Carysil q2 fy24 concall notes:
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Finanicials
- Revenue (in crores):
- Q2 fy24 164 (yoy growth of 18% & qoq growth of 15.5%)
- Q2 fy23 139
- Q1 fy24 142
- H2 fy24 311 (yoy h1 growth of around 2%)
- H1 fy23 305
- EBITDA
- Q2 fy24 34, margins: 20.6% (yoy growth of 48% & qoq growth of 24%)
- Q2 fy23 23, margins: 16.4%
- Q1 fy24 27, margins: 19.2%
- H2 fy24 61, margins: 20% (yoy h1 growth of around 7%)
- H1 fy23 57, margins: 18.4%
- Net profit:
- Q2 fy24 16 (yoy growth of 78% & qoq growth of 33%)
- Q2 fy23 9
- Q1 fy24 12
- H2 fy24 27 (yoy h1 de-growth of 4%)
- H1 fy23 28
- Average realizations for granite sinks at around rs. 5630 for the current vs rs. 5270 last year.
- Revenue (in crores):
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Revenue distribution
exports | domestic | |
---|---|---|
fy23 | 78% | 78.4% |
H1 fy24 | 22% | 21.5% |
Granite sinks | Steel sinks | Appliance & Others | Solid surface sinks | |
---|---|---|---|---|
fy23 | 52% | 13% | 11% | 25% |
H1 fy24 | 49.7% | 12.4% | 11.1% | 26.8% |
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Guidance
- Management is guiding for a 1000 crore revenue by end of fy25.
- Management expects for the remaining quarters of fy24 (i.e. q3/q4 fy24), they should be doing a run rate of 720-750 crores of revenue, i.e. around 180-190 crores of per quarter revenue.
- Domestic sales should be growing at a healthy pace for the second part of fy24(~30-40% growth) and expects to cross 200 crores of revenues next year(fy25). They closed on a good October. Dealer network 3200+ and gallery count increased from 10 to 60 in the last 2 years.
- Company witnessing an inflow of new orders and potential prospects to tap in near future. In the final stages for a large quantity of orders coming in q4 (both in granite sinks & stainless steel sinks).
- Guidance of overall margins at around 18-20%, domestic sales will have margins at around 17-18%.
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Volumes:
- Granite sinks volumes q1: 1L, q2: 1.5L, h1: 2.53L (current capacity 10L)
- Stainless sinks: 54k: h1 fy23 (current capacity 1.8L)
- Kitchen appliances: 28k: h1 fy23
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Business updates
- Management sees the market for home improvements increasing rapidly in recent years and carefully aligning strategies to make India the world’s premier manufacturing hub and top alternative destination. They aspire to become the strongest player in the world for sink manufacturing.
- Company was able to gain market share from competition and acquire new clients. This is because of cost-efficient product offerings.
- Assembly lines for faucets have started. Currently only 2-3% of the overall revenue. Carysil believes that the technology is critical for growth, and designed a new chimney that will be the best of the class.
- They are part of a trade show in Mumbai ACETECH exhibition, and received an overwhelming response from the audience. Carysil brand domestically emerging not only in sinks but also in built-in appliances.
- Management expects to participate in a number of exhibitions in the UAE and the United States to increase brand awareness.
- Focus is very much on USA & other markets like UAE, South Africa, Australia and new markets like Oman, Saudi & Turkey.
- Europe is CIF and US is FOB, on an apple to apple basis US business is most profitable.
- IKEA orders for stainless steel sinks will commence in q4 fy24 and also a large volume for stainless steel sinks from a new customer will commence in q4 as well.
- Channel inventory overhang is over and management expects the worst is behind for the home improvements space.
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Acquisitions
- Carysil always looks for acquisitions with strong cash flow and profitability.
- Company is in a spree of acquisitions, having already acquired 3 in the UK (tap factory and two more), and now acquired United Granites LLC in the US. Company looking for inorganic growth and looking at opportunities which complement their existing basket of products.
- United Granite LLC is into kitchen tops, faucets etc. and management is planning to sell sink + faucet in a box. They are also planning to bring back the technology to India with this acquisition.
- The entire team except the promoter are retained. The current senior management will lead the business in the future.
- Currently, the United Granite’s capacity utilization is ~60%, but will take it to 90% in coming quarters with improved efficiency.
- The United Granite’s EBITDA has been between 7% and 11% over the past three years. We estimate this to increase to more than 15% in the coming quarters with increased capacity and better material sourcing and operating leverage.
- At peak utilization it can generate a revenue of 15-16m$ (120-130 crores). Current year expecting sales of 9.5-10m$.
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Things to look for in coming quarters:
- Domestic sales & brand emergence in India
- New orders coming in q4 fy24
- Guidance of 1000 crores by fy25 (guidance of 250 crores per quarter as against current 165 crores per quarter)
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Overall management is very bullish on the prospects for the coming quarters and stock has moved 30% after q2 results. If the narratives match with the numbers in the coming quarters we probably expect good returns.
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Disclosure: 5.4% of the overall portfolio, added after q2 results at around 703 before it started to run after the concall.
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