Global Surfaces IPO: Is it worth your investment?

Global Surfaces, a natural stone processing and engineered quartz manufacturing company, has come out with its IPO (initial public offering). Here's a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision.

In a nutshell

• Quality: Global Surfaces' ROE and ROCE for FY22 are 26.6 and 20.9 per cent, respectively. It also has a higher net profit margin compared to its peer, Pokarna. Moreover, Global Surfaces also has healthy operating cash flows.
• Growth: In the last three years, Global Surfaces' topline and bottomline grew at a CAGR of 8.0 and 30.4 per cent, respectively. A growing population with a rise in nuclear families and a growth in the overall construction industry will help the company grow.
• Valuation: The stock will be priced relatively higher than its peer in terms of both P/E and P/B.
• Overview: Overdependence on the US for business makes it susceptible to the macro headwinds. A growth in nuclear families, preference given to organised players over unorganised players will augur well for Global Surfaces in the long run.

About the company
Incorporated in 1991, Global Surfaces is engaged in processing natural stones and manufacturing engineered quartz. Their products have application in flooring, wall cladding, countertops, etc., and are widely used for commercial and residential industries within and outside India.

Strengths:

• Wide product portfolio and innumerable designs.
• Established presence in international markets like the USA, Canada, Australia and the Middle East.

Weaknesses:

• Geographical concentration: Global Surfaces has derived a significant portion of its revenue by exporting its products to the US. In FY22 and for the first six months of FY23, the revenue generated by exporting to the US was 99.1 and 94.9 per cent respectively of their operating revenue.
• Availability of substitutes: There are other alternatives available in the market such as tiles, laminate and soft flooring which are gaining popularity amongst people, as these materials are easy to use and do not require additional coating.

Disclaimer: This is not a stock recommendation. Do your due diligence before investing.

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