Orient Ceramics & Industries Limited Long Term Buy Call : Fairwealth Securities

Orient Ceramics & Industries Limited (OCIL), incorporated in 1977, is recognized for its innovations in home decor, manufacturing a range of tiles including Non-Vitrified, Vitrified, Ultra Vitrified, and 3rd Fired Decorative Tiles for various applications such as walls, floors, and facades. The company also supplements its product offerings by importing and marketing Vitrified Porcelain Tiles, Borders, Motifs, and other value-added accessories from international sources. OCIL is poised for significant growth, with plans to invest Rs. 100 crore in expanding its manufacturing capacity through a greenfield project in Andhra Pradesh and engaging in joint venture agreements. Management expresses confidence in robust earnings for FY11, driven by anticipated volume growth, improved realizations, and a strategic focus on high-margin product mixes. The company also projects a substantial increase in export volumes, having expanded its presence across numerous countries globally. To enhance market visibility, OCIL aims to establish one lakh square feet of retail space. This expansion will involve opening company-owned and operated showrooms, as well as developing new franchises and shop-in-shop stores. The company currently operates three exclusive showrooms in Ahmedabad, Delhi, and Sikandrabad, with the Sikandrabad showroom spanning 5000 sq ft, specifically designed to meet rising demand. In the global ceramic tiles industry, valued at US$36 billion and growing at 6% annually, China dominates as both the largest producer (40%) and consumer (34%). India, a top-five tile-producing country with an annual production of approximately 450 million square meters as of March 2010, has a relatively low per capita consumption of 0.36 sqm, compared to Turkey's 2.44 sqm. The Indian ceramic tiles industry, a large and rapidly expanding sector comprising both organized and unorganized manufacturers, experienced a period of stagnation due to oversupply and increased imports. However, market conditions have recently improved due to an economic upturn, escalating demand from the construction and real estate sectors, and a reduction in dumping and oversupply. These favorable conditions are expected to benefit the industry as a whole, including OCIL. The Indian ceramic tiles market is segmented into wall tiles (35%), floor tiles (53%), and vitrified & porcelain tiles (12%). Vitrified and porcelain tiles, relatively new entrants, have significantly expanded the market. This segment is expected to gradually supersede traditional floor and wall tiles due to superior durability, utility, ease of maintenance, enhanced appearance, premium pricing, and higher realizations. These tiles are already major sellers in international markets. Furthermore, the imposition of anti-dumping duties of Rs. 137 per square meter on ceramic glazed tiles imported from China is expected to provide a competitive advantage to domestic manufacturers. OCIL is noted for its pioneering role in manufacturing Ultra Vitrified tiles in India and is the first in the country to employ an in-house European designer. Its recently launched brands, Europa and Stiler, have gained popularity within the ceramic industry for their innovative designs. The company's International Business Division (IBD) facilitates exports to countries including Dubai, Muscat, Oman, Sri Lanka, Maldives, and Mauritius. OCIL maintains a direct dealer network of over 1000 dealers across India. Financially, OCIL has demonstrated consistent revenue growth, with a Compound Annual Growth Rate (CAGR) of 18.25% over the last five years. The company's revenue has shown uninterrupted growth during this period. Currently, OCIL is trading at a Price-to-Earnings (P/E) ratio of 5.83, which is lower than the industry P/E of 9.27. The Earnings Per Share (EPS) on a Trailing Twelve Months (TTM) basis stands at Rs. 14.63, indicating a positive growth trajectory. In the quarter ending June 2010, the company's revenue increased by 11.4% to Rs. 60.5 crore, and its bottom line surged by 249% to Rs. 5.31 crore. The operating profit margin for FY10 was 13.82%, a slight increase from 13.67% in FY09. #OrientCeramics #CeramicTiles #HomeDecor #ManufacturingExpansion #RealEstateSector #FinancialPerformance #ExportGrowth #RetailExpansion #VitrifiedTiles #OrientCeramics #CeramicTiles #HomeDecor #ManufacturingExpansion #RealEstateSector #FinancialPerformance #ExportGrowth #RetailExpansion #VitrifiedTiles