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Confident of 20% growth, maintain BUY!

Result Synopsis

Amidst the global headwinds, CARYSIL Ltd registered decent performance wherein Quartz & stainless steel sink volumes grew by 9%QoQ each. Revenue from the respective segments increased by 4% & 6% over similar period. Solid surface segment’s revenue grew by 10%QoQ. Overall revenue increased by 5%YoY & 5.5%QoQ to Rs1.45Bn which was largely in-line with our estimates. EBITDA margins came in at 18% as compared to 20.3%/18.2% in Q4FY22/Q3FY23 respectively. Carysil Products ltd revenue stood at GBP 8.8Mn, a decline of 10%YoY & Carysil Surface Ltd revenue increased by 15%YoY in FY23.

Management is confident of achieving 20%YoY growth in FY24 wherein Quartz volumes are likely to come in at 6lakh units owing to pick-up in orders from Europe & expected revival from other global markets. Company is in process of adding new customers & deepening their market share with existing customers. Stainless steel sink’s expanded capacity will be operational by June’23 & appliance biz capacity though delayed will be commercialized by Sep’23. Incrementally, management is focusing on expanding their presence in domestic markets & hence, added ~1,600 dealers. On margin front, with reduction in input cost & better operational utilization in coming fiscals, company expects to regain their margin profile of ~20%.

We believe, the near-term headwinds in global markets have impacted the business performance. However, the worst is largely behind for the company & demand scenario should improve going ahead & company will continue to gain market share from other European manufacturers. Newly acquired companies (i) Carysil Brassware Ltd, (ii) Carysil Surface Ltd performance is also expected to be better in coming fiscals. Hence, we reckon Revenue/EBITDA/PAT growth of 21%/25%/30% over FY23- FY25E. We continue to value the company at P/E(x) of 22x o FY25E EPS of Rs33.7, arriving at a target price of Rs740. Hence, we maintain our BUY rating on the stock.

Result Highlights

* Revenue for the quarter stood at Rs1.46Bn (est Rs1.41Bn), reporting a growth of 5%YoY & 6%QoQ.

* EBITDA margins came in at 18% (est 17.5%) as compared to 20.3%/18.2% in Q4FY22/Q3FY23 respectively. Absolute EBITDA stood at Rs262Mn, reporting a growth of 5%QoQ but declined 7%YoY.

* Net profit stood at Rs125Mn, a sharp degrowth of 25%YoY while increased by 3% sequentially.

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