Stock Pick From Ceramics And Granite Sector

MMDR Act to aid in accessibility of raw material

Aro Granite Industries also focuses on new designs to cater to the market demand. The company is also playing on its new strategy of “Cut to Size” based on customised demand by customers. There is rise in demand from developed countries for finished product of granite. USA has the biggest export market for granite where Aro Granite has a greater footprint.

Company has dependency on raw material to produce final product. There are disputes going on at Tamil Nadu granite mines which is a major source of granite for the company. AGL has to import raw material since past two years which was affecting profit margin of the company. Ministry of Mines has recently taken certain reformatory measures in mining sector. Firstly, it has allowed 100 per cent FDI in mining of minerals and metals with conditions applied. Secondly, the union cabinet approved National Mineral Exploration Policy which aims at involvement of private sector in exploration of minerals. The Ministry will carry out auctioning of identified exploration blocks for exploration by private sector on revenue sharing basis in case their exploration leads to auctionable resources. This factor will aid the company to cater the raw material demand at domestic level which will in turn lead to rise in profit margin.

The company aims at improving working capital cycle. AGI’s key goal is to increase sales at steady pace by maintaining market share. On financial front, the company has successfully reduced its total expenses by 12.81 per cent in FY16 as compared to last fiscal year. The company’s top line decreased by 15 per cent in FY16 as compare to FY15. Operating profit margin by Aro Granite Industries has expanded by 524 basis points to 11.92 per cent in FY16 as compare to 6.67 per cent of FY15.