We are pleased to inform you that our Hidden Gem stock of Sept'14 - Asian Granito India Ltd (BSE Code: 532888, NSE Code: ASIANTILES) has given absolute returns of 400% to our Hidden Gems members in period of 3 years and 6 months, Our team suggested Buy on Asian Granito India Ltd at price of Rs. 98.35 on 29 Sept'14 with a target price of Rs. 200 which is already achieved. We are glad to inform our readers that Asian Granito stock made its 52 week high of Rs. 618.15 on 15th Jan'18 and currently trading at Rs. 490 giving as on date returns of 400% to our Hidden Gems members, our 5-Bagger stock in period of 3.5 years.
In Dec'17 quarter, net profit of Asian Granito India declined 7.66% to Rs 11.70 crore against Rs 12.67 crore during the previous quarter ended Dec 2016. Sales rose 6.36% to Rs 263.78 crore in the quarter ended Dec 2017 as against Rs 248.01 crore during the previous quarter ended Dec 2016.
Below is the summary of Asian Granito India Ltd shared by our team under Hidden Gem stock recommendation - Sept'14
1. Company Background:
- Ceramic wall, ceramic floor and vitrified tiles
- Digital polished glazed vitrified tiles and digital wall tiles
- Marble and quartz
With an aim of giving shape to company’s dream project of having a strong retail presence pan-India, Asian Granito India Ltd. has successfully already opened 49 exclusive showrooms in cities like Mumbai, Delhi, Jaipur, Bangalore, Chennai, Ahmedabad, Nagpur, Amravati, Gonda (Uttar Pradesh), Udaipur, Nasik and Jalandhar till now. With the opening of this showroom in Aurangabad, the number of AGL tiles world exclusives has gone up to 50 outlets
Company plans to ramp up its retail business by opening 100 new exclusive AGL Tiles World stores. Company is confident to double the existing number of ‘AGL Tiles World Exclusive’ stores all over India in this financial year
iii) Asian Granito acquires shares of AGL Industries – 03rd March 2014
Asian Granito India has acquired 100% shares of AGL Industries to become its wholly owned subsidiary. AGL Industries, a company incorporated under Companies, Act 1956 having its registered office at D-702, Seventh Floor, Ganesh Meriden, Opp. High Court, S G Highway, Ahmedabad, Gujarat and is currently engaged in business of agriculture products.
iv) Asian Granito takes contract manufacturing route to capacity expansion – 7th Mar’13
Tile maker Asian Granito Ltd has chosen the contract manufacturing route to add capacity as the demand for ceramic tiles is expected to firm up in the ensuing fiscal after recording muted growth this year.
The Ahmedabad-based firm is tying up with some 15 contract manufacturers to add capacity of about 25,000 sq mt each day in the next six months. It currently operates six manufacturing units of its own with a combined output of 81,000 sq mt a day in and around Ahmedabad.
“We are investing about Rs. 300 crore to put in place a network of contract manufacturers, including on modernizing their facilities. We are funding this expansion through our own accruals,” A.P. Manojkumar Vice-President (Sales and Marketing) told.
Asian Granito is the amongst the top seven or eight companies in the organised tile manufacturing sector after H. R. Johnson, Kajaria, Nitco and Somani. The domestic tile market is estimated at Rs.18,000 crore; it registered lower growth of 11 per cent this year as against 14-15 per cent in the previous fiscal.
The company will consider setting up its seventh manufacturing unit in the South, either in Andhra Pradesh or Karnataka, depending on the availability of gas. Tamil Nadu is company’s biggest market, followed by Kerala and Andhra Pradesh. If company get adequate gas supply, company may consider setting up a 9,000 sq mt a day unit at a cost of about Rs. 70 crore.
3. Financial Performance: (as on 29 Sept'14)
Asian Granito India net profit rises 31.37% in the June 2014 quarter
Net profit of Asian Granito India rose 31.4% to Rs 33.5 million in the quarter ended June 2014 as against Rs 25.5 million during the previous quarter ended June 2013. Sales rose 12.2% to Rs 1762.4 million in the quarter ended June 2014 as against Rs 1571.4 million during the previous quarter ended June 2013.
Asian Granito India net profit rises 62.53% in the March 2014 quarter
Net profit of Asian Granito India rose 62.53% to Rs 59.0 million in the quarter ended March 2014 as against Rs 36.3 million during the previous quarter ended March 2013. Sales rose 22.1% to Rs 2523.4 million in the quarter ended March 2014 as against Rs 2066 million during the previous quarter ended March 2013.
For the full year, net profit declined 17.4% to Rs 141.4 million in the year ended March 2014 as against Rs 171.1 million during the previous year ended March 2013. Sales rose 7.3% to Rs 7591.4 million in the year ended March 2014 as against Rs 7081.2 million during the previous year ended March 2013.
Company has shown a turnaround performance in last 2 quarters and we believe it will continue to deliver robust bottom line compared to last year with better sales realization of its value added products.
Asian Granito Ltd has taken no. of new initiatives to increase the proportion of value-added tiles in its product mix from 25.00 percent in 2013-14 to a projected 30 per cent in two years with a corresponding increase in average realisations and profitability
4. Peer Group Comparison:
Tiles being a volume play, expansion are inevitable. To leverage the current opportunity and tackle with surplus capacity situation, most companies are going slow on organic expansion plans and are eyeing to partner with unorganized sector which constitutes ~50% of the total sector.
i) If you look at financial performance of the company during last 5 years, it shows a poor performance which will not encourage investors to invest in such a company. Company EBITDA and PAT margins shows a declining trend from FY 09-10 to FY 13-14, poor performance in terms of important ratios like ROA and ROE and increase in debt to equity ratio. Moreover, promoter’s shareholding is low at 37.52% which further raises doubt on management interest in the company.
iii) Low promoters shareholding and high debt on books is a concern for us. However, we consider Asian Granito as our contrarian bet considering change in business approach by the management and favourable economy for companies in construction sector. Company has performed well in terms of top line and bottom line growth during last 2 quarters. Considering no. of initiatives taken by the management, we believe operating margins will continue to improve during next 4 to 6 quarters
iv) Peer group companies like Kajaria and Somany are better placed in terms of profit margins but with trailing PE above 35, valuations seems to be on higher side. We believe company like Asian Granito is reasonably valued at trailing PE of 15 and will be the direct beneficiary in case of increase in profit margins. With market cap to sales ratio at 0.3, increase in profitability can re-rate the stock in terms of valuations going forward
v) The advent of low-cost affordable housing, emphasis on providing total sanitation for every household by 2019 and the planned introduction of metro rail networks in Lucknow, Nagpur and Ahmedabad are expected to spur tile offtake. Moreover and the allocation of Rs. 7,060 crore towards the development of 100 ‘smart cities’ and the intended establishment of seven ‘industrial cities’ as per Union Budget 2014-15 indicates strong demand for construction material including tiles. Being one of the largest manufacturers of tiles in India, AGL will be the direct beneficiary
vi) As per our estimates, Asian Granito Ltd (AGL) can deliver bottom line of 227 million for full financial year 2015 – 16, annualized EPS of Rs. 10.05 with forward P/E ratio of 9.8X for FY 2015-16, which makes stock an attractive bet at current market price for long term investors
vii) On equity of Rs. 225.83 million, the estimated annualized EPS for FY 15-16 works out to Rs. 10.05 and the Book Value per share is Rs. 125.62. At current market price of Rs. 98.35, stock price to book value is 0.78
Considering good future prospects and reasonable valuations of the company compared to peers, Saral Gyan team recommends “Buy” on Asian Granito India Ltd at price of Rs. 98.35 for target of Rs. 200 over a period of 12 to 24 months
- 60% at current market price of 98.35
- 40% at price range of 80-88 (in case of correction in stock price in near term)
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