Dhabriya Polywood, a manufacturer of UPVC and PVC doors and windows is expected to be a major beneficiary of GST since the rate applicable on PVC sheets for doors and windows is 18% compared with 28% in case of aluminium sheets.
The Jaipur based company has close to 20% market share in the organized PVC and UPVC doors and windows market and competes with aluminium doors and windows manufacturers. Following increasing aluminium prices and the government’s thrust on affordable housing, Dhabriya reported 41% and 43% jump in sales and net profit respectively in FY17. ”PVC and UPVC doors and windows are eco-friendly and easier to implement than aluminium products and their acceptance is increasing rapidly,” said Hitesh Agarwal, CFO, Dhabriya Polywood.
It has three plants in Jaipur and two in Coimbatore. Utilisation at these plants is 45-55%. It will be setting up another plant in Bengaluru which will be commissioned by the end of 2017.
Analysts expect the company to deliver 30% sales growth and 50% earnings growth between FY17 and FY20. Operating margin before depreciation (EBIDTA margin) in FY17 improved to 14.9% from 10.2% in FY13 and is expected to exceed 20% by FY20.
The optimistic projections are based on the company’s introduction of artificial Italian marble under the brand Dstona. It costs around one tenth of the original Italian marble and still delivers 25% EBIDTA margin. Dhabriya has created this niche product and is the only manufacturer in India. It has made a capital expenditure of INR 5 crore to set up this division which can generate up to INR 25 crore of revenues annually. The product will start contributing to revenue from the current fiscal. The market size of Italian marble is estimated to be INR 12,000 crore and offers a large opportunity.
In the beginning of current fiscal, Dhabriya merged its modular kitchen business subsidiary which reported INR 20 crore revenue and INR 0.6 crore EBIDTA and issued promoters shares of the listed company at Rs 127 per share. On Monday, its shares closed 4% higher than the previous day’s close at INR 144.5. At this price, they are available at 13 times and one time its expected FY18 earnings and sales respectively.