Carysil - Global Aspirations In Kitchen, Bathroom Products: Systematix Initiates Coverage

Systematix Research Report

We initiate coverage on Carysil Ltd. with a 'Buy' rating and a target price of Rs 705 (40% upside potential), based on 20 times FY25E earnings per share of Rs 35. The scrip has corrected by more than 40% since April 2022, on fear of global demand slowdown.

Impacted by channel de-stocking, the company has been reporting weak performance since Q2 FY23. But we expect a strong rebound Q4 FY23 onwards, considering its strong order book and volume visibility with large global customers.

Carysil aspires to become a global one-stop shop for all kitchen and bathroom lifestyle products. Post strong 22%/32%/52% compound annual growth rate in revenue/Ebitda/profit after tax over FY17-22 (on a ~700 basis points Ebitda margin expansion to ~21% and forex gains), we estimate 24%/21% /13% CAGR over FY22-25E, expecting ~20% Ebitda margin and higher interest costs (rise in debt).

Regular capacity addition and working capital needs will likely limit operating cash flow/Ebitda at ~60% level; healthy return on equity (~20%) will be maintained though.

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