Acrysil: Business Analysis

Acrysil is a rising smallcap delivering quartz sinks across the world. A testament of its quality is reflected in the presence of IKEA as the company's client. The company is also trying to expand its portfolio with products like premium bathroom fittings, built in appliances for modern homes among others.

Acrysil Limited was incorporated in 1987 by a first-generation promoter, Mr. Ashwin Parekh, and manufactures granite-based kitchen sinks, also known as “Composite Quartz Sink”. The company has a technical collaboration with Germany-based “Schock & Co.”, which is a leading decorative mouldings company in the world. The Group also manufactures stainless steel kitchen sinks mainly for the domestic market, through Acrysil Steel Limited. Acrysil Limited holds 100% stake in Acrysil Gmbh, Germany, and Acrysil UK Limited. Acrysil Products Limited is a step-down subsidiary of Acrysil Gmbh, through which Acrysil Limited has entered the UK market.

Product Portfolio

Quartz Kitchen Sinks:

Acrysil is among the select few manufacturers of Quartz Kitchen Sinks in the world and has the distinction of being the only one from Asia. Quartz is a rock-hard material and kitchen sinks manufactured using quartz look great, have curvaceous appeal, simple to clean and are resistant to scratches. Acrysil’s quartz sinks with steel moulding, an innovative product incorporating steel moulding in Quartz for the first time, has also started making waves as the product is introduced in different markets in the world.

Stainless Steel Sinks:

Acrysil’s stainless steel sink cater to high-end segment willing to pay a premium for high quality and elegantly designed sinks. With innovative products and new technologies, the Company looks to leave a mark in this market. The acquisition of a UK-based distribution company, which sells stainless steel sinks to the top customers in the nation, has proven to be a major impetus to the export of stainless-steel sinks.

Kitchen Appliances:

Acrysil plans on becoming a one stop solution for all the kitchen needs which is why it ventured into kitchen appliances industry. It has a diverse line of products for kitchen needs, like faucets, chimneys, hoods, cook tops, hobs, microwave ovens, ovens, wine chillers, and food waste disposers. Acrysil looks to dominate the market with its top-of-the line design and quality.

Sternhagen Bathroom Suites:

Sternhagen is the premium offering of Acrysil through which it aims to serve the demand for luxury bathrooms. The brand was launched in 2017. The aim was to produce luxury bathroom interiors, sanitaryware, highlighter tiles, and fittings, which would cater to both domestic and international markets. Sternhagen is a well-known top-of-the-line brand from Germany. The company is owned by Acrysil GmbH, which is the Company’s completely owned subsidiary. constantly reinvent themselves has set this brand apart. It distinguishes its products by including elemental shapes, intricately crafted designs, unique details, and luxurious solutions for classic suites. Sternhagen has developed and patented a high-tech quartz material known as Sani-Q. This material provides silk finish to the highlighter tiles and sanitary ware. The manufacturing process ensures that the Sani-Q achieves the desired level of finesse to meet the standards.

Ample room to grow:

Acrysil derives majority of its revenues from exporting its product globally. In FY22 Acrysil derived 80% of its revenues from exports. The company currently exports to 55 countries and plans to expand further by penetrating new geographies and take the number of countries served to more than 70.

An advantage of the company’s major presence in developed countries like US and UK is that it can foresee the type of change in behaviour and demands the countries transitioning from a developing to developed one will bring forth. To enhance the company’s focus on Europe, Acrysil increased its equity stake to 100% stake in Acrysil Products Limited, formerly known as Homestyle Products Limited. At the same time to increase its penetration, develop a strong network and capitalize on opportunities in North America, the company incorporated a wholly-owned subsidiary “Acrysil USA INC” to deal in kitchen, bathroom and tile products.

Domestically, the company is focused on increased market penetration and improved distribution. The company is planning promotional campaigns to increase brand visibility in metro cities as well as tier 2 and tier 3 cities. The company has increased its distributor network from just 30 in 2014 to 82 as of Q1FY23. At the same time the distributor network has increased from 400 in 2014 to 1880 in 2022. A point to note here is that the distributors count which was constant at 1500 for the last couple of years, jumped to 1880 during Q1FY23. This clearly shows the commitment of bullishness of the management in the domestic market.

Brand Carysil, TekCarysil & Sternhagen:

Acrysil has focused on developing a strong brand with Carysil, TekCarysil and Sternhagen. Carysil Quartz Sinks are sold to discerning Customers across the World. TekCarysil, featuring High-end Kitchen Sinks is synonymous with best-in-class design, style and quality. Sternhagen symbolises the pinnacle of luxury in design and engineering and is set to redefine the Luxury Bathroom Segment in India and beyond. Sternhagen’s Sani-Q, a patented high-tech quartz material with silk-finish sanitaryware as well as highlighter tiles, has won several awards.

The Carysil brand is designed to impress the consumers and deliver on its promise of reasonably priced sinks with great features. These products are durable and incorporate technology in their features which enhances their designs and utility. Acrysil prioritises the building and marketing of the brand. This is done via aggressive advertisement on various formats, meeting with franchisees, distributors, interior decorators, architects, consultants, and by sponsoring event in numerous cities in India and other parts of the world.

Innovation meets Execution:

Acrysil has consistently innovated with its product offering. Year-over-year it has launched new products in order to meet the ever-evolving needs of the customers. Acrysil is the first Company in the world to carry out the composite quartz moulding of a 90-degree Apron Sink. The Company has partnered with a leading Hungarian firm to produce 3D Composite Wall Tiles, becoming Asia’s First Firm and the world’s second-largest company to do so.

Growth of the company can be clearly seen by looking at the pace of capacity expansion Acrysil has taken. The current quartz sink capacity of Acrysil stands at 10 lakh sinks per annum with the last 2 years seeing breakneck capacity addition. The company had quartz sink manufacturing capability of 2,20,200 p.a. in 2010 which increased to 5,00,000 p.a. in 2020. The last two years saw the company doubling its capacity from 4 lakhs to 10 lakhs per annum. Talk about execution!

The company has further announced addition of 2 lakhs p.a. sinks capacity for an outlay of 30 crores. Project is likely to be completed by Q3 FY23.

Structural Play on India’s Growth Story:

Rising middle-class population, decreasing household size, growing demand for premiumization and changing customer preference are just some of the factors that make one have a positive outlook on the sector. Growing demand for modular kitchens is a big positive for Acrysil. A modular kitchen encompasses a range of fixtures and cabinets assembled in a planned manner to facilitate effective usage of kitchen space. A modular kitchen normally consists of wooden cabinets, countertops, internal accessories including built-in covered baskets, and household and kitchen appliances such as a washbasin, dishwasher, chimney, cooking range/stove, and microwave oven. It is custom designed, and customers can choose from a variety of options, features, colours, and patterns. Having presence in both sophisticated kitchen sinks and home appliances category puts Acrysil in a sweet spot and lays ground for visible growth in near future.

Rising income levels and improving living standards along with significant growth of residential construction industry is expected to be a key driver for the market.

Strategic Partnership With IKEA:

Acrysil entered into a strategic partnership with IKEA Supply AG(Switzerland) for manufacturing and supply of composite Quartz sinks. The agreement is helping the company in establishing itself as an emerging leader in the production and delivery of high-quality quartz sinks and pave way for more such institutional partnership in future. The company has added necessary capacity in order to serve IKEA’s demand. The order from IKEA for supply of Quartz kitchen sinks has been doubled recently and production and supplies of additional order started in July 2022.

Financials

Acrysil has grown Sales/EBITDA/PAT at a CAGR of 22%/34%/52% for the last 5 years. It has manageable debt with Debt/Equity of 0.54x. ROE/ROCE of 26%/22% as of FY22. Its CFO/PAT has been consistently >100% except for FY22 due to higher inventory during the year.

Valuation

Acrysil’s performance has attracted investor interest and the valuation had once skyrocketed to 44x TTM earnings. Since then, valuation has cooled off and currently it is trading at 26x TTM earnings, a premium to its 5 year median multiple of 22x. The premium however can be justified based on the performance the company has delivered and the future potential it holds.

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