Acrysil Ltd. BSE Scrip Code:

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1 Acrysil Ltd. BSE Scrip Code: Plastic Products September 14, 2012 Equity Statistics Current Market Price Rs Week High / Low Rs. 149/87.35 Market Capitalisation Rs. crores 39.0 Free Float Rs. crores 20.0 Dividend Yield % 3.0 One Year Regression Beta Times 0.4 BSE Volumes Trend - Average = 2.12 Thousand 40 in '000s Business Summary Acrysil Ltd (Acrysil) is into manufacturing of granite-based kitchen sinks which is referred as composite quartz sink. It also manufactures other kitchen materials like food waste disposer and faucets. The company had collaborated for technical knowhow with a German-based company called Schock & Co. It markets its products under the brand name of CARYSIL. Acrysil s ISO 9000:2001 certified manufacturing plant is located at Bhavnagar, Gujarat. It manufactures steel sinks through its subsidiary Acrysil Steel Pvt Ltd. Geographically, the company relies heavily on export sales which amounted to 76% of its total income in FY11 and 78% in FY Relative Returns Being a niche product, the company has positioned itself as an established player with limited competition. The premium kitchenware segment is seeing an increase in India, thus benefitting the growth of Acrysil. However, the company faces significant risks such as fluctuation in raw material process, foreign exchange risk and competition from other small-scale local Kitchenware manufacturers such as Futurasink, Diamond Sink etc. The company however benefits from the extensive experience of the promoters in the kitchen sink business Sensex Acrysil Acrysil is currently trading at 10.4 times FY12 EPS and 1.4 times adjusted book value. Returns (%) 1M 3M 6M 1Yr Absolute 13% 40% 35% -1% Relative to Sensex 11% 29% 34% -7% Shareholding Pattern 100% 50% 0% Sep '11 Dec '11 Mar '12 Jun '12 Promoter DII FII Others Board of s Person Role Ashwin M Parekh Executive Chairman Chirag A Parekh Vice Chairman & M.D. V C Mehta M Nageswara Rao J R Naik Ajit R Sanghvi Minoo D Daver A R Shah Rustam Mulla Damodar Sejpal Company Secretary Source: AR, Capitaline and CARE Research 1 Initiative of the BSE Investors Protection Fund

2 Background Acrysil Ltd was incorporated in The company is into the manufacturing and exporting of composite quartz & granite kitchen sinks from India with technical know-how from Schock & Co., Germany. The company s major share of income comes from exports of its products to more than 25 countries such as Poland, China, Malaysia, Greece, Great Britain, France, Bahrain, Malta, Mauritius, Singapore, Muscat, Doha, Jordan, Kenya, Surinam, Cyprus, Dubai, Romania, Israel and USA. The company markets its products under the brand name CARYSIL and is also an original equipment manufacturer (OEM) for some major brands. The company's ISO 9000:2001 certified plant is located at Bhavnagar in Gujarat, India; with two manufacturing units with a total capacity of 2.2 lakh sinks per annum out of which one of them is an export oriented unit. The company holds 84.9% stake in Acrysil Quartz Pvt. Ltd and Acrysil Steel Pvt. Ltd and has a wholly-owned subsidiary in Germany i.e. Acrysil GMBH. Acrysil manufactures steel sinks through its subsidiary Acrysil Steel Pvt. Ltd which is marketed under the same name. Business overview Acrysil s revenue comes mostly from export of kitchenware, sinks and faucets. However with domestic consumers increasingly going in for premium kitchenware and faucets, Acrysil could be expected to capitalize on the increasing demand in local market also. Some of the main competitors for Acrysil are Kohler, Roca, Hindware and CERA sanitaryware. During FY12 exports accounted for 78% of its total income. Quartz, peroxide and resin are the major raw material required for manufacture of the composite sinks, which are imported. Because of the long lead time associated with imports, inventory cycle is usually high. However in FY12, the company has brought down its inventory holding period from 100 to 90 days. This dependence on imported raw materials also exposes the company to foreign exchange risks. Strengths and growth drivers Quartz composite sink being a niche product, has no substitutes in the market. The company has a huge domestic market which it can tap. The promoter has significant experience in kitchenware trading and manufacture. Risk and concerns Raw material price fluctuations due to fluctuations in foreign currency exchange rate may pose problem for the company. The company may face competition from local and Chinese manufacturers of sinks and kitchen materials also. The company is operating in working capital intensive business. Future strategy and expansion plans To cater to newer market and demand, the company is planning to increase its installed capacity of manufacturing quartz kitchen sinks to 2.75 lakh units per annum. The company is looking forward to invest in bio-fuel plants to save on power cost and conserve energy. The company plans to increase the productivity of its R&D facility and introduce new products in the market. Industry outlook The improving rate of literacy along with the increasing disposable income of the consumers resulting from the economic growth in the country is improvising the standard of living in the country. The improved standard of living is driving the demand growth of sanitary ware products in India. The sanitary ware market in developing countries like India and China has been growing tremendously for the past 5-6 years. However, in comparison, the growth is stagnant in the matured markets like US and Europe. The construction growth in China made it the largest market globally in However, India is set to become the second-largest consumer of sanitary ware products in Asia-Pacific region. The sanitary ware market in India is expected to grow immensely given the rising level of middle class, with growing disposable income in hand along with better education levels in the country. The government initiatives and boom in the real estate sector are further expected to contribute to the growing demand of sanitary ware products in the country. Penetration of sanitaryware in India is about 30% which is much lower than neighboring Asian countries, indicating significant growth potential for this sector in Indian market. The Indian sanitary ware market has been growing at about 10% a year, as compared to the global average growth of about 7%. The market size for sanitary ware and bathroom solutions within India is estimated to be over US$ 500 million in The branded segment accounts for a larger share of 60% and is growing at the rate of ~25% per annum. 2 Initiative of the BSE Investors Protection Fund

3 Peer comparison Year ended March 31, 2012 Income statement (Rs. crore) Acrysil CERA HSIL NITCO Total income , Net sales , EBITDA Ordinary PAT Adjusted PAT Per share data (Rs.) Adjusted BVPS Diluted EPS Growth (Y-o-Y) (%) Growth in total income Growth in net sales Growth in EBITDA (12.2) Growth in adjusted PAT (35.0) NM Growth in EPS* (36.0) NM Profitability ratio (%) EBITDA margin Adjusted PAT margin NM Valuation ratios (Times) Price/EPS (P/E) Price/Book value (P/BV) Enterprise value (EV)/EBITDA Note: Acrysil: Acrysil Ltd., CERA: CERA Sanitaryware Ltd., NITCO: NITCO Ltd. FY12 financials for all are based on standalone results NM: Non Meaningful Quarterly financials Quarter ended June 30, 2012 Income statement (Rs. crore) Q1FY13 Q4FY12 Q3FY12 Q2FY12 Q1FY12 Total income Net sales EBITDA Ordinary PAT Adjusted PAT Growth (Q-o-Q) (%) Growth in net sales (5.7) (14.7) Profitability ratio (%) EBITDA margin Adjusted PAT margin Quarterly financials are based on standalone results. 3 Initiative of the BSE Investors Protection Fund

4 Financial analysis Acrysil s total income exhibited an increase by about 14% to Rs.64.2 crores in FY12, mostly due to the increase in demand of products coupled with higher realizations. However due to higher cost of raw materials, the EBITDA and PAT decreased by 12.2% and 35%, respectively. The long term debt-equity of the company was maintained at moderate levels in FY12. Long term debt as on March 31, 2012 was at Rs crores, while short term debt was at Rs crores. The company s liquidity remained low with the current ratio at 1.1 times in FY12. The company has paid a dividend of Rs.4 per share, resulting in a dividend yield of 3% at a current market price of Rs per share. With drop in profitability, Acrysil s RoCE and RoE declined from 23.9% and 26.1% in FY11 to 18.1% and 14.7% in FY12. Annual financial statistics FY08 FY09 FY10 FY11 FY12 Income statement (Rs. crore) Total income Net sales EBITDA Depreciation and amortisation EBIT Interest PBT Ordinary PAT Adjusted PAT Balance sheet (Rs. crore) Adjusted networth Total debt Cash and bank Investments Net fixed assets (incl. CWIP) Net current assets (excl. cash, cash equivalents) Per share data (Rs.) Adjusted BVPS Diluted EPS* DPS Growth (Y-o-Y) (%) Growth in total income 64.5 (6.5) Growth in net sales 66.7 (9.8) Growth in EBITDA (18.4) 8.1 (12.2) Growth in adjusted PAT (19.6) 2.2 (35.0) Growth in EPS* 95.5 (24.2) 2.4 (36.0) Key financial ratio EBITDA margin (%) Adjusted PAT margin (%) RoCE (%) RoE (%) Gross debt - equity (times) Net debt - equity (times) Interest coverage (times) Current ratio (times) Inventory days Receivable days Note: Financial Year (FY) refers to period from April, 1 to March, 31 Financials are based on standalone results NM: Non Meaningful 4 Initiative of the BSE Investors Protection Fund

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