Accumulate Acrysil (India) between Rs 110-120, says Ashish Chugh, Investment Analyst.
Chugh told CNBC-TV18, “I had talked about Acrysil (India) more than a year back. The stock has not gone anywhere from those times. Inspite of the fact that the performance of the company in terms of financials and profits has not been good in the last year, this is primarily on account of the fact of the volatility, which we are seeing in the European markets, which is one of the major markets for the company.”
He further added, “Now this is a small company. I would first like to say that this is an illiquid stock. So the best way for your viewers is not to buy the stock the day it has been talked about on your channel. But wait for the stock to decline. I think Rs 110-120 levels may be a good level to accumulate the stock.”
“This is a small company which is into a niche business. This company manufactures granite and kitchen sinks. This is a niche product which not many companies do in India. 80% of the production of the company is exported. Company has got a technical collaboration with a German company call Schocken Company which also holds a 10% stake in Acrysil.”
“If you look at the financials of the company, FY12 sales were about Rs 62 crore, which were up by 12% over FY11. There was a decline of 35% in profit after tax which declined to about Rs 4 crore. This company has got a small equity of about Rs 3 crore which means an EPS of about Rs 13-14.”
“Now in the first quarter of the current financial year, sales are almost flat to about Rs 17 crore. Profit after tax is lower than the same period last year. It is about Rs 1 crore which is about 30-35% lower than the same period last year.
Now this is a company where I believe lot of ramp up can happen. The company can scale up being a small company it is easy for this company to grow by 40-50% compared to many other players.”
“The valuations of the company there is no other listed company which manufactures kitchen sinks. But the closest peers to this company could be somebody like a Hawkins or a TTK Prestige. If you compare the valuation of the company in terms of sales to market cap or PE ration, most of these companies have PEs of about 30-35 whereas this is trading at a PE of less than 10.”
“There is a lot happening in the company, they are introducing new products. The company has recently set up a new plant for the manufacturing of stainless steel kitchen sinks. So you can expect more contribution in terms of sales and profitability coming from that plant. Besides the company is also exploring new geographies and also giving a renewed thrust to the Indian markets. So the growth can possibly come from those markets.”
“Besides this the company is planning to get into from just a sink company this company is planning to get into the
entire gambit of kitchen products. Company is introducing number of products for kitchen. They are introducing kitchen appliances, chimneys and allied products.”
“As far as investor friendliness of the company is concerned, this company has been giving dividends on a regular basis. It has given dividends of close to 40% for the last 4 years. Even during a time when their profits plunged by about 35%, they have maintained dividend of 40%. So I would give it lot of weightage because this was a time when the company was doing expansion also and they have sent a positive signal to the market by balancing their growth objective with sharing the profits with the shareholders. So I think I will give that a lot of weightage.”
“In the recent times this company has also given a 1:2 bonus also to the shareholders. The stock is available cum bonus. So I believe that this is a small company where the potential for growth is good, they are into niche products, their product is perceived as a premium product. So from these levels it could only be that one may have to hold the stock for a long time because it is very difficult to predict as to what quarter is going to be good growth for the company. But I think 1-2 quarters of growth for the company can completed re-rate the stock from the current levels.”
Disclosure: Me and my family may have investment in Acrysil India.