Building Products - Tiles Initiating coverage

Asian Granito India Ltd BUY

Getting its act together...

Institutional Research Focused on profitable growth

Asian Granito India Limited (AGIL) is the fourth largest tile company in India with total
CMP (Rs) 375
manufacturing capacity of 1 lakh SQM / day (33mn SQM) spread over eight plants (all in
Target (Rs) 470 Gujarat). Aided with commissioning of the new capacity and aggressive marketing
Upside 25% strategy, AGIL is geared up for profitable growth over the coming years. Strong Brand,
expansive reach and large operating scale are the three critical aspects to grow
building products business as demonstrated by the three leading tile / sanitary
Nifty: 9,198; Sensex: 29,707 ware brands in India. AGIL is pursuing the same path to scale up its business. AGIL has
set s target of doubling revenue toRs20bn and improving net profitability margin to 6%
Key Stock Data (3.6% now) over the next five years. Improved utilization, focus on value added products,
lower energy cost and measured capacity expansion in future may well bolster AGIL's
BSE Code 532888
financial performance. AGIL is a good long term bet.
NSE Code ASIANTILES
\Bloomberg Crystal Ceramics acquisition: A strategic move towards value added products
ASIAN IN
Shares O/smn (FV Rs10) 22.6 AGIL business took a significant leap forward in 2015 led by its acquisition of Crystal
Ceramics (70% stake). Post acquisition, AGIL expanded the capacity by 80% by adding
Dividend Yield (%) 0.13
12000 SQM / day high value double charged vitrified tiles plant. The State-of-art plant
Market cap (Rsbn) 11.4
got commissioned in August 2016 producing high value large size double charged tiles
52-week high/low 386/144 and helped improve margins to 12.4% in 9MFY17 from 9.1% in FY16. The plant has
3-m daily avg vol. 3,08,612 access to cheap gas from nearby ONGC wells. Currently utilized at 75%, the plant will
reach to 90% utilization in FY17 thereby further improving margins.
Rel. Performance Change in product mix to be margin accretive
(%) 1m 3m 12m AGL‟s revenue mix changed over the years with the share of high value tiles like double
ASIAN 31.5 60.1 156.9 charged and GVT increased to 21% and 19% in FY17 compared to 13% and 14%
NIFTY 3.1 12.1 21.4 respectively in FY15. Post capacity expansion at Crystal Ceramics, the ratio of own
SENSEX 2.9 11.7 20.1
manufacturing to outsourced revenue improved to 59/41 from 52/48 in FY16. The
management targets tiles revenue growth of 10/12% annually with improved product mix
as low value products will be outsourced while high value products will be manufactured
Shareholding Pattern in-house.
(%) Jun16 Sep16 Dec16 High margin Marbles and quartz business to see healthy growth
Promoter 37.5 28.2 28.2 AGIL has 2200 and 800 SQM / day capacity of composite (engineered) marble and quartz
FII - - 0.2 respectively. These two products contributed 9% and 7% to the total revenue in FY17.
DII 0.1 0.1 0.1 During FY2017, the company invested Rs200mn to add third line for quartz
Others 62.4 71.8 71.6 manufacturing primarily targeting export markets. The management is expecting
additional revenue of Rs600mn per annum from this line. Being high-end product with
handful of10/11 players, the business fetches high margin of 20/25%.
Strong earning CAGR of 42% over FY16-19, attractive investment bet
Kamlesh Kotak
kamlesh.kotak@amsec.in
The management shared vision of doubling revenue to Rs20bn with EBITDAM of 15/16%
+91 22 4343 5222 by 2021. We believe AGIL will log revenue and earnings CAGR of 11% and 42% over
FY16-19 respectively aided by higher margins and lower finance cost. We believe
EBITDAM to improve to 13.5% and 14.3% over FY18 and FY19 from 12.5% in FY17.
D/E, ROCE and ROE will improve to 0.6, 17% and 15% respectively in FY19. We forecast
EPS of Rs12.3/Rs17.1/Rs23.5 respectively for FY17/18/19.At CMP, the stock is trading 22
and 16x FY18/19 EEPS. Valuing at 20x FY19EEPS, we ascribe fair value of Rs470 to the
stock. AGIL is a good long term bet on the consumption sector.
Exhibit 1: Key Financials (Consolidated) Exhibit 2: Key Indicators
Y/E Mar FY15 FY16 FY17E FY18E FY19E Y/E Mar FY15 FY16 FY17E FY18E FY19E
Sales 8460 9939 10501 11694 13400 EBITDAM (%) 6.8 9.1 12.5 13.5 14.3
yoy (%) 9.1 17.5 5.7 11.4 14.6 NPM (%) 1.7 2.5 3.5 4.4 5.3
EBITDA 577 908 1315 1576 1920 PER (x) 21.4 34.2 30.5 21.9 16.0
yoy (%) -8.0 57.4 44.8 19.8 21.8 P/BV (x) 1.1 2.3 2.8 2.5 2.2
PAT 148 248 370 516 707 EV/Sales (x) 0.6 1.2 1.4 1.2 1.1
yoy (%) 22.4 67.4 49.5 39.3 37.0 EV/ EBITDA (x) 8.1 12.6 10.8 9.0 7.4
Equity 225.8 225.8 300.9 300.9 300.9 RoACE (%) 8.5 10.8 12.3 14.3 16.8
EPS (Reported) 6.6 11.0 12.3 17.1 23.5 RoANW (%) 5.2 7.6 9.7 12.3 14.9
Source: Company, AMSEC Research

Refer Disclosures & Disclaimer at the end of the report.Our reports are available on Bloomberg ASNM <GO>, ThomsonReuters, Factset and Capital IQ April 10, 2017
Asian Granito India Ltd- Initiating Coverage
Business at a glance
Exhibit 3: Capacity Built up Exhibit 4: Revenue mix across verticals

17%

83%

Tiles Marble & Quartz

Exhibit 5: Revenue and Volume breakup Exhibit 6: Product wise contribution across tiles
(%)

Revenue Volume
21% 21% 36% 19%

41% 42%

21%
38% 37%

24%
9MFY17

9MFY17

GVT Double charged PVT Ceramics

Own Manu Outsourcing Associate

Exhibit 7: Channel mix Exhibit 8: Geographical revenue split

11%
34%
35%
21%

65%
34%

West South North East

Retail Institutional

Exhibit 9: Tiles Volume and Realisation Trend Exhibit 10: Tiles Revenue and YOY change
(mn sqm) (Rs / sqm) (Rs mn) 13.5 (%)
340 354 15.6
347 342 351 12.3
333 4.6 4.6 9.3
10,735
6,378

7,240

7,572

9,290
8,276
19.2

20.9

22.3

26.4

30.3
24.2

FY17E

FY18E

FY19E
FY14

FY15

FY16
FY17E

FY18E

FY19E
FY14

FY15

FY16

Volume (Mn SQM) Realisation Rs / SQM Revenue yoy change

Source: Company, AMSEC Research

April 10, 2017 2

Asian Granito India Ltd- Initiating Coverage
Strong player in tile industry

Set up in 2002, AGIL is the fourth largest tile manufacturing company in India with a
capacity of 33mn SQM (17mn SQM own, 11mn through subsidiaries and 5mn SQM
outsourced from Morbi) spread across eight plants. With strong infrastructure, fast
expanding dealer / distribution network, change in product mix, AGIL aspires to double
its revenue over next five years to Rs20bn with significant improvement in margins. The
Company already has firmed up plans to add 10mn SQM capacity over FY18/19
including setting up of one more plant in Andhra Pradesh.

Crystal Ceramics acquisition: A strategic move towards value added products

Profitability levers: higher
utilization,lower gas cost,
better product mix to
improve margins
AGIL business took a significant leap forward in 2015 led by its acquisition of Crystal
Ceramics (70% stake) for Rs900mn. Crystal Ceramics was started in 2005 and has a
15000 SQM plant for PVT/GVT and soluble salt tiles at Mehsana, Gujarat. The plant has
access to cheap gas from nearby ONGC wells at 70% cheaper rate compared to normal
price.

Post acquisition, AGIL invested Rs 900mn to set up a new plant for manufacturing large
size, high value double charged vitrified tiles with a capacity of 12,000 SQM/ day
taking the total capacity to 27,000 SQM/ day. The State-of-art plant with latest
technology got commissioned in August 2016 and produced larger sized 1000x1000
and 800x800 double charged tiles using latest technology of larger width kiln and
digital printing machines which not only are cheaper but also fetch higher realization.
This helped improve margins to 12.4% in 9MFY17 from 9.1% in FY16. Currently utilized
at 75%, the plant will reach to 90% utilization in FY17 thereby will lead to further
improvement in margins.

Crystal Ceramic contribution to overall tile revenue will increase to 27% from 9% in
FY16. The Company has plans to further expand the capacity by 15,000 SQM/ day in
FY19, through a small capex of Rs350/400mn.

Exhibit 11: Gas availability

Company Capacity Gas Source
AGL Own plants 52,000 SQM / day Sabarmati Gas at market price
Artistique Ceramics 10,000 SQM / day RAS gas @ 50% lower than market price
Amazon (Subsidiary) 6,000 SQM / day Sabarmati Gas at market price
ONGC gas @ 70% lower than market
Crystal Ceramics (Subsidiary) 27,000 SQM / day
price

Aided by lower cost of gas, AGIL‟s power and fuel cost as a percentage of sales came
down to 13.6% during 9MFY17 from 17.7% in FY12.

Exhibit 12: Power and fuel cost as % of sales

(Rs mn) (%)

17.4
17.7
15.0
15.5
13.6
12.9
1,106

1,233

1,163

1,279
1,312

982

FY12 FY13 FY14 FY15 FY16 9MFY17

Power and fuel % of sales

Source: Company, AMSEC Research

April 10, 2017 3

Asian Granito India Ltd- Initiating Coverage
Change in product mix to be margin accretive
AGL‟s revenue mix changed over the years with the share of high value tiles like Double
charged and GVT increased to 21% and 19% in FY17 compared to 13% and 14%
respectively in FY15. Post capacity expansion, the ratio of own manufacturing to
outsourced revenue improved to 59/41 from 52/48 in FY16. The Company's own plants
having capacity of 52,000 SQM / day are under-utilized at 70% now which the
management targets to increase to 90 /95 % over next two years.
The management targets tiles revenue to increase by 10/12% annually with improved
product mix as low value products will be outsourced while high value products will be
manufactured in-house.
High margin Marbles and quartz business to see healthy growth
AGIL has 2200 and 800 SQM / day capacity of composite (engineered) marble and
quartz respectively. These two products contributed Rs900mn and Rs660mn (9% and 7%
to the total revenue) in FY17. The total market size for marble and quartz including
exports is estimated to be Rs6bn. AGIL commands 40% market share in the domestic
market. Being high-end product with handful of 10/11 players, the business fetches
high margin of 20/25%. During FY2017, AGIL invested Rs200mn to add third line for
quartz manufacturing primarily targeting export markets. This will be commissioned in
April 2017. The management is expecting additional revenue of Rs600mn per annum
from this line.
Exhibit 13: Marble & Quartz revenue trend
(Rs mn) (%)

17 17
15

12
12
11
1,113

1,566

1,226
689

840

981

FY12 FY13 FY14 FY15 FY16 9MFY17

Marble & Quartz revenue % of sales

Source: Company, AMSEC Research

Exports a growth market

AGIL's exports revenue grew at healthy CAGR of 34% over FY12/16 though still
constituted 5% of the revenue. It has presence in 50 plus countries. Export markets have
been good as the WC cycle is much lower at 30 days compared to 90/120 days in
domestic market. With higher contribution from quartz exports and steady growth in
tiles exports, the Company targets to scale up exports to 8/10% of the total revenue.
Exhibit 14: Exports contribution on the rise

(Rs mn) (%)

6.5

5.0

3.5 3.7
3.1

2.5
153

245

240

494

469
311

FY12 FY13 FY14 FY15 FY16 9MFY17

Exports % of sales

Source: Company, AMSEC Research

April 10, 2017 4

Asian Granito India Ltd- Initiating Coverage
Capex of Rs1.4bn over FY17-
19 to drive 50% growth in
revenue
Shifting to retail model with
aggressive expansion of
dealer network and show
rooms
April 10, 2017
Major capex done, building on future pipeline in a measured way
Over FY15/16, the Company invested Rs1.4bn in expanding capacities / upgrading
technology, mainly through debt financing resulting in to its debt doubling to Rs3.2bn
as on March 2017 (D/E 0.8). Besides, it also invested Rs750mn in acquiring stake in
Amazon Ceramics and Crystal Ceramics which was funded through issuance of equity
(Valued at Rs900mn). The Capex for Crystal Ceramics got commissioned in August,
2016 while the same for quartz will start contributing from 1QFY18 onwards.
Going forward, the Company has embarked upon capex of Rs750mn for setting up a
15,000 SQM/day greenfield plant in Andhra Pradesh (51/49 JV) to be commissioned in
June 2018. The plant will enjoy various tax benefits besides will save on logistic cost as
the location is in close proximity to both raw material source as well as Southern tiles
market. The next phase of Crystal Ceramics expansion (Rs350/400mn) adding 15,000
SQM /day capacity will come up in FY19. With improved profitability, the overall capex
of Rs1.4bn over FY18/19 will be funded through internal accrual and minimal debt.
Strong management team
AGIL has excellent management bandwidth supported by a team of well experienced
promoters and professionals. Mr Kamlesh Patel, Chairman and MD is driving strategy
and marketing aspect while his brother Mukesh Patel looks after production, technology
and product development. With the promoters vast experience of over two decades and
hands on approach fully focused on growing the business, AGIL has made rapid strides
in tile business to emerge as fourth largest tile Company in India.
Leading manufacturing edge
AGL has 16 manufacturing lines, 14 digital printing machines spread across eight
manufacturing plants. With strong technological edge, the Company has been pioneer
in many new products launch in India like double charged tiles, jumbo tiles
(1000x1000SQM), Ultra slim GVT tiles, and introduction of widest five tiles Kiln etc.
Aggressive marketing strategy aimed to grow retail business
AGIL has been aggressive in expanding its distribution network. During FY14/17, it has
expanded the dealer network from 500 to 970 with retail touch points increasing from
2,800 to 5300. During the period, it also expanded exclusive franchisee run showrooms
/ display centre from 70 to 120 and targets to increase to 300 over next three
years. The Company expanded in to government business which constitutes 15% of the
overall tile revenue while rest 50% of the project business is through private projects
like housing, hospitality, commercial real estate etc. The proportion of project / retail
business improved to 65/35 from 75/25 three years ago which the management targets
to be 50/50 by FY19/20.
Exhibit 15: Fast expanding dealers &sub-dealers network
Source: Company, AMSEC Research
5
Asian Granito India Ltd- Initiating Coverage
Tile industry looking up led
by pick up in domestic
demand, promising export
markets. GST will pave the
way for higher growth of
organized / branded
players
April 10, 2017
Indian tiles Industry: In a sweet spot
Tiles are integral to home and interiors improvement and have emerged as an
aesthetically superior flooring and cladding solution, rather than just being hygiene
products. As per industry sources, Indian tiles industry is estimated to be Rs 280bn
(including exports) with equal contribution between organized and unorganized
players. In volume terms, it is pegged at 850mnSQM. India is the third largest
consumer of tiles in the world, accounting for ~6.25% of the global ceramic tile
consumption and is one of the fastest growing ceramic tiles market in the world. With
over 600 unorganized players and ~20 organized players, domestic tile industry has
grown at CAGR of 10% in last five years. However in FY16, the growth has been in
single digit. A majority of the Indian tile manufacturer‟s hail from Morbi (Gujarat) and
account for ~60% of the total production Morbi is possibly the second largest tile
cluster in the world. However, majority of them are unorganized players and lack
marketing expertise. They do not possess the resources required for sales, marketing
and to create large brands. As a result, these small units prefer to associate with
leading national tile brands as their manufacturing / outsourcing partner.
Since 2014, India made rapid stride in the exports market and leapfrogged to number
two players in 2016 after China, dislodging Brazil. The exports over the last three
years has grown at 20% CAGR to ~120MSM in 2016 valued at Rs40bn. Globally, tile
industry size is estimated to be 12,100 MSM providing ample growth opportunity for
Indian players.
Till 2013, there were anti-dumping duties on Chinese vitrified tiles. Post the removal
of duties, Chinese companies dumped tiles in India which exerted pressure on
domestic tile manufacturers on account of lower freights from China to South India.
Govt imposed anti-dumping duty of $1.37/sq m on all vitrified tiles from March 2016
which got expired on 30th Sept 2016 and a fresh petition has been filed.
Manufacturers are expecting a bit higher duties this time ($2-2.5/sq m).
Nevertheless, the domestic tile manufacturers have evolved and have become
competitive to its overseas peers. Factors like adopting latest technology, launch of
new designs with limited lead time, making larger sized tiles have helped domestic
players not only to mitigate import threat to an extent but also emerge as formidable
players in the export markets.
Demonetization put sudden brakes in volume growth for tiles companies. Half of the
manufacturers in Morbi belt were shut and some are still facing the heat. However,
after three months of disruption, most players are back in business. Sensing good
opportunity in the domestic and export markets, ~50 new plants are coming up in
Morbi over next 12/18 months.
Growth drivers for the industry
 Growing aspirational consumption for quality / branded products
 Growth of infrastructure, real estate, hospitality, railways, metro rail etc.
 Government initiatives in terms of
o Smart Cities mission
o Swachh Bharat Abhiyaan / Sanitation for all
o Housing for all 2020
o Atal Mission for Rejuvenation and Urban Transformation (AMRUT)
o Enactment of Real Estate Regulation Act (RERA) aiming at protecting
property buyer‟s interest and curbing unfair trade practices by real estate
developers will propel demand from genuine buyers over the long term.
 The implementation of Goods and Service Tax (GST) will bring down effective tax
rate to18% from current 18-27% across different states. This will not only bring
the unorganised players within the tax net but also narrow down price differential
between unbranded and branded products enabling demand shift from
unorganized products to leading organized players.
6
Asian Granito India Ltd- Initiating Coverage
Financial performance :Chequered past, promising future

AGIL's profitability dwindled sharply over FY10-15 due to variety of factors. Late
transition from traditional soluble salt tiles to high value PVT/GVT tiles, higher
proportion of low margin / WC intensive project business and high level of debt mired
the performance over FY10-15 with EBITDAM falling to 6.8% in FY15 from 23.5% in
FY08. However, financial performance started to improve 2015 onwards. During
9MFY17, EBITDAM improved to 12.5%.It is noteworthy that the Company generated
positive cash flow throughout FY07-16 and could improve WC significantly from 252
days to 70 days over the decade. In FY17, with interim dividend of 5%, it returned to
dividend list after a gap of three years.

Exhibit 16: Asian Granito India Ltd-Consolidated Financial Snapshot

Key Financials Snapshot CAGR CAGR
FY06 FY07* FY08* FY09 FY10 FY11 FY12 FY13* FY14* FY15* FY16*
06-16 12-16
Sales 1,008 1,791 2,275 3,329 4,064 4,804 6,238 7,084 7,752 8,460 9,939 25.7% 12.4%
EBIDTA 235 400 535 558 472 581 667 698 627 577 908 14.5% 8.0%
PAT 151 211 265 268 190 201 181 171 121 148 248 5.1% 8.2%
Cash Flow from Operations -25 99 209 35 387 249 23 192 616 1,042 207 23.3% 72.3%
Cash Flow from Investing -197 -110 -121 -382 -473 -219 -203 -490 -285 -326 -2,212 27.4% 81.7%
Cash Flow from Financing 228 33 -43 403 180 -76 262 335 -432 -761 2,031 24.4% 66.9%
Equity 141 141 211 211 211 211 211 222 226 226 226 4.9% 1.8%
Total Net Worth 446 719 1,670 1,898 2,063 2,240 2,396 2,646 2,754 2,898 3,632 23.3% 11.0%
Gross Debt 430 626 652 1,095 1,371 1,316 1,793 2,369 2,150 1,652 3,170 22.1% 15.3%
Gross Block 332 707 1,234 1,905 2,345 2,556 2,727 2,825 3,082 3,375 6,027 33.6% 21.9%
Long Term Investments 41 1 1 - - - 30 180 127 105 131 12.3% 44.5%
Cash & Current Investments 16 42 86 123 217 171 254 291 192 147 173 26.5% -9.1%
Key Ratios
EPS 10.7 16.4 14.1 12.7 9 9.5 8.6 7.7 5.4 6.6 11
ROE% 43 39.6 24.8 15.4 9.6 9.3 7.8 6.8 4.5 5.2 7.6
ROCE% 29 30.1 25 17.7 10.6 10.9 11.8 10.6 8.4 8.5 10.8
Debt Equity 0.9 0.8 0.3 0.5 0.6 0.5 0.6 0.8 0.7 0.5 0.8
Gross Asset Turn (x) 3.1 3.4 2.3 2.3 1.9 2 2.4 2.6 2.6 2.6 2.1
WC Days 252 180 190 154 133 138 143 149 131 56 70
Dividend Payout % - - 8.3 - 12.9 12.2 13.6 - - - -
Cost Matrix
RM/Sales% 31.5 25.9 23 30.5 38.4 43.8 51.5 54.5 59.9 60.6 61.7
Employee cost/Sales% 3.5 3.5 4 5 4.9 5.2 4.9 5.1 5 5.2 5.9
Power & Fuel/Sales% - 23.5 23.9 22.9 17.5 17.6 17.7 17.4 15 15.5 12.9
Gross Margin% 30.1 35.7 37.1 38.7 33 24.6 20.5 20 16.4 14.6 17
EBIDTAM% 23.3 22.3 23.5 16.8 11.6 12.1 10.7 9.9 8.1 6.8 9.1
PATM% 14.9 12.8 12.9 8 4.6 4.2 2.9 2.4 1.6 1.7 2.5
Selling & Admin / Net Sales% 3.1 8.7 7.5 16.6 16.4 8.2 5.9 5.6 4.1 4 3.9
Source: Company, AMSEC Research, * indicates consolidated numbers

Aiming to double revenue by 2021

Going forward, the management shared vision of doubling revenue to Rs20bn with
EBITDAM of 15/16% by 2021 and PATM of 5.5/6%. Improved product mix, outsourcing
of low-end products and scale up of manufacturing capacity for value added products,
focus on growing retail and export business will work well for AGL.

We forecast tiles volume growth at 11% CAGR and marble and quartz business to grow
Strong margin expansion at 9% CAGR over FY16-19 respectively. We believe AGIL will log revenue and earnings
led by operating leverage,
CAGR of 11% and 42% over FY16-19 respectively aided by higher margins and lower
better product mix to drive
finance cost. We believe EBITDAM to improve to 13.5% and 14.3% over FY18 and FY19
earning CAGR at 42% over
FY16-19, the highest from 12.5% in FY17. D/E, ROCE and ROE will improve to 0.6, 17% and 15%
amongst the peers respectively in FY19. We forecast EPS of Rs12.3/Rs17.1/Rs23.5 respectively for
FY17/18/19.

April 10, 2017 7

Asian Granito India Ltd- Initiating Coverage
Business at a glance
Exhibit 17: Net sales Exhibit 18: EBITDA & EBITDAM
(Rs mn) (Rs mn) (%)
23.5
22.3
16.8

14.3
13.5
12.5
11.6 12.1
10.7
9.9 9.1
8.1
6.8

10,501

11,694

13,400
1,791

2,275

3,329

4,064

4,804

6,238

7,084

7,752

8,460

9,939

1,315

1,576

1,920
400

535

558

581

667

698

627

577

908
472
FY17E

FY18E

FY19E
FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E
FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16
Net sales EBIDTA EBIDTAM

Exhibit 19: PAT & PATM Exhibit 20: Return ratios (RoE&RoCE)
(Rs mn) (%) (%)
12.8 12.9
39.6

8.0 30.1
25.0

5.3 17.1 16.8

4.6 4.2 4.4 24.8 14.3
2.9
3.5 10.6 10.9 11.8 10.6 10.8 12.3
2.4 2.5 8.4 8.5
1.6 1.7 15.0 14.9
231

296

268

201

181

171

121

148

248

370

516

707

12.3
190

9.6 9.3 9.7

7.8 6.8 7.6
4.5 5.2
FY17E

FY18E

FY19E
FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E
PAT PATM ROCE ROE

Exhibit 21: Net D:E Exhibit 22: Gross Asset Turnover

(x)
(x)
3.4

0.8 0.8 0.8 2.6 2.6

0.7 2.6
0.7 2.3 2.4
0.6 2.1 2.1
0.6 0.5 0.6 1.9 2.0 1.9
0.5 0.5 0.7 1.8
1.7
0.3
FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E
Net D:E Gross Asset Turn

Exhibit 23: Working capital days Exhibit 24: Cash flow from activities
(Days) (Rs mn)
850
200 700
175 550
143 149 400
118 113 105
107 98 111 98 93 250
93 93 93
98 78 98 100
73 87 82 90 90 90 90
(50)
67
(200)
88 90 (350)
77 71 76 71 72 70 68
65 67 (500)
56 58
FY17E

FY18E

FY19E
FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16
FY17E

FY18E

FY19E
FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

Cashflow from Operations Cashflow from Investing

Inventory days Debtor days Creditor Days Cashflow from Financing

Source: Company, AMSEC Research

April 10, 2017 8

Asian Granito India Ltd- Initiating Coverage
Valuations

At CMP, the stock is trading 22 and 16x FY18/19 EEPS. Valuing at 20x FY19EEPS of
Rs23.5,, we ascribe fair value of Rs470 to the stock. AGIL is a good long term bet on the
consumption sector.

Exhibit 25: Business Quality Quadrant

Source: Company, AMSEC Research

Exhibit 26: Peer valuation table

Company Name Sales (Rsmn) EBIDTAM (%) PAT (Rsmn) RoE (%)

FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E

Asian Granito 10,501 11,694 13,400 12.5 13.5 14.3 370 516 707 9.7 12.3 14.9
Kajaria Ceramics 25,392 28,222 32,785 19.8 20.0 20.2 2,515 2,900 3,503 25.4 24.2 24.3
Somany Ceramics 18,007 20,006 23,155 8.9 9.0 9.4 877 1,007 1,231 19.2 18.8 19.6
Cera Sanitaryware 10,044 11,386 13,105 16.7 16.9 17.2 1,038 1,198 1,406 22.4 21.5 21.2

Company Name CMP PAT (CAGR 17-19E) EPS PER (x)

FY17E FY18E FY19E FY17E FY18E FY19E
Asian Granito 375 38% 12.3 17.1 23.5 30.6 22.0 16.1
Kajaria Ceramics 615 18% 15.8 18.2 22.0 38.9 33.7 27.9
Somany Ceramics 681 18% 20.7 23.8 29.0 32.9 28.7 23.5
Cera Sanitaryware 2,874 16% 79.8 92.1 108.1 36.0 31.2 26.6
Source: Company, AMSEC Research

April 10, 2017 9

Asian Granito India Ltd- Initiating Coverage

About the company

Asian Granito Ltd was established by two brothers Kamlesh Patel and Mukesh Patel in
2002. The Company‟s product range includes Ceramic floor, Digital Wall, Vitrified,
Parking, Porcelain, Glazed vitrified, Outdoor Tiles, Composite Marble and Quartz etc.

AGIL is the fourth largest tile manufacturing company in India with a capacity of 33mn
SQM (17mn SQM own, 11mn through subsidiaries and 5mn SQM outsourced from
Morbi) spread across eight plants. The Company already has plans to add 10mn SQM
capacity over FY18/19 including setting up of one more plant in Andhra Pradesh.

Plant Particular SQM / day

Idar Ceramics 8,000

Dalpur GVT & PVT 16,000
Dalpur Wall tiles 10,000
Dalpur Parking tile 5,000
Dholka Wall tiles 10,000
Amazon Ceramics (For ceiling) 6,000
Crystal Soluable salt 6,000
Crystal GVT 9,000
Crystal DC 12,000
Dalpur Marble 22,00
Dalpur Quartz 800
Total 85,000

Mr Kamlesh Patel, Chairman and MD looks after sales and marketing while Mr Mukesh
Patel, MD takes care of production and technology aspects. The next generation also
has joined the management. The group has no other business and is focused on
growing the tiles business. The management team across functions comprises
professionals working with the company for more than a decade. Total manpower is
6000 people across al plant.

Of the total revenues 83% comes from the core tiles division while rest 17% comes from
Quartz and Marbles. Of the tiles revenue PVT/GVT/Double charge vitrified tiles and
Ceramics contribute 24%/19%/21% and 36%. AGL has been continuously adding up
dealer network from 2,800 in FY14 to 5,300 as on December 2016 to enhance its
market presence. Channel mix stands at 35:65 from Retail:Institutional, which is
targeted to be at 50:50. It exports to as many as 50 countries. Exports contribution to
revenue is at 5%.

Over the last three years, the Company has been in transformation phase. Focus is to
create more visibility through branding and sales promotion, expanding product
portfolio, move towards value added products like double charged tiles, larger size tiles
etc. The company modernized and revamped manufacturing operations by upgrading
production of multi charged, digital and vitrified tiles while soluble salt and other low-
end products are outsourced from Morbi. The Company moved to become no 3 player
in Glazed Vitrified tiles after Kajaria and Somany.

April 10, 2017 10

Asian Granito India Ltd- Initiating Coverage
Exhibit 27: Business evolution

Board of Directors Mr. Kamleshbhai Patel, Chairman

Mr.Mukeshbhai Patel, Managing Director
MrAmrutbhai Patel , Non Executive Independent Director
MrsIndraNityanandam,Non Executive Independent Director
MrAjendrakumar Patel, Non Executive Independent Director
MrPremjibhaiChaudhari, Non Executive Independent Director
MrKanubhai Patel, Executive Independent Director
MrBhogibhai Patel, Non Executive Director
MrSureshbhai Patel, Non Executive Director

CFO Mr.Kalidasbhai Patel

Company Secretary Mrs. RenukaUpadhyay

Statutory Auditors AL Thakkar& Company, Chartered Accountant

Bankers HDFC, SBI, IDBI

Plant Locations Eight plants at four different locations in Gujarat: Idar, Dalpur, Dholka, Mehsana

April 10, 2017 11

Asian Granito India Ltd- Initiating Coverage
Exhibit 28: 3QFY17Quarterly financial performance (Standalone)
Rs Mn Q3FY16 Q4FY16 1QFY17 2QFY17 3QFY17 % yoy % qoq 9MFY16 9MFY17 % yoy
Net sales 2160.2 2257.5 1926.3 2422.9 2201.2 1.9 (9.1) 6445.3 6550.3 1.6
Other operating income 2.9 9.5 4.7 15.2 1.6 (45.1) (89.4) 12.2 21.5 75.6
Stock adjustment 24.9 102.5 -68.4 113.2 -129.9 (621.3) (214.7) -88.3 -85.1 -3.6
Purchase of finished goods 753.8 1037.2 844.5 991.0 1017.5 35.0 2.7 2569.1 2853.0 11.1
Consumption of raw materials 644.7 423.5 391.3 473.5 468.3 (27.4) (1.1) 1695.8 1333.1 -21.4
Employee cost 130.4 130.0 117.0 139.9 139.0 6.7 (0.6) 376.6 395.9 5.1
Other expenditure 193.5 183.1 236.4 301.5 293.7 51.8 (2.6) 628.7 831.6 32.3
Power and fuel 235.4 216.2 239.1 235.7 195.5 (17.0) (17.1) 777.0 670.3
Total expenditure 1982.7 2092.5 1759.9 2254.9 1984.1 0.1 (12.0) 5958.9 5998.9 0.7
EBITDA 180.4 174.5 171.1 183.1 218.7 21.3 19.5 498.6 573.0 14.9
add: Other income 2.6 -1.4 0.3 0.9 1.1 (57.8) 24.1 8.3 2.3 -72.8
Depreciation 57.5 47.0 52.9 54.1 57.6 0.2 6.5 162.1 164.6 1.6
Interest 59.7 46.0 52.7 51.8 62.6 4.9 20.8 171.9 167.1 -2.8
Profit before tax 65.8 80.1 65.8 78.1 99.6 51.4 27.6 172.9 243.5 40.8
Provision for taxation 20.2 23.6 17.3 16.2 34.9 72.7 114.7 47.9 68.4 42.8
Adjusted PAT 45.6 56.5 48.5 61.9 64.8 42.0 4.7 125.0 175.2 40.1
Extraordinary items 0.0 0.0 0.0 0.0 0.0 - - 0.0 0.0 -
Reported PAT 45.6 56.5 48.5 61.9 64.8 42.0 4.7 125.0 175.2 40.1
Equity Capital 225.8 225.8 300.9 300.9 300.9 228.5 300.9
EPS (Reported) 2.0 2.5 1.6 2.1 2.2 5.5 5.8
EBIDTA (%) 8.3 7.7 8.9 7.5 9.9 159bp 242bp 7.7 8.7 100bp
PAT (%) 2.1 2.5 2.5 2.5 2.9 83bp 40bp 1.9 2.7 73bp
Tax / PBT (%) 30.7 29.5 26.3 20.8 35.0 432bp 1419bp 27.7 28.1 39bp
Gross Margin (%) 34.1 30.8 39.4 34.9 38.4 430bp 353bp 35.2 37.4 219bp
Raw Material / Net Sales (%) 64.7 64.7 64.2 60.4 67.5 276bp 705bp 66.2 63.9 (226bp)
Other expenditure/Net Sales(%) 9.0 8.1 12.3 12.4 13.3 438bp 90bp 9.8 12.7 294bp

Exhibit 29: 3QFY17 Quarterly financial performance (Consolidated)

Rs Mn Q3FY16 Q4FY16 1QFY17 2QFY17 3QFY17 % yoy % qoq 9MFY16 9MFY17 % yoy
Net sales 2355.8 3098.7 2115.0 2641.5 2456.7 4.3 (7.0) 6825.6 7213.2 5.7
Other operating income 9.0 10.0 13.1 13.0 8.6 (3.5) (33.5) 25.1 34.7 38.6
Stock adjustment 9.8 38.4 -134.7 19.9 -159.1 (1,725.1) (900.3) -135.9 -273.9 101.5
Purchase of finished goods 675.3 1510.0 707.2 744.8 785.7 16.3 5.5 2361.7 2237.6 -5.3
Consumption of raw
762.0 500.5 536.2 722.7 605.9 (20.5) (16.2) 1914.5 1864.8 -2.6
materials
Employee cost 144.3 173.7 153.3 160.2 162.3 12.4 1.3 420.3 475.7 13.2
Other expenditure 215.7 267.6 269.9 395.2 400.6 85.7 1.4 727.7 1065.7 46.4
Power and fuel 290.0 334.7 347.9 299.0 334.8 15.4 12.0 934.9 981.7 5.0
Total expenditure 2097.1 2824.9 1879.8 2341.8 2130.0 1.6 (9.0) 6223.2 6351.6 2.1
EBITDA 267.7 283.8 248.3 312.7 335.3 25.3 7.2 627.5 896.3 42.9
add: Other income 0.9 5.3 2.0 0.9 3.7 313.5 293.6 8.7 6.6 -23.9
Depreciation 69.4 87.7 88.0 90.6 76.0 9.6 (16.1) 187.7 254.6 35.7
Interest 84.9 70.6 79.5 102.8 116.6 37.4 13.4 212.5 298.9 40.7
Profit before tax 114.3 130.8 82.8 120.3 146.4 28.0 21.7 236.0 349.5 48.1
Provision for taxation 41.1 44.8 23.9 22.3 44.3 7.6 98.8 70.5 90.4 28.2
Adjusted PAT 73.2 86.1 58.9 98.0 102.1 39.5 4.1 165.5 259.0 56.5
Extraordinary items 0.0 0.0 0.0 0.0 0.0 - - 0.0 0.0 -
Share of profit of Associate 3.4 7.2 8.5 1.0 (71.4) (88.6) 7.7 16.7 117.3
Minority Interest -6.5 -3.4 -10.3 -9.7 48.5 (6.0) -12.2 -23.4 91.3
Reported PAT 70.1 86.1 62.7 96.3 93.4 33.3 (3.0) 161.0 252.4 56.8
Equity Capital 225.8 225.8 300.9 300.9 300.9 225.8 300.9 -
EPS (Operational) 3.2 3.8 2.0 3.3 3.4 7.3 8.6
EPS (Reported) 3.1 3.8 2.1 3.2 3.1 7.1 8.4
EBIDTA (%) 11.3 9.1 11.7 11.8 13.6 228bp 182bp 9.2 12.4 321bp
PAT (%) 3.1 2.8 2.8 3.7 4.1 104bp 44bp 2.4 3.6 116bp
Tax / PBT (%) 36.0 34.2 28.9 18.5 30.2 (574bp) 1173bp 29.9 25.9 (401bp)
Gross Margin (%) 38.6 33.9 47.6 43.7 49.8 1126bp 614bp 39.3 46.9 758bp
Raw Material / Net Sales (%) 61.0 64.9 58.8 55.6 56.6 (437bp) 109bp 62.6 56.9 (578bp)
Other Exp./Net Sales (%) 9.2 8.6 12.8 15.0 16.3 715bp 134bp 10.7 14.8 411bp
Source: Company, AMSEC Research

April 10, 2017 12

Asian Granito India Ltd- Initiating Coverage
Financials (Consolidated) (Rs mn)
Profit and Loss Account Cash Flow Statement
Y/E (Mar) FY15 FY16 FY17E FY18E FY19E Particulars FY15 FY16 FY17E FY18E FY19E
Net sales 8460 9939 10501 11694 13400 PBT 189 350 547 778 1070
Consumption of materials 5125 6136 5849 6513 7464 Non-cash adjustments 407 553 808 865 906
Increase/(Decrease) in stock -156 66 87 169 239 Changes in working capital 487 -642 -339 -329 -441
Staff Expenses 440 589 642 706 812 Tax & Interest Paid -41 -54 -166 -245 -340
Power & Fuel cost 1312 1279 1317 1423 1565 Cashflow from Oper. 1042 207 850 1069 1195
Other Operating expenses 850 1093 1465 1645 1878 Capital expenditure -374 -2222 -400 -630 -750
Total expenditure 7572 9162 9360 10456 11958 Change in investments 37 -3 - - -
EBITDA 577 908 1315 1576 1920
Other investing activity 11 14 2 2 2
Depreciation 191 275 422 463 511
Cashflow from Invs. -326 -2212 -398 -628 -748
Operating Profit 386 633 894 1114 1409
Issue of equity 0 75 - - -
Other income 30 14 15 17 18
EBIT 416 646 909 1130 1427 Issue/repay debt -530 1599 173 28 50
Interest 227 291 362 352 357 Interest Paid -227 -291 -362 -352 -357
Exceptional income/expense - -5 - - - Dividends paid - - -18 -43 -61
Profit Before Tax 189 350 547 778 1070 Other financing cashflow -4 648 - -3 -8
Tax -56 -113 -180 -264 -364 Cashflow from fin -761 2031 -207 -371 -376
Reported Net Profit 133 237 366 513 706 Chg. in cash & cash eq -45 26 244 69 71
Extra Ordinary Items - 5 - - - Opening cash & cash eq 192 147 173 417 486
Share of profit of associate 15 22 24 26 29 Closing cash & cash eq 147 173 417 486 557
Minority int 0 -17 -20 -24 -29
Free Cash Flow to firm 668 -2016 450 439 445
Adjusted Net Profit 148 248 370 516 707
Share O/s mn 22.6 22.6 30.1 30.1 30.1
EPS Rs 6.6 11.0 12.3 17.1 23.5
Ratios
Balance Sheet Particulars FY15 FY16 FY17E FY18E FY19E
Y/E (Mar) FY15 FY16 FY17E FY18E FY19E GROWTH YOY%
SOURCES OF FUNDS : Sales Growth 9.1 17.5 5.7 11.4 14.6
Share Capital 226 226 301 301 301 EBITDA Growth -8.0 57.4 44.8 19.8 21.8
Reserves Total 2672 3331 3665 4130 4765 Net Profit Growth 22.4 67.4 49.5 39.3 37.0
Total Shareholders' Funds 2898 3632 3966 4431 5066 Gross Fixed Asset Growth 9.5 78.6 7.3 2.3 18.6
Non-Current Liabilities PROFITABILITY
Long term borrowings 146 1183 1243 1180 1121 Gross Profit/ Net sales (%) 18.3 15.7 20.6 20.5 20.8
Deferred tax liability 181 301 321 346 376 EBITDA / Net Sales (%) 6.8 9.1 12.5 13.5 14.3
Other long term liabilities 87 274 219 197 217 NPM / Total income (%) 1.7 2.5 3.5 4.4 5.3
Long-term provisions 1 1 1 1 2 Raw Material/Net Sales (%) 60.6 61.7 55.7 55.7 55.7
Long term trade payable - - - - - Int/PBIT (%) 58.9 46.0 40.5 31.6 25.3
Current Liabilities ROE (%) 5.2 7.6 9.7 12.3 14.9
Short term borrowings 1506 1986 2100 2190 2299 ROCE (%) 8.5 10.8 12.3 14.3 16.8
Trade payables 1371 1558 1490 1660 1902 ROIC (%) 6.5 7.7 8.5 10.1 11.7
Other current liabilities 279 313 337 351 366
Tax / PBT (%) 29.6 32.2 33.0 34.0 34.0
Short term provisions 46 62 84 123 151
TURNOVER (Days)
Total Equity & Liabilities 6514 9498 9968 10710 11759
Net Working Cycle 56 70 67 65 64
APPLICATION OF FUNDS :
Debtors Velocity 71 72 70 68 67
Non Current Assets
Fixed Assets Inventory 82 90 90 90 90
Gross Block 3375 6027 6466 6616 7846 Creditors Velocity 98 93 93 93 93
Less : Accumulated Depreciation 1495 2109 2531 2993 3505 Gross Asset Ratio 2.6 2.1 1.7 1.8 1.9
Net block 1881 3918 3936 3623 4342 Total Asset Ratio 1.3 1.2 1.1 1.1 1.2
Capital Work in Progress 150 59 20 500 20 LIQUIDITY (x)
Non current Investment 105 131 155 181 210 Gross Debt-Equity Ratio 0.6 0.9 0.8 0.8 0.7
Intangible assets under development - - - - - Net Debt-Equity Ratio 0.5 0.8 0.7 0.7 0.6
Long term loan and advances 439 240 264 290 319 Interest Coverage 1.7 2.2 2.5 3.2 4.0
Other non-current assets - - - - - Current Ratio (x) 1.2 1.2 1.3 1.4 1.4
Current Assets Quick Ratio (x) 0.6 0.6 0.7 0.7 0.7
Inventories 1912 2451 2598 2883 3287 PAYOUT
Sundry Debtors 1656 1966 2014 2179 2460 Payout (%) 0 0 10 10 10
Cash and Bank 147 173 417 486 557
Dividend (%) 0.0 0.0 10.0 14.0 20.0
Short Loans and Advances 180 262 288 308 324
Yield (%) 0.0 0.0 0.3 0.4 0.5
Others Current Assets 26 41 45 50 52
Du Pont Analysis
Total Assets 6514 9498 9968 10710 11759
NP / PBT (%) 78.2 70.7 67.7 66.3 66.0
Valuation Matrix FY15 FY16 FY17E FY18E FY19E
PBT / EBIT (X) 0.5 0.6 0.6 0.7 0.8
EPS Rs 6.6 11.0 12.3 17.1 23.5
EBIT / Sales (X) 4.6 6.4 8.5 9.5 10.5
CEPS Rs 15.0 23.2 26.3 32.5 40.5
Book Value Rs 128.3 160.8 131.8 147.3 168.4 Sales / Assets (X) 1.3 1.0 1.1 1.1 1.1
EV / Net Sales 0.6 1.2 1.4 1.2 1.1 Assets / Equity (X) 2.2 2.6 2.5 2.4 2.3
EV / EBITDA 8.1 12.6 10.8 9.0 7.4 ROE (%) 5.2 7.6 9.7 12.3 14.9
P / E Ratio 21.4 34.2 30.5 21.9 16.0 Source: Company, AMSEC Research
P / BV Ratio 1.1 2.3 2.8 2.5 2.2

April 10, 2017 13

Note :
Note :
Note :
Asian Granito India Ltd- Initiating Coverage

Recommendation rationale Sector rating

Buy: Potential upside of >+15% (absolute returns) Overweight: The sector is expected to outperform relative
Accumulate: >+5 to +15% to the Sensex.
Reduce: +5 to -5% Underweight: The sector is expected to underperform
Sell: < -5% relative to the Sensex.
Not Rated (NR): No investment opinion on the Neutral: The sector is expected to perform in line with
stock the Sensex.

Disclosures
This Report is published by Asian Markets Securities Private Limited (hereinafter referred to as “AMSEC”) for private circulation.
AMSEC is a registered Stock Broker with National Stock Exchange of India Limited and BSE Limited in cash and derivatives
segments. It is also having registration as a Depository Participant with CDSL and as Portfolio Manager. „AMSEC is registered
Research Analyst under SEBI (Research Analyst) Regulations, 2014 having Registration Number as INH000001378.‟
AMSEC has other business divisions with independent research teams separated by Chinese walls, and therefore may, at times,
have different or contrary views on stocks and markets.
AMSEC or its associates have not been debarred / suspended by SEBI or any other regulatory authority for accessing / dealing in
securities Market. AMSEC, its associates or analyst or his relatives do not hold any financial interest in the subject company. AMSEC
or its associates or Analyst do not have any conflict or material conflict of interest at the time of publication of the research report
with the subject company. AMSEC or its associates or Analyst or his relatives hold / do not hold beneficial ownership of 1% or more
in the subject company at the end of the month immediately preceding the date of publication of this research report.
AMSEC or its associates / analyst has not received any compensation / managed or co-managed public offering of securities of the
company covered by Analyst during the past twelve months. AMSEC or its associates have not received any compensation or other
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Analyst Certification: I, Kamlesh Kotak, the research analysts and authors of this report, hereby certify that the views expressed
in this research report accurately reflects my personal views about the subject securities, issuers, products, sectors or industries. It is
also certified that no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of
specific recommendations or views in this research. The analyst(s) principally responsible for the preparation of this research
report and has taken reasonable care to achieve and maintain independence and objectivity in making any
recommendations.

1. Name of the analyst: Kamlesh Kotak

2. Analysts‟ ownership of any stock related to the information contained: Nil
3. AMSEC ownership of any stock related to the information contained: None
4. Broking relationship with company covered: None
5. Investment Banking relationship with company covered: None

April 10, 2017 14

Asian Granito India Ltd- Initiating Coverage
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