Saturday, June 14, 2014
‘Own House ‘ is the dream and desire of everyone. Still ,millions are homeless in our country ,this along with shift from joint family concept to nuclear family concept creating never ending demand for construction sector related themes.Commercial construction is another area creating demand for building products.Due to relatively higher interest rate and policy related matters growth of housing and commercial construction sectors in past few years were muted . New government already announced its priority to provide house for all and assures positive initiatives in this direction.This does not means government will directly build house for every individual but create a situation which will reduce the burden to build a house like reduction in home loan rates..etc.Let us hope for some bold steps in this direction going forward. Along with this, many commercial construction projects are delayed due to environmental Clarence and other red tape related issues .Any sincere efforts to tackle this issues will revive the building material producer's business prospects. Stock price of many such companies like Cera Sanitary ware ,Kajaria Ceramics,HSIL,Astral Poly techniques,Somani Ceramics ..etc out performed the market in recent times.This week let us look into one such company which is trading at relatively cheap valuation – Asian Granito Ltd
Tile is the most preferred flooring material mainly due to convenience for installation and maintenance ,cost competitiveness,durability and versatility .Currently ,India is the third largest producer of tiles in the world . Vitrified and porcelain tiles are relatively new addition and the entire tile industry is growing at 15 % per year even during this tough time.In our country more than half of tile production is still with un organised sector and organised players are handling the rest . Share price of largest listed peers ( Company’s with a turnover of more than Rs.1000 Cr /year) appreciated substantially in recent times and currently they are trading at an average P/E of 30 . Kajaria and Somani are the two companies in this category . In the growing mid size companies ( turnover between Rs.500-1000 Cr) segment Asian Granito is an unnoticed player which is trading at relatively cheap valuation.This stock is still trading at less than 10 P/E .It is a fact that market leaders always command premium over others but there is no justification for such a steep difference in valuation.
Click on the image for a better view
As per a recent channel check Asian Granito is the second most aggressive tile company next to Kajaria in marketing efforts in recent times. Company is now planning rapid expansion on a pan India basis .AGL increased its manufacturing capacity 40-fold in 14 years, from 2500 square metres per day in the year 2000 to 1,00,000 + sq. mtrs per day .AGL recently opened its 52nd exclusive show room . It is planning to set up 100 more exclusive show rooms across India in next one year. In addition to this exclusive show rooms ,company selling its products through 4000 + dealers across the country .AGL exporting its products to over 40 couturiers and AGL is the first Indian company started exclusive show room out side India .Company started 7,000 square feet exclusive show room in Johannesburg, South Africa. AGL reported an increase of more than 50% in export in latest financial year which reached Rs .23 cr compared with Rs.14 Cr in previous yesr. In recent times AGL is very aggressive in product innovation front too.It introduced different variants of Micro Crystal Tiles, Hi-Tech Tuff Guard, 3rd fire Décor tiles, Porcellanto digital tiles, Digital Glazed Vitrified ..etc. AGL management claiming its latest ‘Carrara White’ double charge tiles is the world’s whitest tile in the unglazed larger format category.All these efforts are started to yield results.AGL is the company which reported maximum growth in top line and bottom line even compared with large players from this sector in last quarter .Company reported a Sales of Rs.252 Cr v/s Rs.207 Cr and a net profit of Rs.5.90 cr v/s Rs 3.63 Cr in March quarter . In FY 2013-14 full year company reported a top line of Rs.771 Cr ,net profit of Rs.14.3 Cr and an EPS of Rs.6.40 . It targeting a top line of Rs.1500 Cr in next four years.
Recently Company acquired 100 % stake in a group company named AGL industries which is in the export of fresh culinary herbs , exotic vegetables and fruits. This is a high potential business and 3 management having enough bandwidth to develop it.After reaching a critical scale there is chances for value unlocking of this division but which is purely management's decision.( Link to the website of new division HERE )
I believe , from the current position of India’s 5th largest producer of tiles ,Asian Granito will advance few notch ahead in the times to come and become a dark horse from this sector .Company came out with an IPO in 2007 @ Rs.97 and its current book value is over Rs.120 .Stock is currently trading around Rs.49 .Recommending a STRONG BUY at current market price of for long term investors.Stock traded in NSE under symbol 'ASIANTILES' and in BSE with scrip code 532888.
# Earlier recommended Orient Bell Ceramics from this same sector . Comparing the growth initiatives taking by both companies in recent past now requesting to shift from Orient Bell to Asian Granito .
Disc: It is safe to assume that I have vested interest in AGL
Posted by VALUEPICK at 8:09 AM