Acrysil is a small-cap company with market capitalization of only 53 crores. The company makes quartz kitchen sinks and says that "we are the only company in all of Asia - and one of just a few companies worldwide – manufacturing quartz kitchen sinks to global standards of quality, durability and visual appeal. We have no competition in its class in India."
~80% of the revenues of the company comes from exports. Till 2011, the company had good margins of more than 20%. Over last few years the gross margins declined to 16% and coupled with higher interest costs, the bottom-line shrinked (even though revenues had a moderate growth).
Recently the company posted a very good June quarter and that got me interested into the stock. The company has had a good revenue growth and improvement in the margins can reward big. The management seems pretty ambitious about the growth in the annual reports.
I would tag the stock as a risky bet but with good potential rewards. The things which I find very risky are:
The ambitious future plans: Company aims to be the "undisputed ‘No 1’ position – the top-most one-stop brand for every requirement in kitchen products – every fitting, accessory, appliance and utility."
For this, the company plans "to further increase domestic sales by launching new models, catering to new projects and aggressive promotion."
Weak financials: The cash-flows are relatively weak with around 70% realisation of the operating profits over last 5 years. The tax payout is also relative low at 20%.
Other things: The company has 4 subsidiaries (with a couple of them in losses). The company does not post the consolidated results on the quarterly basis. I also found the managerial remuneration to be on a higher side (20% of the net-profits). In 2008 the company came up with a preferential allotment to promoters and diluted 15% of the stake of the other shareholders.
With the kinds of ambitions and historical growth, the company does look interesting. The new lines of products and new-brand building can take some time to break-even and thus I will keep a close eye on the margins and debt levels in the upcoming quarters.