Pokarna

Company Overview

• Started as a granite quarrying and processing company in India.

  • Over the years became a leading manufacturer + exporter of premium granite and engineering quartz surfaces.

• Pokarna Engineered Stone Limited [PESL] is a wholly-owned subsidiary to manufacture high-quality quartz surfaces under the Quantra brand using italian tech.

  • Operates a vertically integrated business model, control over the entire value chain.

• Strong U.S Presence accounting for 85% of quartz exports.

• Diversifying into new markets like Canada, France, Mexico, Russia.

Industry

• Granite:

  • A natural stone quarried directly from Earth, cut into slabs, polished, and used mainly for countertops, flooring, and exterior applications.

  • India is a country with one of the largest quartz deposits.

  • In India, the granite industry is valued at $40 billion.

  • Leading supply markets: India, Brazil, China.

• Quartz:

  • Engineered by combining crushed quartz with resin and pigments (typically ~90–95% quartz).

  • More uniform, customizable in design, non-porous (more stain-resistant) and competes with granite, marble, and high-end tiles.

  • Projected to grow at 7–9% CAGR globally.

  • USA and Europe are the largest consumers of quartz surfaces; Australia and Middle East are smaller but fast-growing markets.

  • Shift in supply chains:

    • Anti-dumping duties by the USA on Chinese quartz opened doors for India, Vietnam, and Turkey.

  • Higher margins than granite due to better pricing.

  • Benefiting from higher demand for “sustainable” materials — quartz is marketed as more eco-friendly due to engineering control.

• Global Demand Drivers for Both:

  • Real estate: new residential construction, home renovations, commercial building upgrades.

  • Rising aesthetic preferences for luxury surfaces.

  • Hospitality sector expansion: hotels, airports, malls.

Business Segments

• Granite:

  • One of India’s largest exporters of finished granite + strong in domestic market.

  • Operates multiple captive quarries in Andhra Pradesh, Telangana, and Tamil Nadu.

  • 75+ granite varieties in portfolio sourced locally and from Ukraine, Madagascar, Norway.

  • Two Divisions:

    • Quarrying:

      • Extraction: physically digging out huge blocks of granite stone from Earth.

    • Processing:

      • After quarrying, rough granite blocks are cut, shaped, polished, and finished into slabs, tiles, or other pieces to become usable.

• Quartz (PESL):

  • Integrating two advanced technology lines (Kreos and Chromia) to introduce new-gen quartz surfaces with full-body aesthetics + HD digital printing capability.

    • Kreos:

      • Produces full-body slabs where the entire thickness (inside-out) has the same color, pattern, and texture.

      • Enables production of ultra-thin (7mm) products compared to traditional 12, 20, 30mm slabs.

    • Chromia:

      • Prints intricate, realistic patterns and artistic designs on quartz slabs, allowing designs that mimic expensive marbles at lower cost but high realism.

Growth Drivers

• Investing ₹440 cr to expand quartz production facility in Mekaguda, Telangana with third Bretonstone production line operational by March 2026.

• New Bretonstone line expected to generate turnover of ₹450–550 cr annually.

• Expected EBITDA expansion of ₹145–165 cr and PAT of ₹100–110 cr.

• Kreos technology helping produce full-body, ultra-thin quartz slabs, gaining popularity:

  • Less raw material use + premium pricing = margin improvement.

• Chromia technology helping integrate HD digital printing into quartz manufacturing:

  • Can create intricate patterns, hyper-realistic textures, vibrant colors.

• Demand for engineered stone countertops growing at CAGR of 9.3%.

• More customers opting for quartz over granite due to durability and low maintenance.

• Pickup in US housing demand after slowdown in 2023.

• International forays starting:

  • Russia: good product acceptance and repeat orders; lead time challenges due to limited shipping lines.

  • Canada: distributor looking to expand Quantra’s reach.

  • Mexico: doing good despite low-cost imports; Pokarna positioned as a niche/luxury brand.

  • France: working with one of the largest clients; good repeat traction.

• Focus is more on value growth than volume growth.

Competitors - Caesarstone

• Caesarstone holds roughly 5–6% of the global quartz market share.

• Quantra (Pokarna) is sub-1% of the American quartz market.

• Pokarna does not sell directly to end-consumer/fabricator; instead works with large distributors — their success is linked to distributor success.

• Caesarstone’s gross margins trending at 26–27% compared to ~65% for Pokarna.

Management Guidance

• Kreos line commercialized in Q2FY24.

• Chromia line expected to commercialize in Q4FY25.

• Total CAPEX for Kreos and Chromia lines is about €10M.

• 30–35% EBITDA margin guidance is good for FY25.

• Current tax rate at 35%, expected to move to 25% in FY25.

• India’s stone market largely unorganized and fragmented compared to the US.

• Working on an experience center in Hyderabad.

• Focus remains on exports; local numbers expected to rise after six months.

Valuation

Risks

1. Trade policies - If the U.S. continues tariffs, it could hurt Pokarna's sales significantly, given that 85% of Pokarna's quartz revenue comes from the U.S.

2. U.S. Real Estate - Analysts are predicting a slowdown in the U.S. economy which would affect real estate sales too. This is a significant market for Pokarna.

3. Competition globally from low-cost Chinese producers and Brazil.