Ladies and gentlemen, good day and welcome to Somany Ceramics Limited Q4 FY 2024 Earning Conference Call hosted by Asian Market Securities Private Limited. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ from such expectations, projections, etc , whether expressed or implied.
Participants are requested to exercise caution while referring to such statements and remarks. As a reminder, all participants' line will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhatelia from Asian Market Securities Private Limited. Thank you and over to you, Mr. Karan.
Thank you, Manuja. A very warm evening everyone. On behalf of Asian Market Securities, I welcome you all to Somany Ceramics Fourth Quarter FY 2024 Results Conference Call. We have the senior management team with us to take us through the results and then Q&A. With that, I hand over the call to Abhishek Ji for his opening remarks. Over to you. Thank you.
Should I begin?
Yes, sir. Please go ahead.
Good evening, ladies and gentlemen. For the earnings call for FY 2024 and also for Q4, first of all, let me apologize for the delay. Our board meeting ran a little longer than expected and therefore, the delay on uploading the results and we got delayed by half an hour. Apologies for that. I would go through the market dynamics and also the way forward and the year gone by and then leave the financial discussions for Q&A. As we all know that this year has been a very, very tough year and it's been probably one of the toughest years for the building material industry. The demand has been sluggish both in the domestic and in the export front.
Export because of the various issues around freight and the war and domestic because all the buildings construction which was ready has been delivered and all the new construction tiles comes at the last leg. Therefore, we expect that H2 and even beyond is where the tile demand would start picking up. So it's been a very, very tough year where there was an additional pressure on the domestic market because of the lesser than expected export sales. More geopolitical. The positives have been that the pressure on our raw material, specifically gas, has been not there. We've seen gas prices going down. Just to point out, in FY 2023 the average gas price across the year was INR 59 a standard cubic meter and in FY 2024 it came down to INR 45 a standard cubic meter. So there's been a reduction in that respect.
Other than that, we've also done a lot of work on production efficiencies and various other cost measures which has led to a better EBITDA. However, if I take you through the numbers of FY 2024 and also Q4 2024, we've done a sale of INR 732 on a consolidated level and INR 2,575 on a FY 2024 level. EBITDA on a consolidated level is up from 9% to 10.9% and on the entire year from 7.7% to 9.8%. Similarly, the PAT and the PBT has also gone up subsequently. The capacity utilization has been approximately 86% for the FY 2024, down by a percent and a half from FY 2023. Q4, we were up a little bit Q -on -Q and also YoY by approximately a percent on the YoY. The capacity utilization comes at 89% for the quarter and 86% as far as FY 2024 is concerned.
The segregation between ceramic, PVT, GVT, as mentioned earlier, our focus is on GVT and we have been able to increase the GVT share by 2% overall on FY 2023 to FY 2024. So from 32%, now GVT share in our portfolio is 34%. If I talk of quarter four only, it is up from 32% last year quarter four up to 36%. So 4% increase on GVT in quarter four FY 2024. Gas, I have already spoken about. As far as the brand spend is concerned, we have spent approximately 2.5% of revenue on the brand. Most of that has happened in quarter two and quarter three. Capacity utilization in the sanitaryware segment is at about 70% and the faucet segment is run at 100% capacity utilization. The other highlight is, on not a positive side, is the ASP.
Our ASP has gone down a little bit due to the added pressure and the sales incentive scheme which we have given to promote sales. The guidance for next year is that we are looking at a low double-digit growth, largely fueled by volume on the back of the new Max plant which has started and all the other plants also which are running at capacity. We have a total capacity of approximately 78 - 79 million square meters of installed capacity. This year we sold approximately 68 million square meters, therefore, we have enough capacity in hand to get our growth for next year.
The EBITDA target for next year for the forward statement for EBITDA is an improvement of another 1%-1.5% on EBITDA, subject to a stable input, specifically gas pricing, which is extremely volatile due to the various wars which are continuing in the world. The other third point I would like to specifically mention here, the brand spend also this year we expect to increase to closer to 3% of revenue. I would now open the floor to Q&A and welcome any questions on the FY 2024 or the quarter four numbers. Thank you so much.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on their touchtone telephone. If you wish to remove yourself from the question queue, you may press Star and Two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi. Thank you for the opportunity. Congrats on a strong set of numbers. I want to get a more sense on the bathware business. If you look at this bathware business, it has just grown 9% year-on-year in FY 2024, just a single digit growth on such a low base. How do you see this business growing in FY 2025 and in upcoming years?
We are again looking at a double-digit growth over here. I think sanitaryware is one place where we have struggled in the last year. Bath fittings has done very well. I can give it to you separately for bath fitting and sanitaryware offline. The same reasons, I think the whole building material industry, which is the front of the wall, has suffered entire last year in the sanitaryware industry and also the tile industry. I do understand it is a low base, but again, we are not the strongest of players in the bathware like we are in tiles. There is a lot of other multinationals and also big players like Parryware, Cera, in the domestic market who also have kind of struggled across the year for a double-digit growth.
Understood. Got it. What would be your sense on what sort of Morbi thing in the domestic market? Are they dumping what is happening because export has sort of weakened? How do you see the scenario?
Yes, a little bit of dumping has happened in the GVT because a lot of the plants which came up in Morbi were primarily for export market and export kind of crumbled in quarter three from an average of about INR 1,800 crore -INR 1,900 crore a month. It crumbled to about INR 1,300 crore, even in one month to INR 1,200 crore. Not everything came into domestic market, but that did put pressure in the domestic market.
Got it. What is the plan on the CapEx side? What sort of CapEx should we model for this and next year?
I would let my finance team answer that.
We are not planning much any major CapEx in the next financial year. It will all be routine CapEx, routine in nature. So maybe around INR 50 crore -INR 60 crore is what we are targeting next year. Unless we undertake any modernization project, that is something which we will decide into this.
Okay. How is the progress happening on the Nepal project front?
Pardon?
On Nepal project you had in pipeline.
Nepal project is again due to issues over there of rain, this, that, and the other that is delayed a little bit. It will probably only be in place next year. Even from that point of view, Nepal market, which is estimated to be a 25 million square meter market, last year it slowed down to approximately 13 million - 14 million. Currently we have enough material to sell in Nepal, so we are in no major hurry to bring that plant up to stream. It is better that it comes in next year.
Okay. Next year, will it be in H1 or H2?
H2.
H2. Okay, got it. One last question from my side. How many dealers you have added in this year, and what are your future plans?
We have added almost 110 net dealer addition this year. Gross number is much higher, but there are certain deletions as well on account of various reasons.
Non-performing dealers.
Yes. Net addition of 110 dealers during this fiscal we expect.
I think we would add anywhere between 100 - 150 dealers next year. We are also going to try and see as to how the net addition goes up a little more, where we have lesser number of non-performing dealers coming out.
Okay, understood. Thank you. That is it from my side.
Thank you. The next question is from the line of Rohan Shah from Valorem Capital . Please go ahead.
Hello. Am I audible?
Yes, sir.
Yes, sir.
Yeah. Hi, sir. First of all, thank you so much for taking my question. My first question would be, what do you see the demand in the next two, three years, considering that real estate is booming and people are wanting to renovate their houses or buying new houses, and the tile demand not just on floors now, but on walls as well as on dining tables. Do you think we should see a good growth after H2, as you said, for the next two, three years?
Yes, Rohan, absolutely. I think you have touched upon two separate items. You have touched upon a segment which is very nascent in India, which is the furniture and the tabletop segment. That will grow in time. Obviously, the figure is very low, but that is a separate animal altogether. But obviously it will aid a little bit of value and also a little bit of demand for the tile industry. For example, a lot of ceramic wooden strips have replaced the normal wooden strips in the industry. The same way the tabletop, there will be a little bit of cannibalization where we will try and replace the agglomerate marble, the granite and that market. But it is not a very big thing in terms of today's market size. But yes, it is slated to grow in a very big way.
But you are very right, the real estate market is booming, and a lot of new construction is going to be happening, both in terms of buildings, with the better builders building more and more, and also the IHBs, the individual home. So in both, that will come more in Tier two, Tier three towns. So our concentration is on both accounts, on the projects and the government projects in the big towns and the small IHBs in the Tier two, Tier three, Tier four towns. So both places we are concentrating retail on the smaller towns, projects on the bigger towns. We do believe that probably Q3 and Q4 onwards, there should be a huge traction in this demand.
As far as the total tile demand is concerned, I think the industry domestically is slated to grow at about 4% - 5%, maybe 6%, and to that extent, we would grow almost at double that rate. I said that we are thinking of low single digits. The industry, as far as export is concerned, is volatile. It depends on many factors, but export also is slated to grow in a big way. So we expect an addition of approximately INR 2,000 crore -INR 3,000 crore, if not more, on the current base of approximately INR 19,000 crore of exports.
So closer to the INR 23,000 crore - INR 24,000 crore export. The total tile market, we believe, is about INR 56,000 crore -INR 58,000 crore, out of which about INR 19,000 crore is export, and the balance is India. So that is the growth projected, and let us see how the real estate market chugs along in India. But we are very sure that next two, three years are good years for the total building material industry.
Okay, sir. That seems encouraging. Sir, you touched upon exports as well, so that was just a small question from my end. What is the current situation of exports? Because if that goes to a good amount, then we might have no dumping from Morbi because they all would be focused there. Currently, what is the scenario you are seeing in the export market?
No, I don't have exact scenario, but what I do hear is it is up from the INR 1,300 crore to approximately INR 1,700 crore track rate right now.
Okay. Okay, sir. That would be it from my end. Thank you.
Thank you. The next question is from the line of Jyoti Gupta from Nirmal Bang. Please go ahead.
Thank you so much for letting me ask questions. Good set of numbers, sir. I would like to understand could you realization in terms of GVT, PVT and ceramics. Is it possible to get those numbers?
Jyoti, we could not hear you. You got cut off. Could you please repeat?
I said, could I get the breakup of the realization, GVT versus PVT and ceramics?
Jyoti, that's confidential data. I would not like to discuss it openly.
Okay. The other thing is, my next question is on the GVT side. It's understood that possibly the realizations that are coming from GVT are higher compared to the other two segments. So where do we see GVT in the next two years from 34%? Does it go to like 40% or 36%? What's the kind of guidance would you like to give on that?
Jyoti, I had given a guidance last couple of quarters considering that we put in three plants with GVT. Can you hear me?
No, actually, your voice is breaking in the entire conversation. Even in the midst, I've not been able to hear your talk, actually.
Okay. If somebody can just warn me if the voice is not clear, because here, everything is completely clear.
Okay.
It's clear? Okay.
Yes.
Manuja, is it clear?
Yes, sir.
Yeah.
Jyoti, I had guided even last couple of quarters. If you see our expansion which has happened, we put a GVT plant in our plant in West India, which started in 2023 at Q4, and then we put an expanded capacity around the same time in our south plant for expanding our GVT capacity. The last GVT capacity addition has been this Somany MAX, which started in January 2024. All put together, the GVT capacity is now adequate for the next 18 months. From that point of view, currently, we are at 34% market share of GVT of our portfolio. We do believe that next year this will be notching up closer to 38% and going forward to 40%.
Perfect.
If you see quarter four, we are already at 36% share.
Yes, sure. That is why, because obviously since you are increasing and the rest of the team are actually decreasing, so obviously this means that the realization from here is better, and which is also reflected in numbers. Is there any component of premiumization as well, which is factoring in your realization number as well?
Yes. In fact, because of the premiumization, we have been able to not substantially go down on the average sales price if you see, considering that the market was far more under pressure than what our ASP has gone down. Going forward, GVT of course gets us a better realization, and the Max plant will give us even better realization when it sells more of that product. But having said that, GVT is the segment which is also under the maximum pressure in terms of pricing, because everybody seems to be making only GVT. It is not going to be easy route forward. But very clearly our ASP will only go up more and more the GVT goes up.
Okay. One last question I would like to understand. Like FY 2024, do we see such kind of pressure in terms of exports, and do you think is that going to really spill over the market, domestic market in any material way? I mean, negatively impact the market in any material way.
Due to export?
Yeah. We had a decline in export market, right? Do you see that
Yes, we had a decline in the export market in quarter three, but since February, March, it is again back up from INR 1,300, INR 1,200 crore a month to about INR 1,700 crore a month now.
Okay. So you think that from here, the export market is only going to build and any negative impact of it will not be there in the domestic market for FY 2025?
The negative impact, export was not the only reason for the negative impact. The market also has been sluggish. Quarter three was extremely sluggish. We cannot only point fingers at exports. That only added to the worry. But yes, export is at INR 1,700 and growing. From that perspective, hopefully more capacity would get consumed in the export market. Having said that, in the domestic market also, it was, I think, more than the price pressure, it was also our extra incentive and discounting which we gave, which brought down the ASP. It was a host of everything put together.
Okay. That will be all, sir. Thank you so much.
Thank you.
Thank you. The next question is from the line of Keshav Garg from Counter Cyclical PMS. Please go ahead.
Firstly, I wanted to congratulate you for outperforming the industry in the fourth quarter of last financial year. Also, sir, the performance of the company is very commendable in terms of our working capital management, the debt reduction, and also the cash flow has very strong. I hope that the company continues on this growth path. Sir, just wanted to understand that, sir, now if we see that since 2017, our EBITDA is more or less stagnant, even though last year the EBITDA has increased. Basically our operating margins have reduced from 14% to 9%. Sir, what will it take for the margins to again go back to the earlier mid-teen levels?
Yeah. So thank you, Keshav, for it. Yeah. Thank you for your compliments, I would say. Yes, the performance is increasing trend that you have already mentioned. But I would like to clarify that there is some pressure on our receivables, and that is predominantly because of the March phenomena because this year March, we have reported a better growth as compared to the preceding year March, and that's why balancing number you could see there is three, four days of operation. Coming to your EBITDA action, 2017 versus now. If you see last two, three years EBITDA trend, that is something which is consistently on an upward trend, and we have been maintaining our guidance that our normalized EBITDA margin is something which should be around 11% or so, ± 1%, 2%. We are reaching towards that normalized trajectory of EBITDA. I would say going forward also, this year we closed around close to 10%, and we are expecting around 1.5% improvement going forward on EBITDA.
I would also like to highlight that other than us, I think pretty much everybody in the industry has had no serious EBITDA growth. I do understand that there is a difference between us and market leader in terms of EBITDA. We have been able to bridge it a little bit this quarter and this year, but otherwise there has not been any EBITDA increase across the board in any building material industry.
What has happened is that, of course, the additional capacity, additional volume has come, but it has come at the cost of higher gas cost and also a larger pressure on pricing, specifically due to the overcapacity in Morbi. Which currently, I must state that the pricing in Morbi has more than bottomed out. Anything going forward now is getting compromised on the product, and the dealer and the consumer is clearly being able to visualize the compromised product which they are getting at a cheaper price.
Sure, sir. And sir, can we expect the fourth quarter profit to sustain on a quarterly basis going forward?
Not for quarter one and quarter two. Quarter one is extremely sluggish, specifically because of the election. You must appreciate that all the labor goes back for voting. Plus, our business has certain other elements which restricts the purchase, if you know what I am saying. In these two months, the builders are extremely cautious. From that point of view, the election months are weak months normally, any which ways. It has been added this time because it is early.
The elections normally are in May and June, so April and May are going to be sluggish months. So quarter one, please don't expect any huge growth from that point of view. But yes, from H2 onwards, this will start becoming extremely robust. The growth will start getting extremely robust, and I would be able to maintain these margins because the sales would start coming to the similar levels as quarter one from Q3, Q4.
Just to add, Abhishek Ji, please understand, whatever guidance we give, be it on top line or margins front, we try to maintain our guidance for an annualized basis. So it should not be extrapolated on quarterly basis.
Sure, sir. Also wanted to understand that, sir, the difference in the margin between the industry leader and us, sir, is it only due to higher operating leverage that the industry leader enjoys, or is it that our average selling price and the product mix is also inferior to the market leader?
Yes. Our product mix and the selling price is inferior to the market leader, number one. Number two, of course, operating leverages do come into play. Number three, a much larger part of his manufacturing is in the north, which is approximately 50%, and there is a favorable gas pricing in the north compared to Gujarat and also compared to south, mainly compared to the south. Proximity to the market also makes a little bit of difference for industry leader, for the southern market, which is a very strong market for both of us. These three attributes put together are the reason for the difference in the margins.
Sir, and lastly, sir, since we don't have any large CapEx plan for this financial year, do you think that the company will become debt-free by the end of FY 2025? Sir, if so, are there any plans for a further share buyback?
If you see at the standalone level, we are anyway net debt plus for last two years. There are some debts on consolidated level, and I think we have explained multiple times in past, so no point repeating it again, that it's a CV debt which is for the funding in various multiple small cities. CV is for project financing. We have been amortization schedule for almost INR 40 and odd crore every year. As of now, our long-term borrowing is around [inaudible] . Yeah, it's around INR 185 crore INR long-term borrowing. It would get amortized over the period of three to four years. So there is no point mixing the cash surplus generated as a holding company at standalone level with the FCV debt, which is the fair policy which we have been maintaining.
As far as capital allocation is concerned, we will see how and when the cash flows are, whether we need it for expansion. If not, then we will obviously have a more favorable dividend payout, or I'm not too sure about a share buyback, if that happens or not at that level, but definitely would be more favorable dividend payouts.
And that is something which is demonstrated in last 24 months also. We have done our CapEx of almost INR 400+ crore , and only a marginal debt of 25% we have taken, and that too in FCV. Otherwise, entirely from internal sources only.
Sure, sir. Thank you very much, and best of luck.
Thank you so much.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we will request you to rejoin the queue. The next question is from the line of Jenish Karia from Antique Stock Broking. Please go ahead.
Yes, sir. Thank you for the opportunity. Sir, like we mentioned in fourth quarter, there is a 400 basis points improvement in our mix towards the GVT side, which is great. But if I look at the gross margins, that is not being reflected in the gross margins. Despite our gas cost reducing by 400 basis points on a year-over-year basis, the gross margin expansion is only 200 basis points. Could you help us with reasons for this?
I think we mentioned that GVT is something which is on one end growing, but also under pressure in terms of pricing, and everybody seems to be putting GVT in place. In fourth quarter, there has also been an added sales incentive which has been given to expedite further sales. Coupled with that is the reason why the increase over here is 400 basis points and the increase at the bottom line is only 200 basis points.
Is it possible to quantify the discounts we gave?
Not really. I cannot quantify the scheme and the discount because it is product wise, size wise, region wise, so it is quite a complex matrix.
Understood. Sir, just to understand the pressure in terms of GVT pricing, if you can just help us, the premiums of GVT, which were, say, two or three years ago and what are the premiums to the ceramic or PVT tiles so we will understand what the kind of pressure the GVT is and we can accordingly build in the numbers.
I don't think you will be able to do that and build a number in there because GVT is also getting premiumized. For example, the commodity which used to be a GVT, the bigger sizes like 60x120 which was supposed to be a premium size has become a commodity size and the larger sizes have taken over which is 80x160, 120, 180 and even the largest slabs. It's a question of how quickly we can now move towards the larger slabs and arrest the ASP falling. Just by giving you that number and you doing a modeling, you would completely go wrong with that. Maybe offline we can speak and I can give you a little more insight.
My team can give you more insight as to what the number was of the 60x120 two years ago, what the selling number is of 60x120 in terms of volume and value. Similarly, the three core sizes which were non-existent three, four years ago today has come up in a small way but it's also growing very quickly. When that happens, that's when it will arrest the ASP going down because of 60x120 and 60x60. You won't be able to model exactly. It would be a wrong model.
That's helpful, sir. Thank you so much for that. Second is on the working capital side.
Sorry to interrupt, Jenish. I request you to rejoin the queue.
That was only one question. It was a follow-up on the previous question only.
Okay, sure.
Yeah. Second is on the working capital side. While our working capital has improved significantly on a year-over-year basis, a large part of the improvement is because of higher payable days and lower inventory days. Is this a normalized scenario or there was some one of you would like to clarify?
I think this is a normalized scenario. Only thing which may happen henceforth is a small reduction in debtor days, but otherwise it is a normal scenario.
Yeah. Only clarity is whatever shift you are seeing last year versus this year, that was something because of some arrangement and we have already clarified earlier. But going forward, whatever level today, it should be maintained. It would maintain.
Okay, sure. Thank you so much. I forward back in queue. Thank you.
Thank you. The next question is from the line of Shrinjana Mittal from RatnaTraya Capital. Please go ahead.
Yeah, hi. Thank you for the opportunity. My questions are answered. Thank you.
Okay. Thank you.
Thank you. The next question is from the line of Sneha from Nuvama Wealth Management Limited. Please go ahead.
Good evening, sir, and congratulations on great cash flows and balance sheet improvement. Just couple of questions from my end. Firstly, you mentioned that you expect 5%-6% growth on the domestic industry. Just two things here, of course, you are looking at a higher growth which is lower double-digit growth which guides for market share improvement. The point I am trying to make here is that, what do you look at? Why do you look at only 5%-6% given that we are expecting improvement in the real estate scenario and pick up in tiles sales given that there is so much inventory being sold out and we will have better scenario coming ahead for tile or even other building material categories for that matter?
Yeah. To clarify, Sneha, it's 5%-6% domestic growth which we're talking and not the entire industry. Export, I'm not too sure as to what that growth will be. On the domestic front, there are two reasons why I say it's going to be 5%-6% because if you see the Morbi industry, unlike the branded players which are between 70% and 80% retail and most of our tonnages go into retail and only 12% go into government for us, 8%, 9% go into private projects which are increasing. But if you see Morbi, other than export, if you see their sales, a good 50%-75% of their sales between the medium run brands to the small brand is in the projects. They're already well entrenched in product in the project segment.
For them to grow on a very high base of project sale, therefore I'm saying 5%-6% would be the growth in the industry and not higher for them because their concentration is more towards export. If I had to do the numbers with you on the top four, five players, six players growing at single double-digit at much higher base and all the rest of them growing at 5%, if you look at the absolute square meterage which will come out, that math will tell you.
Understood. We'll try and work on that matter. Sir, secondly, on your margin guidance, while you said that 11% ± 1%, what I'm trying to understand, in the previous quarters, in the past years, we've even seen your margins swinging upwards of 13%, 15%-odd percent. Now with your GVT portion increasing, why don't you expect a higher EBITDA margin? Is it that market is very competitive at this point of time or is there higher discounting taking place? Some sense there would be helpful.
The 14% EBITDA was only five, six years ago, or in 2017, it was that year. Since then it's been sub 10%. In fact-
Not annualized numbers, sir. On the quarterly level. We have seen that happening in Q4s, and this time we are at about 10.8%. We have seen your Q4 going up to
Back to last year Q4. That was a one-off. Otherwise, if you see on an annualized basis, it has been steadily going up and we are talking of annualized basis only, that 1%-1.5% we are looking at EBITDA increase. There is no turning back from a huge amount of pressure on a commoditized product like us in the market. That has been the scenario for the last 20 years. Every time there has been a good year, a good two years, there has been an influx of capacity which comes in. Again, we brace for impact for those one, two years of extended capacity. Yes, there is discounting, there is additional capacity in the system considering Morbi. If you see the number of units which are running today in Morbi, we are only at about 65%-70% capacity utilization. Therefore, clearly there is pressure.
I don't think we have ever seen a single year where there has been no pressure in the tile industry in terms of demand versus supply. We are being cautious in saying that this is something which we are sure we would be able to achieve, having said that the volume would grow in the single digits, high single digits or the low double -digits, whatever it may be. Why I am saying that and why I mentioned that is that this year again, we had said something and the whole industry really could not perform. So I have been cautious because it has been so volatile the entire two years.
Hopefully this year, with everything else in our favor in terms of the raw material prices and also in terms that the building material industry, real estate industry, finally after five years is really looking up, and generally it is a five-year cycle for the real estate industry because whatever launches they do, phase one, phase two takes between two and a half to five years to deliver. Therefore, we do believe that there will be good traction in the Indian real estate industry and also the IHB industry. So very confident of that. On the EBITDA, we are sure we would be able to increase subject to, of course, gas pricing remaining stable by 1%-1.5% or more.
Understood, sir. Last question from my end. Given that you mentioned your lower double-digit kind of guidance, and you also mentioned that you expect Q1 and Q2 to be slightly subdued, do you have any breakup in terms of our understanding that how much high double -digit can we expect in H2 and what sort of a single digit can we expect in H1? Any sense there?
You see, quarter one, I don't think there would be any serious growth coming in at all because quarter one first few months are going to be super tough. I think everybody across industry is feeling that, so I'm not the only one. Yes, I would be able to give you a better breakup maybe in the next call as to what it would be quarter -on -quarter.
Understood, sir. Thanks a lot, sir, and all the very best.
Thank you. The next question is from the line of Amit Purohit from Elara Capital. Please go ahead.
Yeah, thank you for the opportunity, sir. Just one thing on the large tiles that you highlighted. Have you seen pricing pressure in that category as well or that is slightly lower in terms of availability, not much of capacities are available relative to the normal GVT or what is the scenario there actually at an industry level?
The scenario there is, yes, there is lesser competition, but the issue there is that with a lot of the Morbi industry going kind of unchecked because it is an expensive tile, there is more scope of the spurious practices which they adopt. Therefore, from that point of view, there is pressure, but otherwise anybody buying a better product generally would want to lean towards the better brands. But yes, there is that unfair competition which we face there a little more than in the normal tiles.
Okay. Then effectively they pass it on in terms of pricing or you think?
Yeah.
Okay.
Yeah. Obviously, if there is going to be unfair practices taking place, the landed to the dealer becomes that much lesser. From a consumer's point of view, when he is looking at a particular tile, there is a decent amount of difference because of that element coming into play.
These tiles are finding application more in the projects, rather than on residential.
Not really. Even in residential, these tiles are being put, but it is largely architect and influencer led.
Okay. Sir, anything on the Morbi capacity addition? Any sense there?
I don't think there is any capacity addition taking place right now. Whatever capacity is to come in, will come in in the next three to four months, which I believe is another six to seven plants, mostly export-oriented. The amount of plants which are coming, that many plants are also going to shut down. The non-viable ones, the smaller plants, the very expensive plants in terms of gas pricing. I don't think any significant new capacity is coming up in the next 12 months.
Okay. When you say these plants which come in, they typically are at a significantly higher capacity than the earlier ones, right?
Correct. They are typically more efficient plants.
Okay. Thanks a lot, sir. Thank you. Wish you all the best.
Thank you so much.
Thank you. The next question is from the line of Ashish from Investio Investment Advisors. Please go ahead.
Yeah. Thank you so much. It's been a bit perplexing to understand why-
I cannot hear you. I am sorry, I cannot hear you, Ashish.
Yeah. Is it okay? Is it better?
Much better, yeah.
Yeah. It has been very perplexing to understand why the building materials industry has not been able to grow in the last year, despite, I mean, whatever bounces we have seen in real estate and the trend that we are seeing in real estate. So any data analysis that you would have gone through where, or on your experience to which values the difference between the growth of the two industries.
Ashish, I am really sorry, but I could not understand anything of the question.
Just give me a second.
I cannot hear you very well. It is a mumble.
Yeah, hello?
I am sorry, I cannot hear you very, very well.
Manuja, can you please check if it is good audio at your end? Else we can move to next participant.
Yeah. Maybe we can move and we can come back up the queue.
Thank you. The next question is from the line of Utkarsh from BOB Capital. Please go ahead.
Yeah. Hi, good evening, sir. My first question here is regarding your Max plant . If you can just give some sense what would be our current operating rate, and at what level do you expect to operate the plant by next March quarter?
Currently, it's running between 40% and 50% capacity utilization. And hopefully by March, we should be in excess of 80% capacity utilization.
Okay. And sir, I need just few data point, if you can help me. What would be the share of ceramics and PVT volume mix for March quarter and also for FY 2024?
Yes, of course. Ceramic FY 2024 was 37%, PVT was 29%, and GVT was 34%. If you look at quarter four FY 2024, ceramic was 35%, PVT was 29%, and GVT was 36%.
Okay. And sir, what would be our ad spend in Q3 and Q4 of FY 2024 and Q4 of FY 2023?
The ad spend was 2.5% of revenue, and largely the ad spend happens in Q3 and Q4.
Okay. Has it remained same versus on a year-over-year basis?
Yes, it remains the same. This year we expect it to go up.
Okay. What is our revenue growth for sanitary ware and faucet for March quarter and for FY 2024 as well?
It is 7% for Q4 and it is 9% for full year.
I am asking separately for sanitary ware.
Sorry, I do not have the number for Q4. No, the absolute number for Q4. Yeah, it is 7% growth and 9%, but I do not have the exact absolute number.
Okay.
It is INR 80 crore of the bathware business in Q4. And last year, Q4 was INR 74 crore.
Sir, we have that data from the presentation. I am asking separately for sanitary ware and faucet.
Yeah. I am giving you sanitaryware and faucet only.
Okay. I will take the data offline, sir. Thank you.
Thank you. The next question is from the line of Yash Dedhia from Maximal Capital. Please go ahead.
Am I audible?
Yes.
Hello. Is it now okay?
Yes, please.
Yeah, it is good.
Yeah, thanks for the opportunity and congratulations on the numbers. Very good numbers. I just wanted to know a couple of things. What would be the proportion of natural gas cost in our total proportion cost?
What is the what in natural gas cost, I am sorry?
What would be the proportion of natural gas cost in the total cost?
Approximately 30%.
The EBITDA push which we are guiding about, say, 1%-1.5% in coming financial year, this financial year. What are the levers which we are banking on for the same?
The two levers are increased GVT production, and the second lever is capacity utilization, increased capacity utilization.
But the capacity utilization for this quarter is already high, pretty high. So operating leverage, the play out of operating leverage is not that great, if I am not wrong.
It is, because we can outsource a lot more.
Okay. That is it for me. Thank you. Thanks a lot.
Thank you. The next question is from the line of Miraj from Arihant Capital. Please go ahead.
Hello. Congratulations on a great set of numbers, sir. Just a couple of things from my side and one clarification. Firstly, I want to understand on the ASP front, how is this monitored? How does this fluctuate? Is it purely based on how much discounts you give, or what kind of demand struggles that happen are also factored in this? Because I want to understand if we are anticipating next year to have a very robust demand, our ASPs should increase from year on and this should be the bottom. That is my first question. The second question is, on the GVT side, if you could tell me what is our capacity in GVT and the utilization for FY 2024 in GVT.
Capacity for GVT, I don't have that number offline, but I'll give it to you. My team is working on it. As far as the first question is concerned, the pressure is all to do with the demand in the market and also to do with the premiumization. The ASP number going up or going down depends on how quickly we can premiumize, because with the commodity, there is more of a discounting pressure. There is a lot more players at the commodity segment than in the premium segment. So it's a question of premiumization, which we are continuously making effort to increase, and arrest the ASP or maybe increase the ASP. Your second question on what is our total capacity for GVT. Out of the 78 million, we have a capacity of 25 million of GVT. 21 million of that is our own capacity, 4 million is outsource.
Okay. Perfect. Thank you so much for that. As you mentioned, sir, that premiumization is one of the reasons that will take care of the ASP. Currently, could you guide us somehow, just give us some picture that from our sales right now, what percentage would be premium products, what percentage would be commodity products? If you could just throw some light on that.
That's a very complex matrix to give you because every product has a premium and a non-premium product. I'll have to take you side-wise. That will take a long time.
No worries. Thank you so much for clarifying these questions. Lastly, sir, you mentioned the guidance for next year is single digit, right? Single digit growth or double -digit growth? High single digits?
Low double -digit growth.
Low double -digit. Okay, perfect. Thank you so much, and all the best for the future, sir.
Thank you.
Thank you. The next question is from the line of Vineet Shanker from JM Financial. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. I just wanted to ask if you can give us the absolute gas prices for RAS, Gujarat gas and the biofuel , and also the mix, if you can.
For South, it is INR 50 a standard. As we speak, this month, last two, three months' average is the best guidance. So that's what I'm telling you. South, it is INR 50 a standard cubic meter. In Morbi, it is INR 47 a standard cubic meter, and in our North plant, it is INR 45 a standard cubic meter. If you look at the entire year, South has been INR 52 a standard cubic meter, Morbi has been INR 45 a standard cubic meter, and in the North, it's been INR 43, INR 44 a standard cubic meter.
Thank you. Sir, just wanted to confirm again, Morbi, currently, what is the price?
INR 47 currently, and INR 45 for the year.
Okay, got it. Sir, if you can also give us your retail and institutional sales mix.
Sorry?
Retail versus institutional sales mix, B2B versus B2C.
80%-20%. Our retail is almost 80% of our sales mix, and 20% is coming through institutional, which comprises various segments, including the government contracts, the private builders, the corporates. All these institutions put together is around 20%. And 80% is coming through our retail network, which we call dealer network.
Okay. We still must get up the team for the government segment. Are we doing anything-
Can't understand. Lower your voice.
Just a minute. Repeat the question.
Sorry. One of our competitor has aggressively gone into the government project side and is increasing their team size in that particular segment. Are we also doing something in that area, if you can highlight?
I mean, government projects are really doing well. We already have a team in place for government. Obviously, as and when the sale goes up, we keep increasing the manpower across India. Obviously, we cannot ignore. Government is 12% of our revenue, and that will remain the same or maybe go up slowly because government projects are really moving up the value chain.
Got it, sir. Sir, just one last question on the gas again. Was there any contribution of spot gas during the quarter?
Entire South is spot gas.
Okay. Got it.
Yeah.
Thank you.
Thank you. The next question is from the line of Abhishek Shah from Valcore Capital. Please go ahead.
Hi, sir. Thank you for the opportunity. I actually wanted to understand in terms of pricing, our average realization or at company level or at industry level, how has the pricing moved in the last 10 years? What we heard was prices have not increased for the last 10 or even 14 years. Just wanted to check, is that correct, and maybe if you can help us understand that better. That's one. Second question is, if I look at most real estate developers, the listed players at least, their sales booking has actually gone up 2 x or even 3 x, some even 4 x over the last couple of years. So we're not talking about 10% or 20% growth, we're talking of multiples. What I am trying to understand is, if there is a lag of two and a half years, could we see that level of growth coming in our industry as well? Are we prepared in terms of capacity if something like that comes, will we be able to take advantage of it? Thank you.
Your first question, absolute figures have gone up because tiles have become larger, better, thicker, and also more in GVT and PVT than ceramics in the last 10 years. If you look at the absolute number, yes, it has gone up, but otherwise you are very right in saying that in 10 years, inflation-adjusted prices have only gone down. It is probably the only industry in the building material where prices have become much more under pressure. Some of it is positive, which is because of operating leverages, the indigenization of machinery, indigenization of plant, the total capacity going up, efficiencies of plant, et c. I think the absolute pricing obviously has gone up on two accounts, premiumization of tiles and also gas prices going up, so that pushed up the prices.
Pressure is because all of this has come at a cost of an inflation-adjusted situation, which is not favorable for the industry. I hope I am able to answer the first question. The second question, Morbi is running at 65%-70% capacity. Yes, in case there is a huge uptake in the building material, which is not going to come over one year, which we are pretty sure if it comes over five years, we are very well poised to do that. Any new capacity in the industry to be put in greenfield takes about 15 months, brownfield takes about nine months. Yes, currently considering that 25% of Morbi is underutilized, there is more than enough capacity for us to take that advantage.
Got it. Sir, just one more thing. There are talks about U.S. imposing anti-dumping duty on exports from India. How will that impact our sector? I want to understand. Apologies if this was-
Our industry doesn't. We don't export to the U.S. at all. What we're hearing is that the U.S. duty which they were talking is not going to be as severe. I'm nobody to take that call as to how severe it will be. I do believe that U.S. in the total gambit is approximately, next year if we are looking at INR 22,000 crore, is approximately about 8%-10% is the value of the U.S. export. It's about INR 140 crore a year. It's about 7%-8% of the total export. Of which the duty will be put in probably 3%-4% of those materials.
It's not going to be a blanket duty across the tiles. I don't think that's going to move the needle too much. If you remember last year, we were afraid of the European duty and people were talking of 50%, 80%, 90% duty which Europe will impose on India, and finally it came at 6%. I do believe the U.S. is also going to be in the single digits or maybe in the very low double -digits as far as duty is concerned. I do not feel that is going to be a major concern for the exports.
Got it. Thank you so much, sir. Very helpful.
Thank you. The next question is from the line of Akshay from Canara Robeco Mutual Fund. Please go ahead.
Yeah. Thank you for the opportunity, sir. Just one question. You just said that retail is 80% and insti is 20%. If you see with all these real estate launches, et c, they fall under the insti part. Morbi is already over-indexed there and they have spare capacity. Isn't it that Morbi will be much better way in capitalizing this demand versus us? How does it benefit us because we are more dependent on the retail side? Is it that you expect this 80%-20% share to shift? How does it benefit them?
No, the 80%-20% shares may not shift very much. I think it will be probably 75%-25%. Obviously, projects is going to be a lot thicker in the next couple of years. So we will increase our project shares by 7% from the existing 20%. That is one. Most of the projects beyond the point cannot be supplied only by Morbi. There's enough capacity in Morbi which is lying vacant. Some of it will be directly supplied to the project, some of it will be contracted by us. There's more than enough capacity available. That's one thing which we're not really afraid of.
Okay. Thank you.
Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Somany for closing comments. Over to you, sir.
Thank you for joining us for the earnings call. I hope this year is a much better year than next year. We are hopeful, backing on the real estate industry being extremely robust and strong. Minus the first quarter, which is going to be a very tough quarter due to elections, I think quarter three, quarter four onwards, we do see a good run-up for the next three to four years. Thank you so much. We would wait for the same call for the earnings call in quarter two. Thank you so much.
On behalf of Asian Market Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.