Decolight Ceramics Ltd - 18.00 Rs
Incorporated in 2000 by Shri Girishkumar Pethapara, Decolight Ceramics Ltd (DCL) - part of Gujarat based Deco group is mainly engaged in production of Vitrified ceramic tiles and porcelinato tiles. It specializes in manufacturing all types of vitrified tiles broadly in sizes of 605 x 605 mm & 807 x 807 mm and in many variants like mono colours, special colours, marble prints, matt finish, granite (salt and pepper), full body multicharge) etc. Notably, its products are approved by various entities hence company has direct sales to builder, contractor, corporates, housing boards etc on one hand whereas on the other hand it also markets its product in the retail segment under its own brand name ‘Granolite’. In near future, DCL is contemplating to setup its own retail outlets to improve the margins. Vitrified tiles have become extremely popular over the years due to ease in laying, strength, durability, hygiene and most importantly are available at one fourth the cost of Italian Marble. Hence they are widely used as floor tiles in residential complexes, commercial complexes (SEZ, IT parks, airport, hotels, call centres etc.) and retail spaces (shopping malls, multiplexes etc.). Today, with having more than 5000 dealers in India and exports to more than 20 Countries, Granolite is rapidly becoming a well known & reputed brand.
Initially, starting with a production capacity of 3,000 sq mtrs per day of vitrified tiles, DCL today boast of having a capacity of 12,000 sq mtr. Of these 6,000sq mtr has been added last year only. Based on Chinese technology, company plant is located at Ceramic City ‘Morbi’ in Gujarat which fulfills 70% needs of the ceramic industry in India apart from having ample supply of clay. As power constitutes the major cost, company has put up coal gas plant which ensures efficient fuel consumption and substantial savings compare to conventional fuel cost. Further company has taken trials of Pet coke firing system which is slated to be even cheaper than coal gas technology. Moreover, it has installed one 1.25 MW Wind Turbine Generator and is in the midst of installing another two turbine aggregating to 3.35 MW from Suzlon.
Recently, company has diversified into Aluminium Composite Panel (ACP) and has set up a plant with an installed capacity of 25,000 sq ft per day which started commercial production from end May 2008 only. In future company intends to take this capacity to 35,000 sq ft per day. ACP is used primarily as exterior covering of commercials buildings and corporate houses. While adding to aesthetic beauty of the structure, it also provides good thermal as well as sound insulation. It is also used in the inner surface and walls of the buildings. The product has recently been introduced in the Indian market and has significant market potential with less competition. Incidentally, DCL can use its established distribution network to market this product as ACP is also a construction material.
Last year in May 2007, DCL raised nearly Rs 45 cr thru IPO route at Rs 54 per share. This was largely to fund the capacity expansion of vitrified tiles, set up a plant for ACP & install wind turbine generators. It has fully utilized the funds as per projections and is estimated to get the benefit in current fiscal. Even for FY08, it has registered excellent performance. Sales increased by 60% to Rs 81 cr and net profit shot up 75% to Rs 8.80 cr even after making high tax provisioning of Rs 5.80 cr which is 40% of PBT. This translates into EPS of Rs 5 on expanded equity of Rs 18.30 cr. Accordingly for FY09 it can report a topline of Rs 100 cr and bottomline of Rs 10.50 cr i.e. EPS of Rs 6. Hence the company is available fairly cheap at an EV/EBIDTA of less than 3x times. Besides, there is a remote possibility that in future promoter may think of merging group companies like Deco Ceramic Industries, Decogold Glazed Tiles Ltd with DCL. Investors are advised to buy at current levels with a price target of Rs 30 in 12~15 months. However, investor should keep in mind that there is stiff pricing war in ceramic industry from the local unorganised segment and from Chinese players as well.
Initially, starting with a production capacity of 3,000 sq mtrs per day of vitrified tiles, DCL today boast of having a capacity of 12,000 sq mtr. Of these 6,000sq mtr has been added last year only. Based on Chinese technology, company plant is located at Ceramic City ‘Morbi’ in Gujarat which fulfills 70% needs of the ceramic industry in India apart from having ample supply of clay. As power constitutes the major cost, company has put up coal gas plant which ensures efficient fuel consumption and substantial savings compare to conventional fuel cost. Further company has taken trials of Pet coke firing system which is slated to be even cheaper than coal gas technology. Moreover, it has installed one 1.25 MW Wind Turbine Generator and is in the midst of installing another two turbine aggregating to 3.35 MW from Suzlon.
Recently, company has diversified into Aluminium Composite Panel (ACP) and has set up a plant with an installed capacity of 25,000 sq ft per day which started commercial production from end May 2008 only. In future company intends to take this capacity to 35,000 sq ft per day. ACP is used primarily as exterior covering of commercials buildings and corporate houses. While adding to aesthetic beauty of the structure, it also provides good thermal as well as sound insulation. It is also used in the inner surface and walls of the buildings. The product has recently been introduced in the Indian market and has significant market potential with less competition. Incidentally, DCL can use its established distribution network to market this product as ACP is also a construction material.
Last year in May 2007, DCL raised nearly Rs 45 cr thru IPO route at Rs 54 per share. This was largely to fund the capacity expansion of vitrified tiles, set up a plant for ACP & install wind turbine generators. It has fully utilized the funds as per projections and is estimated to get the benefit in current fiscal. Even for FY08, it has registered excellent performance. Sales increased by 60% to Rs 81 cr and net profit shot up 75% to Rs 8.80 cr even after making high tax provisioning of Rs 5.80 cr which is 40% of PBT. This translates into EPS of Rs 5 on expanded equity of Rs 18.30 cr. Accordingly for FY09 it can report a topline of Rs 100 cr and bottomline of Rs 10.50 cr i.e. EPS of Rs 6. Hence the company is available fairly cheap at an EV/EBIDTA of less than 3x times. Besides, there is a remote possibility that in future promoter may think of merging group companies like Deco Ceramic Industries, Decogold Glazed Tiles Ltd with DCL. Investors are advised to buy at current levels with a price target of Rs 30 in 12~15 months. However, investor should keep in mind that there is stiff pricing war in ceramic industry from the local unorganised segment and from Chinese players as well.
No comments:
Post a Comment