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After 1,100% jump in 5 years, this stock is projected to rise 20% more

NEW DELHI: Asian Granito India, the fourth largest tile make..

NEW DELHI: Asian Granito India, the fourth largest tile maker in India, has been on a roll, having surged 140 per cent in last one year and over 1,100 per cent in five.

Brokerages such as Edelweiss Securities call it a 'multi-storied' compelling growth story. Asian Granito makes ceramic digital, polished/glazed vitrified tiles and marble.

The market size of the tile industry is Rs 24,000 crore at present and is projected to grow to Rs 1.5 lakh crore by FY22.

Analysts say the industry, and within that Asian Granito, is likely to ride this huge growth. A drop in GST rates to 18 per cent and a switch towards organised the tile market are all positives for the firm, they said.

Tiles account for about 5 per cent of a building cost. The unorganised sector accounts for about 50 per cent of the market share. Kajaria, Somany Ceramics and Asian Granito are among a few big brands in the industry.

On the valuation front, Asian Granito India trades at 19 times FY19 expected earnings, compared with Kajaria Ceramics' 27 times and Somany Ceramics' 24 times.

In a survey conducted by on brokerages' market outlook for 2018, Religare Securities listed Asian Granito India as one of its top three conviction ideas for FY18.

An outlook for robust growth of the tiles industry, led by lower per capita consumption and an expected pickup in the real estate sector, augurs well for Asian Granito, said Jayant Manglik, President, Religare Securities.

Manglik said better product mix, focus on B2C sales and higher capacity utilisation would result in improved profit growth for the company.

The company's revenue and PAT are likely to expand at 16 per cent and 32 per cent, CAGR, respectively over FY17-20E, he said. Religare Securities has a target of Rs 642 for the stock, which would mean a 22 per cent upside potential.

Edelweiss Securities expects the company's operating margin to jump 250 basis points over FY17-19E on increased contribution of VAPs, higher B2C sales, lower gas prices, sharpening focus on branding and expansion of dealers' network.

Demand is a function of revival in construction activity. However, lower prices for branded goods and reduced price differential with unorganised players across categories is a significant positive.

Edelweiss Securities believes a boost in the company's profitability in the coming years may lead to a re-rating of valuation multiples.

"GST implementation is expected to help market share gains for the organised players as many firms based out of Morbi may convert into organised players, as it will be difficult to bypass GST or shift focus to export markets to replace anti-dumping duty-hit China, thus helping organised players like AGL gain domestic market share, or outsource facilities to organised players," Edelweiss Securities said.

Mayuresh Joshi of Angel Broking said what the management envisages in terms of retail contribution to the overall top line, specifically on the high margin vitrified tile business, is fuelling the stock.

"The recent acquisition is going to be margin-accretive. The margin improvement along with vitrified tiles, where realisations are better, should prop up earnings outlook. We remain extremely positive on the stock over the next 12 to 15 months," Joshi said.

Original Article


ET Markets


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