Pokarna Ltd Construction Materials
Market Cap.: ₹ 739.26 Cr.
Current Price: ₹ 1,192.20
Book Value: ₹ 211.63
Stock P/E: 9.44
Dividend Yield: 0.84%
Face Value: ₹ 10.00
sales profit both increasing
initial look good
– Company has a good return on equity (ROE) track record: 3 Years ROE 71.56%
How come return of equity so high for this business?
why sales not increased this year ?
It is one of the largest exporter of finished granite from India, dealing in over 70 premium colours.
Besides finished granite company also exports natural quartz based engineered stone under the brand name ‘QUANTRA’ .
l there is still room for further margin expansion as engineered stone business is running at 50% capacity utilization.
From an interview
Getting mining lease is a long-drawn-out process. If it is a large quarry, then one has to go to Delhi to get the ‘environmental’ clearance. And all that takes years together. It’s not easy to do quarrying in the country. It doesn’t matter whether it is ownership land or lease land; it’s always difficult. The process is rather time-consuming.
In same interview Mr.Gautam Jain says
*Daltile, a company based in the US, happens to be one of our biggest customers. It has also been my biggest distributor for the last twelve years. One of its representatives, who visited us a few days ago, said, “Mr. Jain, you need not be so perfect; even if sometimes you give us not-so-good materials, we will accept them. In the last twelve years, you have not given us a reason to complain.
Caesarstone, Cambria, Bretten are the companies competitor.
Caesar doesnt do any mining activity but buys most of its ‘raw material’ from eastern europe and Asia for Quartz.
Engineered stone business has good competitive advantage. Pokarna has unlimited supply from its own mines. The market is huge and it comes down to their marketing and distribution abilities. Caesar has done exclusive deals with IKEA US and Canada so their advantage is branding, distribution and reach.They are bullish and adding capacities in North America despite raw matl shortage. Pokarna hugely benefited because of cost reduction.
On the question of other Indian Quartz manufacturers, there are many doing it.There is nothing unique that Pokarna does except it is the exclusive licensee of Breton technology from Italy to make Quartz stones which gives an edge over others.
what if India disallow stone mining?
Environment issues ??
80% export business
Alpha ideas copy paste gokarna looks great
The Flooring in US is 50% carpet, so stone has to mostly to the kitchen counter top (except hotels and malls, offices, whos construction has saturated). But in India flooring is mostly tiles and stone, and stone (granite) is increasing.
Considering Quartz stone replacing Natural (granite) in developed market, it can happen in India also gradually. And as the income levels go up, tiles might be replaced by stones for flooring.
They sell quart stone to Lowes, Home depot, Costco, Sears. They said top seller for them is Viatera. Confirmed Saesarstone was most expensive.
In India,Shobha is one of their clients which uses granite countertop in their high-end residential projects.But most of the sales are coming in from exports through B2B sales.
Upside is huge with uptick in demand for housing in US and other markets.
You are right promoters lent money to the company which was interest free. Pls check Q1 FY16 ppt they have mentioned that interest is payable @14% from Q1 as things have improved. This fact alone is a major comfort factor regarding promoters.
India accounts for around 20% of the world’s resources
of granite and as per Indian Bureau of Mines the country
Management is good business wise but may be unethical I guess