Acrysil Ltd- Analysis

Acrysil Ltd was incorporated in the year 1987 and in collaboration with Schock & Co Gmbh, a leading German MNC, started manufacturing one single product line ‘Composite Quartz Sink‘(premium kitchen sink) since 1990. Schock & co Gmbh, a German multinational which invented quartz sink and is a world leading player in Kitchenware.

Acrysil continued with a single product which was Quartz sink for many years primarily in the export market given the pricing range of the product. In the export market the company continued doing white label manufacturing i.e. manufacturing for other retailers and brands. In the last few years have started selling during their own brand name in the export market which is still very small.

From 2010 onwards they started to diversify into other kitchenware and started focusing on the Indian market. In 2011, they launched stainless steel sink for the domestic market, 2013 launched kitchen appliances and then bathroom ware in 2017.

Composite quartz sink-Quartz is one of the most durable materials available. It can withstand the highest temperatures and is resistant to stains, scratches, dents and chips. Quartz sinks are made with a composite of quartz and acrylic (generally 80% quartz and 20% acrylic), which offers strength and flexibility, making them highly unlikely to crack.

Quartz sinks are scratch resistance, easy to maintain, dont make much noise and looks elegant.

Below is a video about Composite quartz sink by competing company Roca-

Globally, the kitchen sink market is dominated by stainless steel sink with more than 90% market share. Other types of sink including quartz ones have a market share of less than 10%. This is mainly due to the premium pricing of quartz sink.

While in the export market Acrysil primarily does white label manufacturing, In the Indian market the company positions its product at an luxury segment with its own branding.

The company’s product prices are much higher than Indian standards. For eg.

Product Name:

Carysil Quadro Stainless Steel Single Bowl Kitchen Sink with Drainer- Price =  ₹ 16,900 

Carysil Elegance Single Bowl Sink= ₹6270

Carysil Original SCHOCK German Engineered Technology Quartz Tip Toe N 200 Double Bowl 34×20 Kitchen Sink= ₹10,899

Whereas the basic stainless steel kitchen sink cost between ₹2000 to ₹3000 in India.

Similarly, the kitchen appliances and bathroom are priced at an premium range, limiting the growth in the Indian market. The other more obvious reason I believe is the lack of awareness of the brand among the masses.

Whereas US & Europe are developed and more mature market with people having higher ability to purchase and are also concerned about the looks of their kitchen.

Acrysil Ltd- Some Pointers

1. Present in 50+countries.

2. The company maintains a good dividend payout ratio.

3. Since the company manufactures sinks, they requires moulds as per customer need and specification. To cater to them Acrysil has 130 moulds & 400+ SKU’s. Moulds are the biggest capital expenditure spend for the company. 

4. Of the 80% export revenue, 30% comes from the US, 20% from US and 30% from Europe.

5. In terms of product pricing, for contract manufacturing usually the prices are fixed and the manufacturers have to work backward to maintain their margins.

6. Acrysil Ltd has six subsidiaries, including two overseas subsidiaries and one step down overseas subsidiary. Largest one being Homestyle Products ltd with a revenue of close to ₹65cr. Setup 100% subsidiary in US by the name of Acrysil USA Inc on Apr 20,2020. Want to be closer to the its biggest market.

7. With every addition of 1 lac sink, the company can bring in 45-50 cr of Revenue.

8. Raw material used to manufacture Quartz sinks are MMA(Methyl Metha Acrylate) & Acrylics. Prices have fallen by 10% in the recent past.

9. Product realization per piece is approx 1000-15000 higher in the export market. 

Acrysil Ltd- Business Model

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Acrysil Ltd- Brands & Distribution

Carysil- Acrysil sells its kitchen sink products under Carysil brand name.

Sternhagen- Acrysil sells its bathroom ware products under Sternhagen brand name. Launched in 2017

TekCarysil- Acrysil sells its kitchen appliances & ultra premium sink products under Tek Carysil brand name.

The company promotes its brands in events and tournaments in India. They have distribution of 1500+ outlets showcasing their products as well as 80+ brand exclusive experience center owned by the company.

Acrysil Ltd- Brands

Acrysil Ltd- Product Categories

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Quartz Sinks

Acrysil started manufacturing quartz sink since its inception and this product has been the growth driver still today. Composite quartz sink are the largest contributor to revenue at 75%.

Acrysil Ltd- Quartz Sinks sold

Acrysil Ltd- Quartz Sinks capacity

The realization seems weird given the high pricing of its products in EBO or online channels in India.

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Stainless Steel Sink

Acrysil Ltd launched its stainless steel sink manufacturing via its subsidiary Acrysil Steel Private Limited in 2011 to cater to the Indian market. But still the revenue is too little given the big market of India.

In FY20, the company had increased its capacity of stainless steel sink to 90,000 of which 60,000 is of press sink and 30,000 is that of premium range Quadro sink. The price difference between quadro sink and press sink is about 30%. Quadro sink prices are similar to that of quartz sink.

Acrysil Ltd- Stainless Steel

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Kitchen Appliances

Launched their luxury kitchen appliance range in 2013 which includes Faucets, Hoods & Chimneys, Hobs & Cook tops, Ovens, Microwave etc. They sell them under the brand name ‘Tek Carysil’. For the Kitchen appliances products, the company basically assembles and brands products.

Acrysil Ltd- Kitchen Appliances sell

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Bathroomware

Sternhagen Wash Basin & 3D Tiles

Quartz Wash basin & tiles sold

Launched its bathroom ware brand Sternhagen in the year 2017. Sternhagen products uses patented Sani-Q technology giving it greater finesse. Suzanne khan is its brand ambassador. Acrysil has been promoting its Sternhagen brand through sponsoring Polo tournaments but still the number of units sold is quite low. A total sale of 800+ wash basin & 30,000+ tiles for an entire year is quite low given India’s size.

Earlier the product pricing was high because of the use of Quartz in the product, in order to capture the market they have introduced 3D concrete tile with a technology from a Hungarian company which reduced the prices to half.

Sternhagen initial price was ₹1200/ sq ft which they are trying to bring to ₹500-600 per sq ft.

Sternhagen Polo Cup

Acquisition of 'Homestyle Products ltd'

Acrysil Ltd acquired 74% stake in Homestyle Products Ltd, a UK based Kitchen products distribution company in FY15. The idea was to access the distribution and retail channels of the company and place its products there. Increased stake to 87% in FY16 which was further enhanced to 95% in FY17, then to 98.75% in FY18. In FY20, Acrysil took 100% control of the Homestyle Products Ltd and renamed it ‘Acrysil Products Limited’.

The products are sold under Homestyle earlier brand names: Link

Technology Partner- "Schock & Co Gmbh​"

Schock & co is a leading German company into kitchen ware & in particular quartz ones. Schok & Co which started operations in 1924, invented the quartz composite sink in the year 1979. The company has a number of patents in its name(130+) and it continues to file new ones.

According to Acrysil’s Management, there are numerous ways in which Quartz sink can be made but that made by Schock technology is superior. And Schock has shared the technology only with 4 companies globally including Acrysil, the only one in Asia.

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Acrysil ltd-Financial Analysis

Acrysil Ltd- Quartz Sinks sold

Despite manufacturing luxury products margins remains low at 9-10%. That may be due to they being in the white label manufacturing space. 

Debt levels remains high at over ₹100cr which the company has reduced to ₹84 levels by Q3FY21.

Currently the fixed asset turnover stands close to 2x which can be taken to 3x.

Shareholding Pattern

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What is NOT working for the company?

The domestic branded business of the company has not grown much despite all those marketing events, Exclusive brand outlets & distribution channels.

Quartz Sink market has remained small in India at just ₹35-40 crores despite being in the business for more than 3 decades. Couple of reason I can think of are premium pricing and lack of awareness of the brand among the masses.

Same goes the case with kitchen appliances and bathroom wares.

The company has increased its dealer and distributor base but the growth remains elusive for the company’s domestic market.  Therefore, they are going after exclusive brand outlets at premium locations. 

India’s FY20 per capita is $1877 compared with Germany’s $45,466 & UK’s $39,229. That limits the purchasing ability of Indian’s compares to those of developed nations. 

Other point I think is clearly lack of brand awareness as the promotion are limited to very niche events. Sponsoring in very niche sporting event such as horse racing/polo, the target audience remains very low. Managing Director, Chirag Parekh seems to be a big polo fan.

The MD of the company, Chirag Parekh has repeatedly mentioned that he wants the company to be positioned in the luxury segment and not in the mass. Even being called a luxury company, the margins remain average.

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What is WORKING for the company?

Given the high prices of the products, the developed market offers a better opportunity for the company i.e. exports. 

In particular, the contract manufacturing for brands such as GROHE, Homebase , B&Q retailers such as IKEA, Menards etc remain the only and key growth driver of company’s revenue.

Acrysil has entered in an strategic partnership with IKEA, for manufacturing Quartz sink for their global requirement mainly Europe. For this the company has increased capacity and started dispatching to them recently.

The UK subsidiary of the company is also doing well. Earlier Homestyle products ltd was importing from China and then selling those products in their brand name in the UK, now that is getting replaced by Acrysil products.

With the global lockdowns more and more people are spending time indoors. Home is the focal point across the world. People are going for home improvements. There are big cheques coming in from the govt in the form of support in developed nations. Demand has seen buoyancy since July 2020 in the export market. Along with the new tie up IKEA offers visibility in growth.

Acrysil Ltd- Share price

The company’s share price has moved up a lot but still available on a higher side at 3x of sales and 33 time Price to earning ratio. Any correction would be a good entry point.

In terms of competition, there exists a number of player selling quartz sink but according to Acrysil’s management the quality of the company’s product is much better than others demanding higher prices. But if you do some google search, you will find there are many competing products from global players as well.

Overall an okay kind of company and management with strong tailwind with them.

Further reading:

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