Decent Volume, Margin Recovery In Q2 To Accelerate In H2: Systematix

Carysil Ltd.’s healthy recovery in Q2 (revenue Rs 1.64 billion, up 18% YoY and 15% QoQ; 20.1% Ebitda margin) was driven by exports (up 22% YoY and 33% QoQ).

Normalisation of channel inventory in the U.S. and continued market share gains in quartz sinks from global leaders due to advantage of lower manufacturing costs helped. After three acquisitions in UK, Carysil acquired United Granite in USA (revenue potential Rs 1.3 billion, current CU 60%) which will help it to provide fully integrated, seamless tops with the accessories, faucets, and sinks.

Supply of stainless-steel sinks to IKEA will commence from Q4. A large volume order is expected in Q4 from a newly added customer. Overall, management expects strong revenue and margins in H2 from exports.

Domestic business is also expected to rebound on addition of dealers and new products, participation in exhibitions and B2B team’s focus on projects.

Thus, guidance of Rs 10 billion revenue (including inorganic) and 20% Ebitda margin for FY25E is intact.

We have revised up FY24E/25E earnings by 7%/5% and estimate 25%/34%/42% compound annual growth rate in revenue/Ebitda/profit aftet tax over FY23-25E. Despite regular capex, return on capital employed (~23%) should be healthy in FY25E.

Thus, we maintain ‘Buy’ rating on Carysil, with a revised target price of Rs 987 (25 times FY25E price/earning).

We see large potential in the scrip despite ~70% rally since our initiation in February 2023.

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