Acrysil: Niche Kitchen Sink Player

Name1st Reco Date1st Reco priceTargetProspero RatingReport Date*
Acrysil ltd19Dec2013 Rs. 174Rs. 3506 / 1019Dec2014

A) Company background:

Acrysil Ltd manufactures and sells kitchen sinks made from quartz as well as stainless steel. The company has recently launched a couple of high end kitchen and bathroom products to target the domestic market – food disposers, cook tops, chimneys & hobs, wine chillers and quartz wash-basins.

The company exports (80% of revenues) its products to approximately 30 countries, including the US, UK, France, Greece, Far East and Gulf countries. The company has manufacturing facility at Bhavnagar where quartz sinks; stainless steel sinks, cook tops and chimneys are manufactured / re-engineered.

B) Investments arguments:

1) Kitchen sinks, a highly profitable product: Quartz kitchen sink has been an aspirational product for the West. Given that there are only a few established players in the business, Acrysil has earned gross margins in excess of 60% in this segment. Kitchen sinks contribute ~85% of Acrysil’s revenue and ~100% of its profits as on March-13. Acrysil’s Bhavnagar manufacturing facility has an installed capacity of 275,000 quartz sinks against total sales of 180,000 sinks in FY13. Acrysil has recently ventured in stainless steel sinks to cater deeper in the domestic market.

2) Owned brand owned technology: Acrysil started as a quartz kitchen sink manufacturer in late 90’s through collaboration with the Germany Company Sochock GmBH and is among the largest five companies worldwide to possess the technology to manufacture quartz sinks. The tie-up ended in 2003 and Acrysil paid some one time royalty to acquire the technology and the CARYSIL brand, which is now completely owned by Acrysil.

3) Lifestyle products, domestic markets have huge future potential: In order to expand its domestic footprint, Acrysil has launched lifestyle products such as cook tops, chimney & hobs, wine chillers, food disposer, ovens, faucets for sinks and wash-basins. Other products such as wine chillers, food disposers, faucets and ovens are purchased from 3rd party vendors. Acrysil also has plans to enter the bathroom space. It recently launched quartz wash basins under the ‘STEN-HARGE’ brand and would launch kamods at a later stage. Given that most of Acysil’s domestic sales happen through bathroom dealers, there is a natural synergy on the distribution side.

4) High growth potential, attractive valuation: The company has announced plans to achieve turnover of INR1,000cr by 2020, which implies a CAGR of 46% over FY15-20e. Most of the growth is expected to come from new product launches and deepening its domestic reach. At the CMP of INR140, the stock trades at 12x trailing earnings which is reasonable for stock with relatively high working capital requirements, modest debt and sub 15% RoCEs.

C) Key risks:

Resorting to acquisitions or excessive debt to reach its revenue targets; failure of new products

D) Financials:

*Report Date may sometimes be different from Recommended Date.

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