Construction material sector is one of the fastest growing with >20% yoy, of which granite is one of the premium construction & sculpture making material. India's total trade value for FY'13 is around $2 billion dollars of which only $600 million dollars worth of granite products is exported to foreign countries. This export segment is growing 20% yoy with a strong demand for South Indian granite in foreign countries.
Aro Granite Industry is a Hosur based company which is just 35 kms away from the granite hub of India Bangalore. It is currently trading at a cheap valuation in comparison with its competitors, with a PE value just less than 4. Its current market cap is <90cr which is just 1/3rd of its previous year sales(254cr).
Aro granite Industries : Manufacturer of Granite Slabs & Titles is promoted by Sunil K Arora who has 27 years of experience in this business, it is an 100% export oriented company suited in Hosur, Tamil Nadu( has high granite reserves and quality granites in the world). It has state of art high quality manufacturing unit in Hosur which produces 3.6lac sq.mtrs granite tiles per annum and 3.9lac sq.mtrs granite slabs per annum. It has received ISO 9001:2008 certification from "TUV NORD", from Germany for quality management services.
It is a premium supplier of Indian granite to over 45 countries and it prime clientele are the USA, Canada, Europe, Japan, Far East and south pacific countries.
Aro granite Industries have consistently exported its products to 45 countries for 3 years in a row and are still exploring untapped markets. Due to is aggressive sales strategy in FY'13 its sales have increased over 15% in 21 countries which it exports. Leading the way is a 33% increase in the sales in North America, 3 times or 314% sales in Libya, which is an emerging market, a 50% increase in Germany and have doubled the sales in Poland, Italy and Japan. This increase in sales helped to achieve 34.15% increase in turnover clocking to ~Rs.254 crores in FY'13 and increase in pre tax profit of 28.57 crores which is 11.19% higher in comparison to FY'12.
It is the one of the best managed company in the granite slab & tiles manufacturing sector, Following are the contributing factors:
- Consistent increase in revenue for past five years, i.e 90% increase in its sales from FY'10.
- Consistent increase in net profit for past 3 years, which as doubled its EPS to Rs:17.11 from Rs:8.61.
- Paying 10% dividend consistently for past five years.
Currently the procurement cost of granite slabs has increased considerably due to the import of granite from other countries like Brasil, Norway, Finland & Africa and the trading is in Dollar & euro. This is due to the high restrictions of the granite mining imposed by TN government(
granite mining scam). However, even-though it imports granite from other countries its OPM:15.46% & NPM:8.39% which is one of the highest among its peers. In future its NPM & OPM are likely improve once it procures granite from its region itself.
With the revival of economy on the global scale especially Europe, North America & Japan where aro garnite has strong foot print and with the stabilization of Indian currency against dollar & Euro. Aro granite Industry is a strong buy at the CMP:Rs-57.35/-.
