also given profits this year. Introduction of new products, especially the split ACs has done the trick. The product is very well received by the public. As shown in the table below, the Air Conditioners seem to have heavily impacted the sales this quarter.
The following is a quarterly snapshot of financial performance of the company:
|
(in Cr.) |
Mar-14 |
Dec-13 |
Sep-13 |
Jun-13 |
Mar-13 |
Mar-14 |
|
Income Statement |
||||||
|
Revenue |
69.41 |
25.03 |
30.09 |
29.76 |
18.84 |
154.29 |
|
Other Income |
0.01 |
0.00 |
0.01 |
0.01 |
0.01 |
0.03 |
|
Total Income |
69.42 |
25.04 |
30.10 |
29.77 |
18.85 |
154.32 |
|
Expenditure |
-59.77 |
-22.99 |
-31.26 |
-30.60 |
-16.76 |
-144.61 |
|
Interest |
-0.39 |
-0.42 |
-0.38 |
-0.17 |
0.11 |
-1.35 |
|
PBDT |
9.26 |
1.62 |
-1.53 |
-1.00 |
2.20 |
8.35 |
|
PBT |
7.50 |
0.15 |
-3.19 |
-1.69 |
0.09 |
2.77 |
|
Tax |
0.00 |
â |
â |
â |
0.00 |
0.00 |
|
Net Profit |
7.50 |
0.15 |
-3.19 |
-1.69 |
0.09 |
2.77 |
|
OPM % |
13.90 |
8.17 |
-3.85 |
-2.81 |
11.09 |
6.29 |
|
NPM % |
10.81 |
0.62 |
-10.61 |
-5.68 |
0.47 |
1.80 |
The increased sales were heavily influenced by production of Inverter Air Conditioners. Traditionally Q4 is the weakest quarter for Air Conditioners but still company has managed to show outstanding growth. The present quarter should be an even bigger blockbuster on back of really hot summer. Lower exchange rate is very favorable to company as most of the components are imported. The company had indicated last year that they would like to start manufacturing other home appliances also apart from split Air conditioners and TVs. Walking the talk, recently, they announced that they have started manufacturing of Air purifiers and expects to earn around rs500cr by 2016-17 by this segment. (More info on http://www.thehindubusinessline.com/companies/sharp-india-launches-air-purifiers/article6101662.ece).
Given the growing emphasis of our P.M. Shri. Modi ji on Indo-Japan ties this company is surely going to be a winner. Furthermore, in future there is every possibility that Sharp Corporation might provide some technical assistance in Solar panel manufacturing from Sharp Solar (A bit speculative at the moment). As far as Balance sheet is concerned, this year the accumulated losses of the company has reduced dramatically from 3.19 cr to around 42 lacs only. It is expected that in the present FY, the losses would be completely wiped off and due course they would announce dividend. The promoter company owns 75% of Sharp India.
Technicals:
The stock has given a huge breakout at the levels of rs 28 after years of consolidation. The breakout has happened on massive volumes with 100% delivery (its in T2T segment). Such breakouts take the stock to dazzling heights in 2-3 yrs time. The re-rating along with massive growth in revenues and profits will keep the stock busy for the next couple of years, atleast.