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Asian Granito India Ltd Research Report - 03rd Oct 2016

Miscellaneous | Published on Oct 03rd 2016


Asian Granito India (AGIL) is engaged in the manufacturing and sale of ceramic wall, ceramic floor, vitrified tiles, digital polished glazed vitrified tiles, digital wall tiles, marble, and quartz. The company offers more than 1,200 designs and export its products in 50+ countries. It has eight manufacturing facilities spread across Gujarat and the current combined capacity is 100,000 sq. mtrs per day. Focus on high value product: AGIL’s current, vitrified sales (35%) are lower as compared to its peers like Somany Ceramics (47%) and Kajaria Ceramics (61%). Recently, AGIL has launched various products in premium segments like Imperio, Jumbo – Double Charge, CARARRA White, XXL – Polished Glazed Vitrified Tiles, Polished Vitrified Tiles (Double Charge) etc. Going forward, we expect AGIL’s profit margin to improve due to increase in focus for higher vitrified product sales, which is a high margin business. Shift from B2B to B2C would improve the margin: AGIL is continuously putting efforts to increase the B2C sales from the current level (35% in FY16). It is expected to reach up to 50% in next 2-3 years on the back of various initiatives taken by AGIL to increase direct interaction with customers like strengthening distribution network, opening exclusive brand showrooms, trade schemes on high value products, participation in key trade exhibition, etc. Strengthening distribution network: AGIL has an extensive marketing and distribution network. It comprises of more than 4,500 dealers and sub-dealers (~27% grew over last two years) and more than 80 exclusive dealer showrooms covering each and every state of the country. This helps the company in promoting its range of products in the market and hence is planning to open 200 more exclusive dealer showrooms. Going forward, we expect the company to continue to expand its network through dealers & sub-dealers. Also, the company is opening 16 large format exclusive corporate display stores for dealers and architects. Artistique Ceramic merger to boost margins: In July FY2016, AGIL acquired Artistique Ceramic which has a better margin profile. Going forward, we expect the company to improve its operating margin from 7.5% in FY16 (excluding merger) to 12-12.5% in coming financial year. Artisique Ceramics has a contract with RAS GAS to supply quality natural gas at a discounted rate of 50% to current market rate, which would reduce the overall power & fuel cost of the company. Outlook and Valuation: Considering the various initiatives taken by the government like smart cities, housing for all by 2022, and push towards providing sanitation, would create new demand avenues for entry level or lower priced tiles (ceramic tiles). We expect AGIL to report a net revenue CAGR of ~11% to ~`1,220cr over FY2016-18E. On bottom-line front, we expect CAGR of ~39% to `48cr over FY2016-18E owing to better product mix, higher B2C sales and amalgamation synergy. We initiate coverage on the stock with a Buy recommendation and target price of Rs351 (22x FY2018E EPS), indicating an upside of ~27% from the current levels.

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CMP 277
Target Price 351
Investment Period12 Months

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Shareholding Pattern (%)

Public & Others62.0
Grand Total100.0

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