We recommended Acrysil Ltd in Dec'13 at the price of Rs. 174. At the current market price of Rs. 646, Acrysil Ltd has delivered 271% returns since our first recommendation.  At this stage, we recommend to book profits in this stock.

Our investment premise was based on the company's attractive portfolio in the kitchen sink space, ownership of the CARYSIL brand as well as its manufacturing technology and the huge scope to diversify in the kitchen & bathroom space. While the market has recognized the attractiveness of Acrysil’s business, its growth over past three quarters has been lower than original guidance due to delays in certain product launches. Valuations at 33x FY14 earnings are rich considering that the company has debt-to-equity of 1x and RoCEs < 20%.

Our exit call is based on assessment that building a scalable brand outside the kitchen sink segment will remain a challenging task for Acrysil. Its success in domestic market is yet to be proven and improvement in working capital cycle and debt situation is sometime away (most peers are debt free and have short working capital cycle). In this light, the current valuations at 33x FY14 P/E are expensive.

We recommend EXIT at Rs. 646 with gains of 271% in nine months. We like Acrysil’s business on a fundamental basis and we will look to re-enter the stock below Rs. 450

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