This article provides a fundamental analysis of Acrysil Ltd.
In order to benefit the maximum from this article, an investor should focus more on the process of analysis instead of looking for good or bad aspects of the company. She should learn the interpretation of different types of data and transactions and pay attention to the parts of annual reports etc used to get the information. This will help her in improving her stock analysis skills.
Acrysil Ltd Research Report by Reader
Q: Dr Vijay, I like the content on your blog and the in-depth stock analysis.
I am analyzing a small cap company Acrysil Ltd that is into manufacturing of kitchen sinks. Acrysil’s sales for FY 2014 was Rs 104 crore and current Market cap Rs 236 crore. Last 10 year Sales CAGR is 26% and PAT 64%. PE at 26 times is on the higher side compared to our checklist but company’s growth in future looks promising both in domestic market (with all focus on housing and related products) as well as from point of view of Export markets where Acrysil supplies premium products though their overall share is small.
Current margins are low but likely to improve with growth coming. Net profit margin is in the range of 6 to 7%. I do not have much information on management of the company as it is very small company and there is not much information available in public domain and haven’t seen any analyst reports.
Shall be grateful to get your detailed analysis on Acrysil and whether it can be a good investment candidate for the medium term. Regards.
Dr Vijay Malik’s Response
Thanks for your feedback! I appreciate the way you have analysed Acrysil Ltd. You have analysed most of the relevant factors and summarized it well.
Financial Analysis of Acrysil Ltd:
Sales have been growing at good pace. Profitability, however, is on the moderate side. Operating profit margins of 16-17% and net profit margins of 6-8%, thought, seem decent, are lower compared to historical levels. Company’s tax rate is consistently at 23-26% levels. An investor should check whether Acrysil gets any tax rebate for its business.
Cumulative net profit and cash from operations of last 10 years is almost at similar levels, indicating that cash is not stuck at the end of customers.
Operating Efficiency Analysis of Acrysil Ltd:
Operating efficiency parameters are improving over the years. Asset turnover, receivables days have shown improvement since last 4-5 years. Inventory turnover is stable with growing sales. All these parameters show healthy working capital management and indicate efficient management qualities.
Company has been doing capital expenditure from a mix of internal accruals and debt, which is not bad. However, debt levels are increasing year on year. Debt to equity levels have increased to 0.9 in FY2014. Interest coverage ratio, though, seems within comfortable limits currently, might become the cause of concern, in case Acrysil is not able to maintain its healthy growth and profitability.
Management seems good as it has been sharing the fruits of growth with shareholders and has increased dividend payment in line with growth of profits. Dividend payments have increased at 25% CAGR in last 7 years.
Overall, Acrysil seems a good business. Market has also recognized it and given it high valuations. At current P/E of 26, it is no longer a hidden value stock. At current valuation levels, it does not offer any margin of safety.
I believe that an investor can find other attractively priced opportunities in current markets. However, you should do your own analysis before taking any investment decision about Acrysil Ltd.
Hope it helps!
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- The above discussion is only for educational purpose to help the readers improve their stock analysis skills. It is not a buy/sell/hold recommendation for the discussed stocks.
- I am registered with SEBI as an Investment Adviser under SEBI (Investment Advisers) Regulations, 2013.
- Currently, I do not own stocks of the companies mentioned above in my portfolio.