Acrysil is definitely a right balance of risks and opportunities. It's a company which is into manufacturing kitchen sinks. One would think that what makes me write on just any other kitchen sink manufacturing company. There is something unique about their sinks and that is, that about 75-80% of the material used in making it is Quartz mineral, cast by a means of special computer controlled polymerization casting process.
Their unique product in terms of quality and design makes then different from other stainless steel sinks available in the market as they are completely scratch free (Quartz being one of the hardest material) and have aesthetic looks. Even it provides the flexibility of choosing from a wide range of colors, thus matching it with the color of the walls of the kitchen.
The company has been reporting high NPM (net profit margin) in the range of 15-17%.The business has performed well, with productivity gains, growth in volumes and sustained margins notwithstanding rise in input costs. In the nine months ending Dec'08 the company had already posted sales of 42.7 Cr which was more than the entire sales of FY2007-08 at 30.3 Cr. Even the profit for nine months ending Dec'08 stood at 6.96 Cr, more than double of the 3.6 Cr for the entire FY2007-08. However, during the Mar'09 quarter, the company reported a substantial drop in sales. The revenue actually dipped by 50% in comparison to previous quarters, thus affecting the margins.
The company basically exports its sinks and that is understandable since in India the demand for high-end products is limited, but the thing is that demand can actually catch up in Metros where there is an inclination for such kind of products.
The company as of now is enjoying good overseas market and intends to establish its footprints outside India before making way into India. There may be good opportunities for this company, but one needs to assess the risks as well.
Their unique product in terms of quality and design makes then different from other stainless steel sinks available in the market as they are completely scratch free (Quartz being one of the hardest material) and have aesthetic looks. Even it provides the flexibility of choosing from a wide range of colors, thus matching it with the color of the walls of the kitchen.
The company has been reporting high NPM (net profit margin) in the range of 15-17%.The business has performed well, with productivity gains, growth in volumes and sustained margins notwithstanding rise in input costs. In the nine months ending Dec'08 the company had already posted sales of 42.7 Cr which was more than the entire sales of FY2007-08 at 30.3 Cr. Even the profit for nine months ending Dec'08 stood at 6.96 Cr, more than double of the 3.6 Cr for the entire FY2007-08. However, during the Mar'09 quarter, the company reported a substantial drop in sales. The revenue actually dipped by 50% in comparison to previous quarters, thus affecting the margins.
The company basically exports its sinks and that is understandable since in India the demand for high-end products is limited, but the thing is that demand can actually catch up in Metros where there is an inclination for such kind of products.
The company as of now is enjoying good overseas market and intends to establish its footprints outside India before making way into India. There may be good opportunities for this company, but one needs to assess the risks as well.
- The company depends on just one product for its growth. It can make or break the company in the years ahead.
- It has been enjoying very good growth over the last few years, but it still depends on exports for its revenues.
- It is to be seen, if the latest quarter results can in any way be termed as a general slackening of demand for its product
Note: The stocks discussed at www.hbjcapital.com thru blog postings are neither a part of “10in3” not “Street Smart” issues which we publish for paid subscribers. These are just stock specific views by HBJ Capital team; one MUST do the due diligence before doing any investment based on our reco.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
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