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Sunday, 10 September 2017

Dhabriya Poly – A Home decor and Interior Company


Dhabriya Poly is a manufacturer, exporter and trader of a whole range of PVC products like Doors, windows, wardrobes, modular Kitchens etc. along with manufacturing Office furniture.
From the year 2006 to 2013 we have seen the rise of Real estate in our country.  It has seen an all-time boom. We have seen numerous projects coming up from various builders. In the rush to capitalize the real estate boom, many builders have incurred debts which are exceed their repaying capacity.  However, in the recent times we see that the supply in real estate is far more than the actual demand, thus the previous escalated prices of real estate has been on a corrective mode. 

The falling prices have hit the real estate companies as with the huge interest payments they are unable to serve their debts and even major players like Jaiprakash and Unitech have down like a pack of cards.
However in all the hullabaloo around the real estate, associated companies to Housing sector are in a bloom. Housing Finance companies - LIC housing, CAN Fin homes, Gruh finance and manufacturers of housing products like Tiles- Kajaria & Somany, manufacturers of sanitary ware - Cera Sanitary ware etc., are seeing an increase in their market share.

So we might wonder why are the associate companies blooming while in actual the Housing sector is seeing a decline. Simplistically said, housing projects require materials and the manufacturers of these housing materials are not so leveraged like the builder companies thus the associate companies bloom.

There are many factors which are in favour of these Associated Housing sector companies like -

* Government policy of Affordable Housing for all Pradhanmantri Awas yojna, decreasing interest rates on housing loans.
* Swach Bharat mission leading to the constructions of toilets across the country.
Smart City Projects
* GST - GST rate on aluminum products are higher than PVC, making PVC more viable.
* 7th Pay Commission- Giving more spendable income in hands of official,  with past experience of pay commission,  demand for housing sector rises.
* Rural Demand - good monsoon for last 2 years would help in increased demand from rural sector.

Dhabriya Poly is one of such company which manufacturers PVC doors, windows & other housing material.  In the past wood was a major raw material for construction companies. Doors, windows, wardrobes etc. were all made of wood. Then the Government issued policies of saving trees and natural resources thereby restricting the use of wood and making it a scare resource thereby raising its cost. Builders had to look for alternatives like, ply boards and more durable PVC or aluminum. Among PVC and aluminum, PVC is a more cheaper and durable solution. Thus in the newer residential and commercial projects, we see an increase in the use of PVC.

The Jaipur based company has close to 20% market share in the organized PVC and UPVC doors and windows market and competes with aluminum 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, chief financial officer, Dhabriya Polywood.

It has three plants in Jaipur and two in Coimbatore. Utilization 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 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 Rs 5 crore to set up this division which can generate up to Rs 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 Rs 12,000 crore and offers a large opportunity.


In the past, it has been observed that companies with cheaper substitute products have given strong returns to shareholders. For instance another Jaipur based company, Mayur Uniquoters which introduced artificial leather has reported 30 times jump in profit in the last ten years while its market capitalization capitalization rose by nearly 100 times.

Dhabriya did sales of Rs 95 crore and net profit of Rs 5 crore in FY17. The return on equity for the year was 18% and its debt equity was 1.2.

In the beginning of current fiscal, Dhabriya merged its modular kitchen business subsidiary which reported Rs 20 crore revenue and Rs 0.6 crore EBIDTA and issued promoters shares of the listed company at Rs 127 per share.

Currently the stock has total market capitalization if Rs 173 cr. having P/B value of 5.98 Stock is trading @ Rs 160 having book value of Rs 27 . Given its core manufacturing in PVC related products and the favorable Government Policies, Dhabriya Poly, with its well laid expansion plans, is poised to see a sustained and stable growth in the coming years.

Given its core manufacturing in PVC related products and the favorable Government Policies, Dhabriya Poly, with its well laid expansion plans, is poised to see a sustained and stable growth in the coming years.

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