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Result Synopsis

CARYSIL Ltd reported decent performance in Q2YFY25 wherein revenue grew by 26.6%YoY to Rs2.07Bn (in-line with our est) which was driven by exports biz (82% of revenue) which grew by 31%YoY. GP margins on a consolidated basis improved from 53%/53.3% in Q2FY24/Q1FY25 to 55.6%, however, operating margins declined by 218bps YoY to 18% due to higher employee & other cost. On standalone basis, revenue increased by 11%YoY, but gross margins declined from 61.4% in Q2FY24 to 58% in Q2FY25 due to higher input & freight cost. Consequently, EBITDA margins came in at 16.5% Vs 22.7%/19.7% in Q2FY24/Q1FY25 respectively. Quartz volumes increased by 7%YoY, and ASP improved by 10%YoY which led to Quartz revenue (46% of sales) growth of 18%YoY. Stainless-steel sink’s revenue (11% of sales) increased by 12%YoY driven by 18%YoY volume growth, but realization declined by 5%YoY. Solid surface revenue (31% of sales) grew by 45%YoY to Rs638Mn. Domestic biz constituted 18% of revenue which registered a growth of 10%YoY & 5%QoQ. UK Homestyle biz registered a growth of 15%YoY wherein Quartz revenue stood at Rs170Mn, a massive growth of 31%YoY. Carysil Surface Ltd revenue grew marginally by 5%YoY to £4Mn and United Granite LLC revenue came in at $2Mn. Notably, Gross debt declined to Rs2.56Bn as on Sept’24 Vs Rs2.98Bn as on Mar’24.

Management Guidance

Management maintained their guidance of US$100Mn topline for FY25 and for FY26, management expects 15-20% growth. EBITDA margin guidance is of 20-22%. The company stated that new deals are in advanced stages, which will boost the revenue trajectory, however, there are still audits going-on.

Our View

We remain confident on CARYSIL’s growth owing to improvement in US and Europe business and company expanding its presence in newer geographies. Moreover, with on-boarding of new clients and a higher share from existing customers will boost overall topline. Also, newer capacities across segments will enable the company to cater the growing demand. On consolidated basis we expect top-line to grow by 19%CAGR over FY24-FY27E to Rs11.58Bn and operating margins should remain at 18.4% in FY27E. Hence, EBITDA is likely to grow by 18%CAGR over FY24-FY27E. With the reduction in debt, we expect PAT to grow faster at 26%CAGR over similar period. At CMP, the stock trades at P/E(x) of 24.3x/19.6x on FY26E/FY27E EPS of Rs33.4/41.4 respectively. We continue to value the company at P/E(x) of 25x on FY27E EPS, arriving at a target price of Rs1,035 (adjusted for revised share capital). Hence, we reaffirm our BUY rating on the stock.

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