Carysil - Lowest Cost Global Contract Manufacturer !!!

Carysil's low cost offerings along with marquee clientele puts it in an enviable position. Can it capitalize or will the weight of global acquisitions will slow it down? We analyze

Carysil is amongst the lowest cost global producer of kitchen sinks and appliances and caters to amongst large global clientele like Grohe, IKEA and Karran. The unique positioning makes Carysil amongst one of the few small company companies with global clientele and key expertise in manufacturing.

Carysil Limited (CL) (formerly known as Acrysil Limited) was incorporated on January 19, 1987, by the first-generation promoter Mr. Ashwin Parekh and is involved in the manufacturing of granite-based kitchen sinks, which are referred to as composite quartz sinks’. The company has diversified into various products such as granite and stainless steel kitchen sinks, kitchen countertop fabrication and bath segment. The company also trades in kitchen appliances.

The product portfolio also includes bath segment products such as wash basins, quartz tiles and bath fittings, sold under the brand name, Sternhagen. All the products are sold in the domestic market under the brand name, Carysil.

The company’s registered office is situated in Mumbai. The manufacturing plant of the company is located at Bhavnagar, Gujarat, and is ISO: 9000:2001 certified.

The company deals in 4 product lines and majorly derives it’s revenues from exports:

1. Quartz Sinks

2. Stainless Steel Manufacturing

3. Kitchen Appliances and Faucets

4. Surfaces

   

Quartz Sink (47.3% of revenue in 9MFY25)

The process of manufacturing quartz sink begins with combining MMPA and PPMA to create acrylic resin, which is then mixed with quartz to form a slurry. This slurry is poured into moulds, with a curing time of 45-50 minutes. The facility operates with over 150 moulds.

Waste generated during production is not reused, with raw material wastage at ~8%.

Major clients include:

1. Karran is the largest customer

2. Grohe

3. IKEA

• Daily production is 2,300-2,400 sinks, with each machine producing 34–36 sinks.

• Export order fulfilment takes 50–60 days, while domestic orders are completed within a month.

Unit economics -

Carysil enjoys cost competitive advantage of 30-35% over competitors due to low labour cost, power & fuel cost, this makes Carysil amongst the lowest cost producer of Quartz Sinks.

Gross margins for quartz sinks are 47–48%, with EBITDA margins exceeding 20%.

Ex-factory Realisation per unit has increased from Rs 4,500 five years ago to Rs 5,600–5,700 (ex-factory), as a result of better manufactured products.

The company has won a significant order from the US has been received by the company which should elevate the utilization levels.

Raw material cost:

Stainless Steel Sink - (9MFY25 Sales: 10.5%)

The segment is divided into press steel sinks (~60%) and premium Quadro sinks (~40%)

Press steel sinks are more commoditised, offering lower margins and realisations.
Quadro sinks are ~15% more expensive and cater to the premium market.

The production process for press sinks is automated, while Quadro sinks involve more manual work.

EBITDA margins:
Press sinks: 15%, with potential to rise to 17–18%.
Quadro Sink: 18-20%

Kitchen Appliances and faucets (9MFY25 Sales: 12.7%)
Faucets:

Faucets offer the highest margins among all products and are priced significantly higher than sinks.

Manufacturing is almost entirely in-house, with only 10% of components outsourced.
Indian players face challenges in entering export markets due to quality perceptions.

The company expects to onboard 2-3 major export customers in the near future.

Economics:
Gross margins for sourced appliances are 40%; in-house production provides an additional 5-6% margins.
Current EBITDA margins for appliances stand at 16-17%.
The company is exploring OEM opportunities in the kitchen appliances segment.

Volumes across the above 3 segments as on 9mFY25: (in tonnes )

• The company has a current capacity of 1 million tonnes with 9M FY25 utilization at 65%.

Surfaces business (9MFY25 Sales: 29.5%)
Carysil entered this product category by acquiring Tickford Orange (TOL), UK, for Rs 110 crores (1x sales).

TOL is the holding company of Sylmar Technology (STL) (STL), a manufacturer, distributor and customiser of high quality solid surface products.

Carysil’s wholly-owned subsidiary, Acrysil USA Inc., acquired 100% membership interest in United Granite LLC (UGL) FY24 renowned for its expertise in crafting exquisite countertops and surfaces from natural and engineered stone. The entire surfaces business is housed within these two subsidiaries.

The company is also looking at bringing fabrication segment to India, but it will take time to develop this market in India.

Subsidary Structure:

CL has also ventured into manufacturing stainless-steel kitchen sinks to primarily cater for the domestic market through its subsidiary Carysil Steel Limited, wherein Carysil Limited holds a 84.99% stake.

Carysil’s wholly owned subsidiary in April 2022 ‘Carysil UK ltd.’ acquired 70% of the equity share of The Tap Factory ltd (TTFL) based in Yorkshire, UK. The acquired company’s business is to design and source kitchen and bathroom products, especially modern hot water boiling taps.

Key Geographies:

Exports (80% of sales in FY24)

The return of Donald Trump has lead to shifts in trade policies, which may benefit India in global trade dynamics with heavy tariff levied on China.

The UAE market performed well, with quarterly sales reaching Rs 6 crores (90% from appliances). The company aims to build Rs 50 crores sales from UAE in near future.

Subsidary Performances:
In the UK subsidiary, significant synergies have already been realised. For Carysil Products, margins are optimal.

• Carysil Products is operating at gross margins of 33-34% and EBITDA margin of 17-18%.

• Carysil Surfaces, gross margins are 30%, with EBITDA margin at 15-16%.

• Carysil Brassware is currently operating at gross margins of 40%, but EBITDA margin is lower at 13-14% due to low volumes
  

• US subsidiary – Initially, acquired at US$ 12 mn annual revenue, it has declined to US$ 7-8 mn revenue and is incurring losses because of reduced volume.Utilisation currently is at 40-45%, expected to reach 60-65% in 1QFY26, and 70-75% by FY26.
  

• India (20% of sales in FY24)
  The company plans to expand in Tier 2 and Tier 3 cities and revamp its distribution strategy.
  BIS implementation and fabrication segment expansion are expected to drive growth. A B2B team is being developed to strengthen the Indian market presence.

Fund Raise:
The company raised Rs 125 crores through QIB (1.57 lakhs shares at Rs 794 per share in July 2024).

What can work for the company?
1.) Ramp up in utilization due to a big order inflow
2.) IKEA approving more large SKU’s
3.) Order size from Kohler getting bigger in Stainless Steel Sinks
4.) Softening of freight cost and raw material cost
5.) Gradual work on improving business in US subsidiary which should aid big time in increase in margins.

What works against the company?
1.) Slowdown in sales due to onset of recession in developed markets
2.) Tariff war getting stretched will create uncertainities
3.) High Dependency on top 5 clients

Conclusion -

Carysil has built robust client relationship globally along with manufacturing efficiencies which positions it as one of the key global contract manufacturers from India. With rise in wallet share from key clients the company seems to be in a decent position, however uncertainty on global subsidiaries and capital allocation risks for such a small company seems to be major challenges.

Whether Carysil becomes a major supplier to global kitchen and bathroom companies or struggles to integrate global subsidiaries which may halt growth, only time will tell.

Disclosure - We are not registered under SEBI. All information above is based on public sources and due diligence conducted by us. We may or may not have invested in stocks which we have written about.

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Panacea Biotech - A global vaccine powerhouse in making - https://substack.com/@cashcows/p-158207990