CARYSILNSEQ1 FY2023August 08, 2022

CARYSIL LIMITED

8,567words

170turns

16analyst exchanges

2executives

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Management on call

Chirag Parekh

CHAIRMAN & MANAGING

Anand Sharma

CHIEF FINANCIAL OFFICER – ACRYSIL LIMITED

Key numbers — 40 extracted

73%

pany's performance Our company has recorded strong performance in Q1 FY2023 recording a growth of 73% Y-o-Y and 22% Q-o-Q. Domestic business has increased 117% Y-o-Y to Rs.38 Crores for Q1 FY2023 c

22%

ce Our company has recorded strong performance in Q1 FY2023 recording a growth of 73% Y-o-Y and 22% Q-o-Q. Domestic business has increased 117% Y-o-Y to Rs.38 Crores for Q1 FY2023 contributing 22.2

117%

mance in Q1 FY2023 recording a growth of 73% Y-o-Y and 22% Q-o-Q. Domestic business has increased 117% Y-o-Y to Rs.38 Crores for Q1 FY2023 contributing 22.2% of the revenue. Company has witnessed subs

Rs.38 Crore

2023 recording a growth of 73% Y-o-Y and 22% Q-o-Q. Domestic business has increased 117% Y-o-Y to Rs.38 Crores for Q1 FY2023 contributing 22.2% of the revenue. Company has witnessed substantial increase in

22.2%

22% Q-o-Q. Domestic business has increased 117% Y-o-Y to Rs.38 Crores for Q1 FY2023 contributing 22.2% of the revenue. Company has witnessed substantial increase in demand in domestic markets and expe

25%

ncrease in demand in domestic markets and expect momentum to continue. Our exports increased by 25% Y-o-Y to Rs.100 Crores for Q1 FY2023 contributing 72% of the revenue. The company has maintained

Rs.100 Crore

demand in domestic markets and expect momentum to continue. Our exports increased by 25% Y-o-Y to Rs.100 Crores for Q1 FY2023 contributing 72% of the revenue. The company has maintained decent EBITDA margins

72%

entum to continue. Our exports increased by 25% Y-o-Y to Rs.100 Crores for Q1 FY2023 contributing 72% of the revenue. The company has maintained decent EBITDA margins in 20%+ range with a strong pr

20%

or Q1 FY2023 contributing 72% of the revenue. The company has maintained decent EBITDA margins in 20%+ range with a strong profitability growth of 39% on Y-o-Y basis. Coming to demand scenario in d

39%

company has maintained decent EBITDA margins in 20%+ range with a strong profitability growth of 39% on Y-o-Y basis. Coming to demand scenario in domestic markets We are witnessing strong traction

Rs.5 Crore

ce the company is starting an assembly line for kitchen faucets manufacturing with the capex of Rs.5 Crores with the capacity of 100,000 pieces per year. This project is expected to be completed by end of

3MW

decided to go for renewable energy resource of solar power. The board of directors have approved 3MW (Three Megawatt) solar power plant to be set up with Bhavnagar, Gujarat for captive use. This is

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Guidance — 20 items

Chirag Parekh

opening

“We expect that there would be moderation in inflationary environment with revisions in repo rates by RBI and a continuous increase in interest rates by FED.”

Chirag Parekh

opening

“This shall augur well for our company to maintain healthy margins and overall improvin profitability going forward.”

Chirag Parekh

opening

“The rationale behind this move is to remove confusion between the company name “ACRYSIL” and brand name “CARYSIL”, secondly this change will increase brand recall value and lastly we plan to launch brand “CAYSIL” worldwide as part of our global branding initiatives.”

Chirag Parekh

opening

“Company has witnessed substantial increase in demand in domestic markets and expect momentum to continue.”

Chirag Parekh

opening

“The company has increased dealer network from 1,500 to 1,880 and we further plan to increase our domestic foothold by increasing our dealers to 3,000 by end of FY2023.”

Chirag Parekh

opening

“This project is expected to be completed by end of December, 2022.”

Chirag Parekh

opening

“We have filed a worldwide patent for this green sink technology and Acrysil will be the first company in the world to launch green sink made out of bio-green quartz.”

Chirag Parekh

“So, we to understand this year and next year, there is going to be unprecedented travel across the world and any company in the world will witness a little bit softening quarters with this I think this is going to be a seasonal quarters this year and next year because of the people have been locked up, they need to travel as.”

Chirag Parekh

“Once the inflation comes under control, I think everything will be back on track, so I think the last US data which I came across so that they have been able to beat the inflation and remodeling and kitchen industry is doing well.”

Chirag Parekh

“As far as quickly, as far as the work top business which we acquired is doing very well, we actually beat the forecast in quarter one because it does not only do the business in kitchen, it does, all the luxury yachts across the world, so we are able to beat the forecast on the quarter one that is the Sylmar Technology Limited, it is doing quite well and we will keep right time whether we want to do the backward integration for that.”

Risks & concerns — 3 flagged

The first question I had was regarding what kind of traction have you been seeing in the US and the European markets with regards to on the demand side, while you clarified that the supply side is doing quite strong given us, there is a shift on the sink front to you the older all I have been showing, how is the demand looking like out there and you have seen a slowdown or something?

— Vinayak Mohta

And the commentary around like a recession scenario in US and challenge in UK market, are you seeing demand tapering on those market, Sir?

— Manish Ostwal

Third point I would like to say stress on is that the input cost in Europe is getting very high, so more opportunity lies right now in trying to grab a larger market share in Europe, UK and US, so I think helping up on the contrary that what we think.

— Chirag Parekh

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Q&A — 16 exchanges

Thanks for the opportunity. Congratulations to the entire team for a good set of numbers. Sir, just few questions, so first is to understand what is the size of opportunity for quartz sinks in the Indian market?

Chirag Parekh

So, in the last data which we got and Deloitte was our partner and try to get this research report done and we have seen that the total kitchen sinks sold in the organized sector, which would be of our category that is total sink is about 5 million sinks, when you are talking about the premium market where our opportunity size is about 30% of that, so we are talking about 1.5 million sink in premium product line and against that I think we are doing the quantity at about 120,000 numbers approximately a year, so I think we have just grabbed about 8-10% of the market share. Got it, Sir. Another

Good evening and congratulations on a great set of numbers. The first question I had was regarding what kind of traction have you been seeing in the US and the European markets with regards to on the demand side, while you clarified that the supply side is doing quite strong given us, there is a shift on the sink front to you the older all I have been showing, how is the demand looking like out there and you have seen a slowdown or something?

Chirag Parekh

So, I would say, I think I can talk about my category overall yes, this is a very challenging situation for companies in rest of the world, but for us if you see the quarter one, we have also had a challenging quarter one, I think we did quite well than what we saw, so I think we at this point of revenge travel, inflation is I think it is there, it has overall been impacted the industry, so far our secondary sales whatever we have learned from our counterparts in UK, Europe and US, it is quite good, they are quite strong, the inventory levels added are high, the most of company will able to tr

Good afternoon, Sir. Thank you for taking my question. Sir, I wanted to understand on how the renovation demand in a global market is panning out because that is one thing which is actually going to lead to a lot of replacement of stainless steel sink by quartz sink, so if you can throw some light on the key markets the renovation, what kind of renovation demand you are seeing there and the other thing being the new acquisition as you mentioned that you were able to cross sell a lot of other product as well, so I think you are also now into kind of counter products as well as the UK acquisitio

Chirag Parekh

So, we to understand this year and next year, there is going to be unprecedented travel across the world and any company in the world will witness a little bit softening quarters with this I think this is going to be a seasonal quarters this year and next year because of the people have been locked up, they need to travel as. As far as the remodeling trend is concerned nothing has changed, I think the remodeling of the kitchen is still less than 5year in Europe, UK and in the US, I think that does not change, the people are delaying the products or remodeling, because of the travel, that was s

Sir, thank you for taking up my question. Sir, firstly in the opening remarks you mentioned that in start to exports to Grohe, Germany, so could you quantify with a new order or from the existing we have got anything?

Chirag Parekh

again please little bit low and loud? Sir, in your opening remarks you stated about that we have started exports to Grohe, Germany, is this new order or is it from existing business that you already have? No, that is a complete new business on PVD, so it is over and above what the current business. Sir, you have mentioned quite a few times that in the Q2 there might be some delay or something like that, but on a full year guidance or whatever the capacity utilization that we are targeting, is there any delay or we are still on track to achieve what we have committed? I think, as of now like I

This is Rajesh from Alpha Equity Advisors. Sir, you know your first comment I do not know just to clarify, you said India market size is 5 million, within the premium market size is 1.5 million and currently you sell roughly about 120,000 whether I heard it right?

Chirag Parekh

Yes. But if I look at your FY2022, the volumes what you are mentioning there is 650,000, so I am getting slightly confusion? That is including exports. Understood. What I can tell you the quarter one last year versus this year quarter one, I will just quickly tell you the quantities, we have done I mean just give us some time we will come back on the India numbers, I will come back to you. Okay, can I put the second question? Yes, please. Perfect, Sir, you did recently acquisition, from the distributors in perspective, so can you give some more colour that how this basically is, what are the p

Thank you for the opportunity. Most of questions already answered, only one question on the margin side, during this quarter because of the consolidation in the margin for the quarter declined quarter-to-quarter, so for the acquired entity where do you see the margin and overall blended margin outlook for the rest of the financial year?

Chirag Parekh

So, like I had said in my statement that the import costs are decreasing, the freight costs are decreasing, so that there will be a margin improvement also for the acquired company and also for the overall business going forward. And secondly, Sir, your presentation slide number #5, you made a comment about going to macro challenges and revenge travel trends in export market, the quarter two will be more moderate so I could not understand revenge travel trends impacting the demand, can you explain that thing, Sir? You know this is obviously we are witnessing, not us, the world is facing the ch

Thanks for the opportunity. Sir, could you please outline just from your understanding that what could be the volume growth we could see in the next two years in the quartz and stainless steel sinks?

Chirag Parekh

So, like we have said that we are expanding our capacities. Past, we have been able to grow at the range of 25% to 30% growth rate and we expect for the next two years that we will, it is our endeavor, we are not going to leave any stone unturned and we are going to try that we maintain our growth level at 25% to 30% over the next two years time. Sir, we have given guidance of expanding the distribution for expanding distribution network from 1,500 to 3,000 by this year end. So just wanted to understand so our dealer network is actually the exclusive ones or what is the difference between dist

Sir, looking at the domestic demand that you highlighted, can we see that the sluggishness in the export market, can be replaced by the domestic market demand?

Chirag Parekh

Yes, so I think we are going to strive for that same route in it, we are not going to leave any stone unturned where ever the demand is strong we are going to quickly move there, we see a good traction in India, we are like 80%:20% ratio last year and we are looking at 70%:30% ratio last year about 65:35 to a large extent it will be compensated by Indian sales. And Sir, when we say that there is bit of a sluggishness in the export demand is that in the European markets or majorly from the US markets or is it from both of them? So, I would not say sluggish I would say a little bit soft because

Sir just taking clarity, the 650,000 quartz sink that we sold last year, in that how much will be the domestic volume and by virtue of this dealer distribution expansion that you are seeing, is it safe to assume that the domestic business should actually - the quartz sink volumes from double and similarly for stainless steel sink, I think we did about 50,000 to 60,000 units last year, if I am not wrong and how much was domestic in it?

Chirag Parekh

So, I think as far as the domestic for quartz sink I think last year we did about 100,000 odd quartz sinks and I think this year we are already moving towards 120,000 to 150,000, we are looking at on a quarter-on-quarter improvements, so it can still further go up, but I think we are looking at, at least 30% to 40% growth for the quartz sinks in India, last year yes, stainless steel sinks and the total sink I think in India we sold at about 50,000 sinks odd and I think this year we are going at maybe 100,000 sinks annual rate, so I think close to double I would say. Did we export any SS sinks

Mr. Chirag, you know my question was 70% of you revenues is from exports at this point of time, if we were to further split between this Europe and US has two large geography, what would the split be, what would be the dependence on Europe and what could be the dependence on the US?

Chirag Parekh

So, across the out of exports 100% approximate 25% is US and 25% Europe. So, out of the 72% exports? So, out of 100% of export it is bifurcation, so 25% US and 25% Europe. And the balance is whatever rest of the world? There are around 40 countries, UK is around 15%. Understood, see the reason I am wanting to get some clarity on this is, you mentioned about the next quarter being weak because of macro challenges, etc., but Europe as a geography could remain weak for the foreseeable future, so for reasons which are beyond anybody's control gas prices and the political message is on and in that

Sir, just wanted to ask one question regarding the purchase of stock in trade on the P&L which was reported was roughly around Rs.62 Crores on consolidated level, so this pertaining towards the Sylmar Tickford trading goods?

Anand Sharma

Yes, you are right, so it is consolidation of Sylmar with the company, the first that is why it is comparatively high. But, Sir, actually as reported Sylmar did the revenue of Rs. 34 Crores so how much trading was done per the Sylmar? So, it is around Rs. 16 Crores added to India. 16 Crores? Yes. There is the question was regarding that 62 Crores were significantly high compared to our previous? There is an increase in the trading volumes in our parent company also on the appliances side, the volume also increase compared to corresponding last three quarters. So appliances are also on consolid

Sir, just one question, could you expand a bit on the green sink foray that you mention in the address, what is the rationale to get into this and have we developed in collaboration with the partner?

Chirag Parekh

No, Sir, we have not first of all collaborated with any partner, it is a self R&D which we have done, we want to be part of this global green initiative and most of the large companies are looking at the companies that these companies are capable to do the green sink, they are able to do more sustainable products, doing products and I think we have done a great job in getting the filing the patent of this, so basically the quartz what we use for our sinks are made of organic pigments like beetroot, spinach and charcoal coming from organic and safe and compared to the other competitors these si

Sir, thanks for the opportunity and congrats on a very good set of results. Sir, I just have a few questions on more from bookkeeping perspective, first is this solar power plant that we are setting up 3 megawatts, what would be the cost for this and how much of savings can we achieve from this?

Anand Sharma

So, Nikhil, the cost could be around Rs.15 Crores to 16 Crores and we get around Rs.4 per unit saving in energy cost. And how many units would the facility be consuming so just to get a payback, what would you payback, Sir? Its around 60 lakhs unit per annum generation capacity. Understood, Sir and what would be our current debt level? Debt level? Yes. Rs.180 Crores on sanctioned basis, utilized basis it will be around Rs.150 Crores. 150? Rs.150 crores. Got it, Sir. Thank you so much, Sir.

Good evening, Sir. First question is on the quartz side, so we have a capacity of around 2.5 lakhs per quarter now with the new production commercializing, so Q2 you had said you will be stop, so what kind of exact run rate do you think we can achieve by Q4 this year and we are also expanding the capacity in another 50,000 units so I think that it will be 300000 per quarter for FY2024, so what kind of run rate do you think we can achieve?

Anand Sharma

So, based on the current capacity what we are realizing might be 170,000 units some of them in quarter one, if we go for three quarter it will be around 510,000 till quarter three with the additional capacity of let us say around 200,000, so around could be a capacity achievement for the quarter, it is 710,000 to 730,000 or 740,000 it is about 25% to 30% more capacity for this current financial year. And for next year also if we assume this kind of we will still capacity, right? Yes, right, actually I would say the next year the dynamics of the business is likely to change, I think you will be

So, I just had one question, now as an organization there are a lot of things, we are expanding in the geographies, we are in product line and as we move from a Rs.500 crore company to around Rs.1000 Crores odd over next two to three years, I just wanted to understand from that what are the initiatives that were taken so that we prepare to the organization for the next level of scale, whether it is terms of people or processes or technology, can you throw some light on that, that would be helpful?

Chirag Parekh

What is the management bandwidth? Management bandwidth in terms of other employee strength, processes, technology? So we are building a new team under me, we promoted Anand Sharma to COO, we also have a new Vice President, we also have a new international marketing head, we are also having European sales head, we are also recruiting American sales head, we are also recruiting chief of staff position forward under me, so the whole global and Indian geography team is expanding, I am just talking above the just level one. As far as the technology is concerned we are like I said in my last time th

I would take this opportunity to thank everyone for joining on the call. I hope we have been able to address all your queries and any further information kindly get in touch with Strategic Growth Advisors our investor relations advisors. Thank you once again and stay safe, thank you.

Management

Speaking time

Chirag Parekh

Moderator

Anand Sharma

Mohammed Patel

Rajesh Kothari

Pritesh Chheda

Nikhil Chandak

Nikhil Gada

Keval Ashar

Harshil Shethia

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Opening remarks

Chirag Parekh

Thanks. A very good afternoon everyone and a very warm welcome to the Q1 FY2023 earnings call of Acrysil Limited. Along with me on this call, I have Mr. Anand Sharma, CFO and SGA, our Investor Relation Advisors. I hope everyone got an opportunity to go through our financial results and investor presentation, which has been uploaded on the stock exchange as well as on our company’s website. Let me start with the global scenario Rising inflation coupled with supply chain disruptions on an account of geo-political tensions had impacted businesses across sectors. However, world is tightening the monetary policy to beat inflation. We expect that there would be moderation in inflationary environment with revisions in repo rates by RBI and a continuous increase in interest rates by FED. The silver lining is that a freight costs and input cost prices, which were one of the rising trend has moderated to some extent. We are seeing favourable tailwinds in freight costs and softening of input pric

Anand Sharma

Thank you Sir, Good afternoon everyone, let me take you through the Consolidated financial performance of the company. Q1 FY2023 Performance: Sales volume for quartz kitchen sinks stood at 170,035 units, stainless steel sinks at 28,608 units, kitchen appliances and other stood at 12,192 units in Q1 FY2023. Total income stood at Rs.171.3 Crores for Q1 FY23 as compared to Rs.99.3 crores in Q1 FY22, recording a robust growth of 73% on Y-o-Y and for Q4 FY22 this stood at Rs.141 Crores, a Q-o-Q growth of 22%. This growth was on an account of a strong demand from both domestic and export market along with consolidation of newly acquired operating subsidiary, Sylmar Technology Limited, UK. EBITDA of the company for Q1 FY23 stood at Rs.34.4 Crores as compared to Rs.23.5 Crores in Q1 FY22, recording a growth of 46% and margin for Q4 FY22 stood at Rs.31.3 Crores, a quarter-on-quarter growth of 10%. EBITDA margins for the Q1 FY23 stood at 20.1% as compared to 23.7% in corresponding Q1 FY2022. Mar

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