Orient Bell zooms 18% on upward revision in credit ratings by Crisil

The company said the growth in the tiles market will continue to be driven by growth in real estate and housing sector, rise in disposable income, growth in renovation & remodelling activities.

Shares of Orient Bell (OBL) zoomed 18 per cent to Rs 684 on the BSE in Wednesday’s trade in an otherwise weak market after Crisil ratings upgraded its ratings on the bank facilities of the company to ‘CRISIL A/Stable/CRISIL A1’ from 'CRISIL A-/Stable/CRISIL A2+’.  The rating agency believes OBL will continue to benefit from its established market position and comfortable financial risk profile.

The stock of one of the leading manufacturer of ceramic and vitrified tiles traded close to its record high of Rs 688 touched on June 2, 2022. In comparison, the S&P BSE Sensex was down 0.5 per cent at 52,919 at 11:10 am. In the past six months, the stock has nearly doubled or up 98 per cent, as compared to a 8.5 per cent decline in the benchmark index.

The upgrade factors improvement in the overall business and financial risk profiles of OBL. Operating performance has improved by revenue growth of around 30 per cent during fiscal 2022 from previous fiscal, backed by strong brand equity, and improved sales contribution from value added-products leading to better operating profitability, Crisil said in detailed rationale.

The rating agency further said that the company’s revenue should further improve by compounded annual growth rate (CAGR) of 10-12 per cent over medium term supported by healthy demand from real estate industry, diversification in product mix, underway capex and upgradation of plants. The operating margin rose to 8.97 per cent in fiscal 2022 from 6.90 per cent in previous fiscals because of increased contribution of high margins products, long term contract for gases and modification in the plants, leading to better operating efficiency. Sustenance of improved profitability levels along with sales growth over the medium term remain a key rating sensitivity factor, it said.

Meanwhile, the growth in the tiles market will continue to be driven by growth in real estate and housing sector, rise in disposable income, growth in renovation & remodelling activities, renewed interest in “DIY trends in home improvement” with the shift to Work-From-Home post the pandemic, focus on affordable housing, lower interest rates and increase in investments in the residential and commercial sectors (growing project and CAPEX launches by major players), OBL said in FY22 annual report.

The customer has become more aware and is keen to engage in tile buying decision-making and designing the overall look of the home, the company said.