Carysil Ltd – CMP – 854
Recommendation: Buy on dip
Fundamental Grade : B Grade (Good Safety)
Brief about the company:
Acrysil (Carysil) is one of the largest producers of quartz kitchen sinks in the world, under its brand Carysil. It is also diversified into other kitchen products. Carysil now produce stainless steel sinks, faucets, food waste disposer units; and kitchen appliances such as hobs, cooktops, ovens, wine chillers and dishwashers.
Performance during Last 5 years:
Revenue grown at a CAGR of 25% and profit grown at a CAGR of 34% during last 5 years whereas share price reported CAGR return of 50%during this period. Return on equity for the past 5 year is above 20%.
Future Outlook:
Kitchen Sink market in India (Quartz Sink – by material) is expected reach USD 300 Million by 2027 growing at CAGR of 10.4% over 2018-27. Further, Kitchen Sink (stainless steel sink) market is expected to reach USD 37 Million growing at CAGR of 16.40% over 2018-27.
The ongoing geopolitical tensions and energy crisis in Europe provide a significant opportunity for Carysil. Production costs in Germany, Italy, and other European countries have escalated due to the crisis, creating a demand-supply gap in Quartz Sink manufacturing and inability by other manufacturer’s to sustain such high cost of inflation. Thus, the Europe + 1 opportunity offers a tremendous potential for Carysil to further penetrate into the market and bridge the gap and expand customer base globally.
Valuation
At CMP, the stock is trading at PE of around 44.50 and P/B of around 7 which is slightly expensive. However, given the high growth potential the valuation can be justified. Price to cash flow is also around 30 which is also justifiable. Fundamentally, the stock is classified as B grade as per our assessment which is providing good safety. Overall, one can hold the position if invested. Also consider adding the stock on any dip in price.