6-year coma for Acrysil shares

I was surprised to see that the company’s shares were literally in a 6-year coma.

Between August 2014 and February 2020, Acrysil share price went nowhere and got stuck in a tight range.

exactly how ITC Shares have been behaving for the past few years.

Or, between 2002 and 2010, HUL’s share price went nowhere.

It just goes to prove one thing. Stock returns are almost never linear.

But what happened after that will surprise you. With 6 years of no returns, the stock gained up to 600% in one year!

What are the reasons for the 7x rise in Acrysil’s shares?

Most stocks have a bullish trend in a bull market. Even the junk stock becomes multibagger.

Is this a case of Acrysil? Is it rising because we are in a bull market?

No.

The bull market is a supporting factor, but there are other reasons that are driving the stock.

Game-Changing Partnership with IKEA

after crashing as low as ₹50 per share in March 2020, Acrysil shares started rising since August 2020.

This was after the company, which manufactures home improvement products, announced a strategic partnership with Swedish home furnishing company IKEA Group to supply quartz sinks.

This order from the IKEA group provided additional revenue. Later in April 2021, the company began shipping quartz kitchen sinks to IKEA. This partnership proved to be a game-changer as IKEA has 400+ stores in approximately 52 countries.

Acrysil derives 76% of its total revenue from quartz sinks. It is the largest producer of quartz sinks in India and Asia. It has two plants that manufacture 5 lakh quartz sinks per year at the end of FY 2020.

Globally, there are only four manufacturers of quartz sinks with shock technology. Acrysil is the only manufacturer in India and Asia.

Acrysil initially began manufacturing its quartz sinks with technical support from Shock. Shock also had a stake in Acrisil, but it sold that stake.

While many may feel that this will have an impact on the company’s operations, it is not because Acrisil already has the technology and may well continue without Shock’s support.

capacity expansion

In March this year, Acrysil increased its capacity to 1 lakh units at its Bhavnagar plant.

Then, in August, the company announced a further expansion of production capacity by an additional 1,60,000 quartz sinks per year.

This initiative will take its total capacity to 1 meter sink per year.

Acrisil said that the production capacity has been expanded to meet the growing demand for quartz kitchen sinks in the global market.

financial situation

Strong financial performance has also supported the stock.

For the June 2021 quarter, Acrysil’s topline was reported at ₹975.5m, a massive increase of 112% compared to the June 2020 numbers.

Meanwhile, the bottomline rose by 194% ₹135m as compared to 45.9m in June 2020.

It had also recorded strong figures in the March 2021 quarter.

Helped by a few investors

The market always takes it as a positive sign when prominent investors like Rakesh Jhunjhunwala hold a stake in the company.

Ashish Kacholia was there for Acrisil. Ashish Kacholia is known for his best pics.

In FY 2021, Kacholia delivered strong returns over Newland Laboratories (650%), Mastek (577%), ADF Foods (449%), and Vaibhav Global (422%).

Back in March 2018, Kacholia bought 2.2 lakh shares of Acrisil, which was a 4.3% stake in the company.

As of June 2021, he held 3.75% stake in the company.

home improvement and building materials

With people spending more hours indoors due to the pandemic, home renovation projects have picked up.

People now have more disposable income and are willing to spend more.

devaluation of rupee

Acrisil is largely dependent on exports. Since exports generate a large amount of revenue, the depreciation of the rupee helps its margins.

A weakening of the rupee leads to an increase in the realization and margin of the rupee.

emerging market

In an interview, the company’s Chairman and MD Chirag Parekh had said that the industry is booming and its penetration is low.

Currently, 90-95% of industries use stainless-steel and about 5-10% use quartz sinks.

The global market for kitchen sinks was valued at US$ 3.1 bn in 2020 and is projected to witness a CAGR of 4% in 2021-2030.

The demand for quartz sinks in the UK continues to grow. Customers are more inclined towards natural stone based products than other products.

In its annual report, Acrisil said it expects double-digit growth in the UK market.

Equitymaster in the Home Improvement Sector…

Aditya Vora, Financial Writer at Equitymaster, tracks this space closely.

According to him, the home improvement space is just starting to gain traction as a part of its sales is derived from replacement demand in case of a slowdown in the real estate sector.

Apart from the underlying real estate demand, Aditya believes that with world economies focusing on China plus 1 suppliers, Indian companies are likely to benefit immensely.

The government’s PLI scheme is also likely to give a strong export boost.

Here he wrote in one of his editorials.

There is a clear, direct relationship between the sale of real estate and the sale of home improvement products as well as building materials.

When you buy your dream home you will be sold steel, cement, paint, plywood, bathroom fittings, tiles, marble, electrical wires, switches, pipes and much more. They are all necessary to build your home.

You will buy furniture, electronics and much more after you buy your home.

I am very bullish about real estate. I think the cycle is changing.

This will create a huge opportunity in the stocks of home improvement and building materials companies.

You can read his full work here: Your Backdoor Entry into India’s Real Estate Boom

Acrysil. About this

Acrisil was incorporated in 1987 by the first generation promoter, Mr. Ashwin Parekh, and manufactures granite-based kitchen sinks, also known as composite quartz sinks.

It is engaged in manufacturing and trading of Sinks, Bath Products, Tiles, Kitchen Appliances and Accessories.

The group mainly manufactures stainless steel kitchen sinks for the domestic market through Acrisil Steel, in which Acrisil holds over 85%.

This article is syndicated from equitymaster.com