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Carysil: Let That Sink In 💦


Remember the time Elon Musk bought Twitter, after a couple of months of drama?

After closing the deal, he actually walked into the Twitter headquarters with a physical sink.

And right after, he posted a video of this stunt on Twitter with the caption: “Entering Twitter HQ - let that sink in!”




That’s probably the most importance a sink has got in the last decade. And to give sinks some more footage is an Indian company, which is also one of the largest sink manufactures in the world - Carysil.


This company has taken the boring old sink, and somehow managed to make it appealing.

Even if you ignore Vaani Kapoor from this (try), Carysil’s sinks are very well-designed and aesthetically made products.


And it’s not just us saying it. Carysil makes more than 10 lakh sinks every year and made nearly Rs. 600 crore in revenue last year from this business.


And while it already is one of the leading players in this business, it expects revenue to hit Rs. 1,000 crore by FY25, which is a steep 30% CAGR over the next two years. What’s happening in the world of sinks that’s making Carysil so optimistic?


1. Quartz Sinks Are Taking Over Homes


Before we start, quartz sinks are made of quartz (the stuff that granite is made of) and acrylic resin. And these sinks are soaring in popularity.


Although they constitute to only 10% of all the sinks sold, it’s a market that’s growing at a 25% CAGR globally.



They have become the preferred choice in people’s homes not just because they look good, but also because they are

  • More durable and resistant to heat, scratches, stains and impact

  • Easier to clean and maintain because they are smooth

  • Less noisy because they naturally absorb sound

  • More hygienic since they are non-porous and odour resistant

  • Higher on aesthetic value because of the premium look and feel, because they complement countertops which are usually made of quartz or granite


The company to invent quartz sinks in 1979 is a 99-year-old German sink manufacturer called Schock. Carysil was incorporated in 1987 in collaboration with Schock to make these in India.


Today, 60% of the world’s quartz sinks are made using Schock’s manufacturing process.




💡 Carysil is among only 4 players globally and is the only manufacturer of quartz sinks in Asia, using Schock technology.


Carysil’s business started with quartz sinks, which still contribute to nearly 80% of its revenue, and has grown at a 27% CAGR over the last 5 years. In fact quartz sinks are such a hot selling product that production capacity for Carysil has gone 2x in just 2 years from 5 lakh units per annum in 2020 to 10 lakh units per annum in 2022.


Demand has been so strong, that despite capacity utilisation of <60% right now, Carysil is already assessing adding capacity of another 2 lakh quartz sinks, which it will finalise on by the end of FY24.

If the market continued to grow at the 25% CAGR as seen in the past, Carysil has enough to last another 2 years without adding any capacity.


2. Stainless Steel Sinks Are Getting Sexier


While quartz sinks seem to be taking over, the market has always been dominated by stainless steel sinks, which make up for more than 75% of the global sink market.


Carysil did set up capacity for stainless steel sinks way back in 2010 to account for this domination.

However, for Carysil, this hasn’t been much of a focus area, with stainless steel sinks making up just 15% of total revenue.



But there’s a change here as well. It recently doubled its capacity in stainless steel sinks from 90,000 units per annum, to 1.8 lakh units. A majority of the capacity share has been added for something Carysil calls ‘Quadro’ sinks - which are basically designer sinks.


These sinks are made using a new technology called Physical Vapor Deposition (PVD), which gives stainless steel sinks a metallic finish.


They are targeted towards the high-end segment, who are willing to pay a premium for superior quality, design and finish. PVD sinks currently contribute to just 10% of the overall stainless steel sinks but have been seeing very high demand.


The impact on financials can be seen in Carysil’s 1QFY24 earnings, where despite a 28% YoY fall in volumes, stainless steel sinks saw a 34% jump in realisation. Going forward, thanks to an enhanced product proposition in stainless steel sinks, Carysil has the potential of seeing equivalent growth here, just as it did in quartz sinks.

Additionally, Carysil has signed an agreement with IKEA for stainless steel sinks, for which production is expected to commence in 2QFY24, which will further boost sales. Before this, since 2021, it was already supplying quartz sinks to IKEA.



3. Expanding Beyond Sinks - Kitchen and Bath

While the sink market is set for high growth, across both quartz and stainless steel, Carysil has been taking steps towards a larger presence in people’s homes.


The maker of sinks commenced making kitchen appliances, for the Indian market in 2013. Under the Carysil brand, it sells chimneys, wine chillers, dishwashers, hoods, cooktops, and built-in ovens- and is playing on the growing preference for modular kitchens, and the rising premium market.



While it started 10 years ago, kitchen appliances contribute to a mere 13% of total revenue.


However, kitchen appliances give Carysil a strong pricing play, with realisations that are nearly 2x that in sinks. It plans on aggressively tapping the underpenetrated Indian market in 2 phases: 1 lakh units by 3QFY24, and another 1 lakh units by 1QFY25, mostly of chimneys and hoods.


It has also started leveraging its quartz dominance from kitchens into bathrooms.


While it already makes sinks, it has started setting up an assembly line for 10,000 faucets, the supply of which is expected to start towards the end of the year. It also recently acquired a company in the UK which gives it access to the tap market, further strengthening its presence.


Most of Carysil’s export revenue comes from sales to leading brands like IKEA, Grohe and Karran. With its tie-ups already in place, selling additional products is a low-hanging fruit for Carysil, which also increases its probability of success in newer products other than sinks.


Financials

Carysil has seen pressure on its financials lately (FY23 and 1QFY24) because of a confluence of several negative factors including (i) weakness in exports, which contribute to 80% of total revenue, (ii) SAP implementation, which resulted in a one-time impact on revenue, and (iii) higher inventories of quartz sinks in the channel. However, its numbers over the long run have exhibited strong execution across segments.



Over the medium to long term, Carysil seems to be well-placed to continue delivering strong growth in revenue and profitability with several factors in its favour, which include:

  1. Dominance in the high-growth quartz sinks market, which has been exhibiting a 25% CAGR

  2. Additional capacity in stainless steel sinks, which have visibility of growth because of tie-ups with the likes of IKEA

  3. Focus and high demand for PVD stainless steel sinks, which Carysil is the only manufacturer of

  4. Strengthening partnership network with large retailers for the export market, which include IKEA, Grohe and Karran; and doubling down of the dealer network in India, which has expanded from 1,500 in FY22 to 3,200 now

  5. Building a strong product portfolio in kitchen appliances and bath, sales of which can be channelled using existing partnerships across retailers, dealers and own stores

  6. Integration of the solid surface business, which is complementary to sinks, and where presence has been strengthened with the acquisition of Tickford Orange in 2022; and integration of the newly acquired The Tap Factory Limited, which gives it presence in the UK tap market

  7. Improving product mix, higher capacity utilisation, rationalisation of spending, fructification of investments in new products, and operational efficiencies resulting in better margins over the medium term


Hence, just as Elon let the sink in, maybe Carysil is a company that you can let into your watchlist! Although since this isn’t a recommendation, we cannot be blamed if it “drains” your portfolio (just kidding - look into the stock yourself please)!


 

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