Ladies and gentlemen, good day and welcome to the Supreme Industries Q3 FY 2025 earnings conference call hosted by DAM Capital Advisors. As a reminder, all participant lines 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. Aasim from DAM Capital Advisors. Thank you, and over to you, Mr. Aasim.
Yeah, thanks. Good evening. Welcome, everyone, to Supreme Industries Q3 FY 2025 results call. We have with us the senior leadership team of the company who will take us through the quarter performance and after which we'll open the call for questions. Thank you, and over to you, Mr. Taparia.
Thank you very much, dear friend. I'm M.P. Taparia, Managing Director of Supreme Industries Limited. I, along with my colleagues, P.C. Somani, CFO, and R.J. Saboo, Vice President, Corporate Affairs and Company Secretary, welcome all the participants who are participating in the discussion of the unaudited standalone and consolidated financial results for the quarter and nine-month period ended 31st December 2024. The standalone results, consolidated results, are already with you. I will give a brief on company product operating performance and their highlights. The company sold 162,733 tons of plastic goods and achieved net product turnover of INR 2,488 crore with the third quarter of the current year, and sale of 158,025 tons of plastic goods, and achieved net product turnover of INR 2,429 crore with the corresponding quarter of previous year, achieving volume and growth of around 3% and 2% respectively.
The company sold 474,645 tons of plastic goods and achieved net product turnover of INR 7,336 crore in nine months of the current year, as against sales of 444,332 tons and net product turnover of INR 7,043 crore in the corresponding nine months of the previous year, achieving volume and product value growth of around 7% and 4% respectively. The consolidated operating profit and profit after tax for the third quarter of the current year amounted to INR 331 crore and INR 187 crore, as compared to INR 400 crore and INR 256 crore respectively in the corresponding quarter of the previous year, resulting in a decrease of 17% and 27% respectively.
The consolidated operating profit and profit after tax for the nine months of the current year amounted to INR 1,103 crore and INR 665 crore, as compared to INR 1,123 crore and INR 715 crore respectively for the corresponding period of the previous year, resulting in a decrease of 2% and 7% respectively. The business scenario of all the product segment of the company for the third quarter ended 31st December 2024, as compared to the corresponding quarter of previous year, has been as under. Plastic Piping System business grew 4% by volume and 1% in value term. Packaging Products segment business grew 9% in volume and 13% in value term. Industrial Products segment business decreased by 5% in volume and remained at flat level in value term. Consumer Products segment business decreased by 7% in volume and 5% in value term.
The overall turnover of value-added product increased to INR 961 crore in the third quarter of the current year, against INR 853 crore in the corresponding quarter of the previous year, achieving growth of around 13%. The company continued to remain debt-free and having a cash surplus of INR 290 crore as of 31st December 2024. Business outlook: The plastic pipe system business growth continued to be adversely affected due to adverse PVC resin price scenario and demand for infrastructure spend not picking up as anticipated. Considering better demand in the second half of the year in the segment served by the company, the company had earlier indicated 16%-18% volume growth for the current year for the plastic piping system.
The plastic pipe business was affected in the third quarter as PVC prices in the open market were quite low compared to domestic producer prices and due to extended winter rainfall in South India and some eastern states. The company expressed good demand from agri and housing segment for the last quarter. The entire distributed pipeline has de-stocked, seeing the continuous fall in PVC prices. As the prices reached a low level, the company expects good demand going forward in the current quarter. The company also expects some improvement in infrastructure demand as this being the last quarter of the financial year. The intermediate PVC prices have stabilized at a low level. Local makers are reducing their prices close to import parity. However, there was a move from local producer to impose anti-dumping duty on import of PVC suspension-grade resin. The decision from the Finance Ministry is still awaited.
Thus, the PVC resin price trend remains an uncertain area. As such, the company is not in a position to give specific volume growth guidance. However, as several brownfield expansion capacities are in place, the company with large portfolio SKU in the system is expected to grow 3%-4% more than the country growth in plastic piping system during the year. All brownfield expansion at various locations of plastic piping system are progressing smoothly. The company is well positioned to cater to increased demand of the product to increase available capacity. The company has reached annual capacity of 820,000 tons as of 31st December 2024, and with the completion of all the expansion plan undertaken in hand, total installed capacity of the piping system business vertical shall reach 900,000 tons by end of fiscal year 2024-25.
Three new greenfield plants for plastic piping division at Jammu, Bihar, and Madhya Pradesh shall be taken up for execution in the coming financial year. At all the three places, it is in company's possession, and detailed plans for product and capacity are being worked out. Equipment has arrived for polypropylene silent pipe system, which has been launched in technical collaboration with Poloplast of Austria during the first quarter of fiscal year 2025-2026. The newly introduced PE-RT piping system and double-wall corrugated pipe are witnessing increasing response. Plans to increase SKU and in bulk suction and secondary water segment are progressing well, until now the division reached to 629 SKU for 421 SKU at the beginning of the year. The company's plastic piping system is servicing 40 different application-based systems and continues to explore to add more value-added system.
The company continues to remain focused, immersed, and enlarge the product basket in its piping business and to increase the range of value-added product. The company now has a SKU basket of 14,234 number in piping system business vertical. The company's placed order for all necessary equipment and the work on civil construction is going in full swing at a new site in Kanpur Dehat, in UP for making windows. In the first phase, the company is planning to put entire window-making facility in Kanpur and cater to customers in Uttar Pradesh, Uttarakhand, and NCR area. The company expects to launch and supply window systems in the first half of fiscal year 2026. The business across the market of Sri Lanka is showing improved performance with better capacity utilization. The division has also participated in institutional business and made orders which are under execution.
Resultantly, the division expects about 20% volume growth in this business for the year with improved profitability. Trials have been successfully carried out for the newly developed cross-laminated film, and samples thereof have been sent to laboratory for testing and certification as well as potential customers for their evaluation. The company continues to expand its range and introduce various new models of chairs and cabinets in its furniture segment. 12 new models have been introduced in the first nine months of fiscal year 2025. The division continues to add showrooms to improve awareness of its range of premium products. Total numbers of showrooms exist 337 by end of December 2024, as of 31st March 2024. Focus on selling distribution channels and adding more retail outlets continues. In the industrial segment business, business conditions remain moderate.
However, the company expects demand scenario to further improve in the sector of home appliances and white goods, to constitute a large part of its business. It is also working to expand its customer base and develop the business in new sectors. With the revival in the business scenario of various appliance customers, the division expects better prospects going forward. The Material Handling Division remains focused on introducing new products and also investing in new machines and molds. Industrial molded pallets are seeing good growth, and the division continues to add new products in its range of pallets at a swing. Presently, the entire range of pallets is being manufactured at one location in Maharashtra. Going forward, the division plans to increase pallet manufacturing locations and likely to commence from March 2025.
Equipment for Bubble Guard boards shall arrive by end of the first quarter of fiscal year 2026 and likely to be in production in the July-September quarter. The division continues to strive to enlarge its customer base and product portfolio, paving the way for moderate growth. Composite LPG Cylinder Division continues to cater to existing overseas customers and also participate in various export inquiries. Supplies against new contract wins received for 10 kg cylinders from Indian Oil Corporation Limited are taking place regularly and shall be completed by February 2025. The division expects to receive orders for further quantity in continuation of existing LOI. Work on standard design of 14.2 kg cylinders for all oil marketing companies is under progress, and expectations generate good business during fiscal year 2026 and thereafter. Commercialization of newly developed CNG cylinders is likely to happen during this quarter of the year.
The Protective Packaging Division has enhanced its capacity utilization and focused on developing customized solutions, and it is working well. The division continues to increase its fabrication capacity in various geographies to cater to increased demand. Expansion activities undertaken are progressing well and shall be fully in place by the end of fiscal year 2025. Negotiation for a suitable location for a new greenfield site near the port in the western region to cater to export opportunity and domestic demand has been initiated and likely to be concluded in the first quarter of fiscal year 2026. The Performance Packaging Division continues to utilize its capacity optimally and work on improved product mix and post-expansion value-added product with minimum investment. Export opportunity remains the focus area for better value addition.
Looking at the business outlook and opportunity, the company has planned and committed very high CapEx, including carry forward commitment of around INR 1,500 crore this year. Total cash outflow towards CapEx has been up to now INR 718 crore and likely to reach around INR 1,000 crore for the year. Entire CapEx shall be funded from internal accruals. This is a brief and overall summary for the quarter and nine months ended in the reference. Thank you for your presence. Now, I and my colleagues, P. C. Somani and R. J. Saboo, are available to reply to various queries raised by all of you. Thank you very much.
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one for the touch-tone 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'll wait for a moment while the question queue assembles. The first question comes from the line of Ritesh Shah with Investec. Please go ahead. Mr. Shah, please go ahead with the question.
Yeah, hi, sir. Am I audible?
Yeah, very, very audible.
Yeah, hi, sir. Thanks for the opportunity.
Sir, my first question was on window profiling business, what you indicated. What is the sort of capacity and the ramp-up that we are looking from this particular initiative of ours? I'm very glad that we are not going to sell profile. We are going to supply completely customized windows, and our annual capacity is 5,000 tons of PVC profile. Correct. Sir, can this 5,000 go to 20,000, 30,000? Is the market size that big, and do we aspire to be there?
Market size today is more than 130,000 tons. Thank you. We have a dream to be a big player.
Thank you. Mr. Shah, I will request you to rejoin the queue for more questions. Next question comes from the line of Shravan Shah with Dolat Capital. Please go ahead.
Hi, thank you, sir. Sir, just to correct me if I'm wrong, so now we are seeing for volume growth for pipe segment is 15%-16%. So nine months, we have done just a 7.8%. So growth rate for fourth quarter is close to 30%-34%. And are we seeing that kind of a traction in the month of January and confident that we can deliver this kind of a number?
The demand as it is remaining today, we are very confident. I can just recall you what I told last time also in the year 2022-2023.
We had 37% volume growth in the second half compared to the first half. This year, the third quarter of the second half was poor. There is a huge destocking taking place in the entire value chain, be it wholesaler, be it semi-wholesaler, be it retailer. And the demand prices are so low, it is very much affordable product. And fortunately, we got capacity available. We got so many new systems operating, and we got more than 14,000 SKU. We are very confident that if no disturbance takes place, we are going to achieve the number what we are telling you.
Okay, okay. Got it.
Sir, in terms of the capacity expansions that we are seeing, that 9 lakh tons by this year in the three places, Jammu, Bihar, and MP, so there, how much capacity are we looking at and how much will likely to come in FY 2026?
When we plan, when we come with our final accounting year on April, that time we will tell you the plan for this new location. As of today, we have got the land in our possession. The plan, what capacity, what product we are going to make there will be announced only on 24th April, which is our meeting to close the account of the year 2024-25.
Thank you. Mr. Shah, please rejoin the queue for more questions. Next question comes from the line of Sneha Talreja with Nuvama. Please go ahead.
Good evening, sir, and thanks a lot for the opportunity.
Just to clarify the last previous participant's question, did we mention as far as ask rate, according to your interviews, around 24% on quarter four numbers? Are we confident on the base of 41% growth of last year that we can still do 24%+ ?
Yeah, confident. Whatever number we told you, nothing unusual thing happens. We will be assuming the number what we are talking.
Sure. Secondly, sir, just wanted to understand the inventory loss that you've mentioned on the interview. What is the quantum of the same?
The right thing about inventory loss, we should talk in April, but as of first nine months, because the inventory loss was not only in PVC, it was in polyethylene also, and which was in excess of INR 100 crore in first nine months. But correctly, inventory loss or gain, we will talk in April.
We are trending a little bit bullish.
Thank you. Ms. Talreja, please rejoin the queue for more questions. Next question comes from the line of Rahul Agarwal from Ikigai Asset Management. Please go ahead.
Sir, good evening. Two questions I had. First, sir, first question was, could you help us understand where is the demand so weak? Is it housing, is it agri, or is it infrastructure?
D emand is weak. It was weak. In third quarter, demand was very weak. This was third quarter. First, it was there; the demand was wiped out. And demand was also not so robust because the demand was there, but it was all supplied from the stocks. And the infra demand is not picked up.
Sir, that's what I was asking. Is it weaker in housing or agri or infrastructure?
Agri demand, as I told you, due to extended agri demand was very poor. Housing was low, but not so low. And infra demand definitely was non-existent. But we are a small player in infra.
Thank you. Mr. Agarwal, please rejoin the queue for more questions. Next question comes from the line of Navid Virani, with Bastion Research. Please go ahead.
Hello, sir. Am I audible?
You're very audible.
Y es, sir. Sir, I had one question around the rapid cash depletion which I'm witnessing. Sir, we had almost INR 1,180 crore worth of cash in Q4 FY 2024 at the end. But currently, we just have INR 300 crores of cash with us. I understand that we are going through a CapEx phase, but I still feel there is some other place where the cash is getting sucked up.
Is it fair to assume that we are sitting on large inventory pile right now, which is where the cash is getting tied up?
We have very good inventory pile now. We have heavy inventory with us.
Okay. So we are confident that the upcoming demand will help us.
Inventory will be completed in this quarter.
Thank you. Mr. Virani, please rejoin the queue for more questions. Next question comes from the line of Bhavin Pande, with Athena Investments. Please go ahead.
Hi, good evening. Am I audible?
Yeah, you're audible.
Yeah. Sir, what is the outlook of PVC prices and revival of demand? Thank you.
Demand is now there is no issue of no demand of PVC pipe. And PVC pipe, we don't see already it has come to a very low level. It's only trended.
Now crude price going up, rupee going weak, and the local makers are losing money at current price. Either anti-dumping duty may come or local maker will find difficulty to go on selling at such a low price.
Okay. That's helpful. Thanks a lot, sir.
Thank you. Next question comes from the line of Keshav Lahoti, with HDFC Securities. Please go ahead.
Hi. Thank you for the opportunity. Sir, how are the things going on OPVC pipes, and how are the expansion plan, whatever we have earlier in Vizag 30 KMT capacity by FY 2027, and is it running on par?
Now we have one line. Now we got three lines now. And three lines are capability going up now to annually around 9,000 tons per year. Okay. Got it. And last question, sir, any guidance on the margin side for this Q4? OPVC market margin is quite good.
For the company, yes. We anticipate this year's margin may be between 13.5%- 14% overall.
Thank you. Mr. Lahoti, please rejoin the queue for more questions. Next question comes from the line of Sonali Salgaonkar, with Jefferies Group. Please go ahead.
Thank you for the opportunity. Sir, my question remains on the demand. Have you seen or are you seeing the channels restocking again, and also how was the demand in the first 20 days of January across segments?
Demand is all segment are good except infra. Infra demand still not come up.
So restocking, are you seeing that?
Demand is there for agri and demand is there for housing. Demand is now started.
Sir, could you share the month-on-month volume numbers for October, November, December, if that is possible?
That is not possible.
Thank you. Ms. Sonali, please rejoin the queue for more questions.
Next question comes from the line of Praveen Sahay, with Prabhudas Lilladher Capital. Please go ahead.
Yeah. My question is again on the volume and what you are guiding for a 30,000 plus for a Q4. So one thing you had highlighted, the stocking is very high at all the channels level. So can you give some color on the comparison at what level of inventory earlier versus now it is at?
Okay. Yeah, I see. General inventory level, at what level they are. General inventory level, we don't know about competition. We don't know. We say we got more inventory, so we are confident that we will have adequate stock and it will be capacity. What you want is.
No, no, sir. No, I am asking related to the channel. As you had mentioned.
We don't have record. So many distributors, retailers, we don't have that.
We got more than 100,000 retailers. I don't know what is the inventory with them. But we know that they are buying quite low. Whenever they place orders, they are after us to supply as quickly as possible. We show that they are having very low inventory. And when the price trend is going down, there is no reason for them to keep inventory. We are available to make this supply. We told them now we are your godown. We want you to keep your godown.
Okay, okay. Okay, sir. Sir, last question related to ATD. As you had mentioned that the Finance Ministry awaits for the implementation of ATD. So what's your take on when that's going to happen in February, March, when it's going to happen?
I don't know. I think that is given only by Finance Ministry. I'm too smart a person. I have no idea.
No clue. You only know that Directorate General of Trade Remedies has recommended some provisional anti-dumping duty on five countries, various companies, which have been sent to them in the beginning of November. Now already more than 80 days passed. Now when the Finance Ministry will issue notification or there will not issue notification, I have no idea.
Thank you, sir.
Thank you. Next question comes from the line of Srinath V., with Bellwether Capital. Please go ahead.
Sir, I want to understand how the CPVC business is growing. Is it growing higher than the 4% volume growth we saw in the piping division? And also want to understand, there's already an anti-dumping duty on CPVC. Is that market a little more stable than PVC? Are retailers holding inventory, and are we seeing primaries happening for us? Thank you, sir.
CPVC, the anti-dumping duty imposed only on China and one company in South Korea. They were not a large supplier, and they were not in any way large supplier to our company. The major supplier coming from USA and Japan and Thailand. And now they have quite a good capacity put in locally also. So we have no reason of anything to do with the anti-dumping duty. And CPVC market definitely has grown better. Our company has grown also in excess of 20% on CPVC.
Okay, sir. And how do you see, given that the fourth quarter is normally the construction-heavy quarter for residential real estate, what is the broad outlook on CPVC now going into Q4 and next year, sir?
Q4 will be further better. Okay, sir. Thank you. I'll get back on the question.
Thank you. Next question comes from the line of Ashish Kumar , with A.K. Capital.
Please go ahead.
Good evening, sir. Sir, I had a question on this announcement that we made last quarter about having a 60 cascade capacity on CNG type of cylinders. So you said that in the announcement, sorry, it was said that the targeted revenue can be INR 60 crores. So just want to understand that it was a testing of what is kind of the thing, or we see a big market opportunity there in terms of value?
Our cylinder is for cascade application, refilling the CNG stations, the petrol pump. It can be supplied only in the cascade form, means cascade of 30 cylinders or 36 cylinders. We are now in the stage of building up the cascade. And once we supply to any of the petrol pump, petroleum company, then we will see success. Cylinder per se has been fully approved or certification in place.
The commercialization will take place only by end of.
Hello? No, audible, sir.
I think the reply is complete. Can you ask any other question?
Yes, I just want to understand that in LPG cylinders, we haven't seen that much traction. But in CNG cascades, do you expect it to be different? Because probably there could be some operating cost benefits for our end clients. So do you see that it probably will have a bigger market than LPG cylinders?
Nowadays, you see at every petrol pump, there is a CNG station. Those CNG stations are filling the fuel through CNG cascade replenishment. So our cylinder, which is a new type of cylinder, would be used in the CNG cascade only. Instead of it, more of the vehicles are moving either electrical or gas. There is a good market potential for the CNG cylinders.
Got it, sir. This is helpful.
Thanks a lot.
Thank you. Next question comes from the line of Swapnil Upadhyay, with Motilal Oswal Financial Services Limited. Please go ahead.
Thank you for the opportunity. Sir, what were the reasons for contraction in margins, and what was the reason for increase in raw material cost quarter on quarter? Can you please elaborate?
Increasing raw material cost like going down?
No, increasing raw material cost as percentage of sales, sir.
Because our margins have to go down because the open market price of PVC is lower than company price. Sell the goods. We started ignoring the open market, the company price which are produced locally, and we were trying to make our selling price close to import quality. Our percentage of raw material will go up.
And what was the reason for contraction in EBITDA margin, especially in plastic pipe segment?
Margin will come down now when I'm losing money on the local purchase. And local purchase, we don't want to give up. We will go on buying local material.
Okay. Thank you.
Supply. Import is a first-class demand. We can't work our company based on imported materials when local production is available. Local producers are a very important supplier for us.
Okay. Thank you, sir.
Thank you. Next question comes from the line of Rishab Bothra, with Anand Rathi Share and Stock Brokers. Please go ahead.
Hello. Yeah, Rishab sir. Sir, just wanted to understand. We mentioned that our capacity will reach by 9 lakh tons by March 2025. How is the growth plan for FY 2026, and what kind of utilization can we expect? FY 2026, we will talk in April. Upgrade. So this 9 lakh is only brownfield expansion. Greenfield will come up thereafter.
Yes. Yeah.
9 lakh tons PVC will be available on 1st April 2025.
Okay. Okay. Got it. Got it.
With respect to the LPG cylinder, I think Supreme and Time Technoplast are the two players currently. Are there any other players who are supplying to the composite cylinders?
As of now, no. Not to our knowledge.
And lastly, what is the market size of this cylinder, and how much market share do we want to gain?
The market size for the cylinder is more than 40 million cylinders. More than 40 million.
Thank you, sir. I'll come back in brief.
Our capacity is not even 2 million cylinders.
So we want to scale up the capacity in cylinder also quickly to gain market share?
We are going to increase capacity to match the demand coming from the oil marketing companies.
Okay. I'll come back in brief, sir. Thank you.
We need to decide how much they want to switch over from the metal to plastic. Plastic is a shape material. Yesterday in Kumbh Mela, the explosion took place because of metal cylinders.
Got it.
Cylinder would not explode. It would get burned out. The damage would have been minimal.
So will lobbying help, and consumer awareness or marketing campaigns help?
The oil marketing company they have sent.
Okay. Fine. Thank you.
Thank you. Next question comes from the line of Navid Virani, with Bastion Research. Please go ahead.
Hello. Thank you for the follow-up opportunity. I just had one more question. Sir, can you help us with the number as to out of the 100%, what percentage of PVC are we sourcing domestically versus imports?
I think maybe 45% or 50%. More than 50% definitely local.
Okay. Okay. That helps. Thank you. Thank you so much.
We are the locally, I think we are maybe the number one customer of the Indian producers.
Thank you. Next question comes from the line of Rahul Agarwal, with Ikigai Asset Management. Please go ahead.
Yeah. Thank you for the follow-up opportunity. Sir, the question last time I was asking was not. Couldn't get a proper answer. What I was trying to know was infrastructure, the contribution to Supreme is very low, and housing you said was okay, and agri was bad because of extended rains. January you were saying housing agri both picked up. So just wanted to know if infra contribution is so low, 3% volume growth, was there any other reason of this demand not really picking up?
Now demand this quarter will be quite okay. There's no issue. Demand will be good from agri, demand will be good from housing.
There's no issue this quarter. Prices are very low, people will start stocking also, and the demand will come from every segment. Now the crops are getting harvested, demand will come from agri also and from housing also. We have so many systems, so many SKUs, new distributor addition. We don't see any problem this quarter.
Sir, maybe I'll put it differently. I think first half the industry grew 8%-9%. What was the number for nine months? Could you have that, sir?
Now in the nine months, what did the government, what did the govt. PSUs from local producers all combined together, all polymer combined together, the growth was only 1% in plastic piping.
Okay. Okay. And you think for the full year?
Yes, and the combination of all the polymer. PVC, CPVC, polypropylene, high-density polyethylene, linear low density polyethylene. All together, the market has grown by 1%.
We don't use linear low density polyethylene. We don't make a DWC system. So LLDPE, we use mostly for infrastructure. So all combined, there was 1%. Our company overall altogether was 7.5%. And other than infrastructure, we have grown by 11.5% in nine months.
Got it, sir. This is really helpful. Thank you so much for taking my question. All the best.
Thank you. Next question comes from the line of Ashok Shah, with Eklavya Capital Advisors. Please go ahead.
Thanks for taking my question. Sir, last quarter raw material price was low, and this quarter raw material price will be something higher. So what would be expected inflation out of this?
I don't think raw material prices are now higher than last year. What I know is that prices are higher, but the effective prices are not higher. Not higher price. Prices are quite low. Very competitive, very economical.
Our product is very economical compared to any pipe.
Okay. Thank you. Thank you.
Thank you. Next question comes from the line of Shravan Shah, with Dolat Capital. Please go ahead.
Sir, just to get a clarification, when we said 1% growth just of previous participant reply, so 1% growth you are saying for nine months FY 2025 or for third quarter FY 2025?
FY 2025 for the nine months, 28% grown 1% of all polymer going into making plastic piping. But that is 1% for all the polymers. Don't use linear low density polymer in our piping business because we are not in deep system.
Okay. But in terms of the broader level, in terms of the PVC level, will this be a 2%, 3% kind of a growth for nine months?
PVC level, the country has grown by 1%. We have grown by 1%.
CPVC country has grown by 9%. We have grown excess of 20%. That is 2% raw material we use to make enough plastic piping system in nine months.
Okay. Okay. Okay. Sir.
Mr. Shah, are you done with your question?
Yes, I'm done. Thank you.
Thank you. Next question comes from the line of Varun Jain, with Dolat Capital. Please go ahead.
Yeah. Hi, sir. So my question was, in the gas piping systems business, you had expected some orders in Q2 FY 2025. So has the order scale increased in Q3, and how is that going? You had told us that there's a very difficult testing procedure for these pipes.
Yes. Gas piping. Gas piping, no, we have still not got any order. We have got certified also. We are waiting for some order to come in this quarter. As of today, we got no orders for gas piping.
Is there any reason for that?
The company has qualified to supply gas piping system. We not only make pipe, we also make fitting. But as of till now, we have not received any order. But we are going to take some time to break through.
Okay, sir. Is there any specific reason why you didn't get any order, like some requirement is not met?
If we need a new supplier to qualify, it will take some time, dear friend.
Okay. Okay. And sir, by when do you expect to ramp up in this business?
Immediately this quarter also.
Okay. Okay, sir. Okay. Thank you and all the best.
You have blessings.
Thank you. Next question comes from the line of Utkarsh Nopany, with BOB Capital Markets Limited. Please go ahead.
Yeah. Good evening, sir. Sir, my first question is regarding the industrial segment.
Our industrial segment volume has regrown for the past two consecutive quarters. I wanted to understand what is the reason for the fall and how this segment is expected to perform in the current March quarter.
See, in the industrial division, the volumes are really not important because there are the various OE customers, various parts which are not related to the volume that way. The only thing is last year in this same segment, we had electronic washing machine orders, which is not forming part of the current business. And that's why on a division level, you are looking at the growth. If you exclude that business, which was not a recurring business, then definitely we had a moderat e growth.
Okay. And sir, my second question is, what would be our CPVC pipe volume growth for December quarter?
Can you please specify once again our plastic pipe segment volume and margin guidance for FY 2025?
CPVC system, we had a growth of 20% plus in the volume. CPVC system volume has grown 20% plus in nine months.
Okay. Sir, can you please specify the plastic pipe volume and margin guidance for FY 2025?
We will say we are talking 3%-4% more than the country growth. But specifically, number on plastic piping system, we maintain still 15%-16%. But in uncertain time, we are scared to give any number. But definitely, we are confident we will grow more than the country.
Okay. Sir, on the margin side?
Margin side will be between 13.5%-14%.
For plastic pipe segment?
The company. For the company, we can talk.
Okay. Thanks a lot, sir.
Thank you.
Next question comes from the line of Amit Purohit, with Elara Capital. Please go ahead.
Yeah. Thank you for the opportunity. Sir, just on your comments that Q3, you saw slower growth in the agri segment as well as infra. So plumbing would have done well housing side. And CPVC has grown probably faster than the rest of the portfolio. And what explains the realization lower for the quarter? And if the coming quarters, there is a likelihood that agri and housing will continue to do well, assuming that PVC prices remain stable, should we see sequential improvement or stable kind of, how do I say? These are the two questions, sir.
PVC prices normally should have slight upward bias. But we can't say we are not clear about the anti-dumping duty. So anti-dumping duty comes in, there is no reason for PVC price to go up also.
But what I say may not go down.
No, sir, I was referring to our performance. I understand PVC price is difficult to predict. What I wanted to understand is that in Q3, our realization on plastic pipe was 131.6% per kilogram. And when I look at the reasons that you highlighted in terms of your performance, this is because agri was not doing well and infra was not doing well, which I presume that would have a lower realization than the housing. And CPVC did 20%. And still, we saw a sequential reduction in realization. So I just wanted to know, is that the hypothesis correct that maybe they?
In infra, we supply higher density polyethylene pipe, which prices are much higher than PVC.
Okay. Okay.
You cannot go by the price per kilo basis. There is no way. In our business, there is no price per kilo basis.
Okay. And in these subsequent.
You told you already real volume number, yes, please.
Okay. Okay. Okay. And coming quarters also, I should expect a stable, assuming that PVC prices remain same. So it should be a stable number.
It's difficult to make a forecast, but yes, we are seeing we'll grow 3%-4% more than the country grows. That part we are confident. And if it doesn't go down, then definitely we'll grow nicely in our plastic piping volume-wise, more than double two digits, better than the country.
Just wanted to know why I'm asking this. It's just to know that is the competitive intensity so high that the, I mean, there is too much of undercutting which is happening amongst the dealers, and dealers are asking for significant discounts from companies. Is that the scenario right now, even in housing?
Nothing like it. Nothing like it. Nothing.
Okay. Okay, sir. Thank you, sir.
Thank you. Next question comes from the line of Rohan with Turtle Capital. Please go ahead.
Hello. Yeah. My question is regarding OPVC. So what is your total capacity at this moment?
OPVC?
OPVC.
5,400 tons. OPVC 9,000. OPVC 9,000. Yeah, yeah. It is 3 lines . Yes. 9,000 tons annually.
9,000 tons annually with three lines that you have right now. Okay. Yeah. And what is the timeline for FY 2029 ?
TImeline. Timeline 2028.
2028. Okay. And with these three lines that you already have, so what will be the revenue that will be generated at optimum utilization?
Two lines have just gone into production. So once they are running properly, then we have no idea. It's a new market, so we have difficulty to do any forecast for the quantity.
We should be able to sell at least more than 6,000-7,000 tons next year.
Okay.
It is all high-value added. High-value added, yes. But volume-wise, we may be able to sell 6,000-7,000 tons next year.
Okay. And can you just explain me the action that is going on, like replacement or supplementing the ductile iron pipe? So is there acceptance increased by passing quarters?
Okay. DI pipe will be the. No, the DI pipe, smaller diameter OPVC pipe is replacing it at a very economical cost to the department, up to 400 millimeters. We are planning 110, 160, 200, 250. It's smaller diameter. So definitely, department going for OPVC is much more advantageous to them at a cost-wise and performance-wise. So we are confident as we go on getting qualified, we will go on getting orders for the capacity work we have put in place.
Okay.
So you mean to say that majority of demand in OPVC is below 400.
As of today, this is our impression.
Okay. And over there, how is the traction going on?
Sorry?
How is the traction going on? The acceptance by government projects?
Government is doing very good. There's no issue. The government is finding it is better than lower in cost and give better performance. Longer life also.
Okay.
Better performance, water outflow is more in OPVC compared to DI pipe. The life is longer also. So there is no issue.
Okay. And how big this can be an opportunity for a company like Supreme? And how big you want to be in this segment?
Yeah. We want to be in segment. We have to still go long way. There are still developed as OPVC has to develop properly in our country. We have to use capacity.
We must have more capacity also. This is a very small capacity. 9,000 is a very small capacity. We are running with a very small capacity. We have aimed to become much larger capacity. That part I can tell you. It will take some time.
Okay. Okay. So this was from my side. Thank you for your explanation.
Thank you.
Thank you. Next question comes from the line of Vipulk umar Anupchand Shah, with Sumangal Investment. Please go ahead.
Hi, sir. So my question is, what was the average price of PVC during last quarter, and what are the prices ruling as on today, sir?
It is right here. Every price, company price, different. Then they give you good discount also. So I have no idea. But the price was INR 83.50, company price. But then they give so many discounts. They give some special discount to your customers.
We have no idea. No idea. You may know it is below INR 80. Open market price is around INR 72. I can give you open market price. Today in Bombay market, open market price of PVC pipe is INR 72. And local company price, declared price is INR 78.50. But then company gives you huge discount based on the quantity.
Okay.
So very, very difficult. Now the prices are not transparent. Only transparent price. So right now, the declared price and real price are quite different.
So have they recovered now, or they are still ruling at low levels only?
They recovered. The import cargo is arriving. There is no anti-dumping duty as on today. So they are quite low compared to local company price.
Okay. Okay. Okay. Thank you, sir.
Thank you. Next question comes from the line of Keshav Lahoti with HDFC Securities. Please go ahead.
Hi.
Thank you for the follow-up opportunity. Sir, as you highlighted that CPVC demand is growing more than 20% and infra demand has been poor, can you give some sense on what is the infra mix and CPVC mix this year?
Sorry?
So as you highlighted, CPVC demand is growing very fast and infra has been very poor this year. Some sense on how much is the CPVC mix in the entire portfolio and infra mix for this year?
CPVC is selling infra now. CPVC and infra. No idea. No idea. No idea. Volume-wise, no idea. That is classified information.
Ok ay. Thank you. That's it.
Thank you. Next question comes from the line of Rishab Bothra with Anand Rathi Share and Stock Brokers. Please go ahead.
Yes, sir. Two, three questions. Our value of share of value-added products have increased from 35%-38%, but still, I think margin have lowered.
So, to what extent the value-added products can increase and margin trajectory look better?
Our plan to go on increasing value-added share, we are investing more and more money. This year we will be investing more than INR 900 crore in plastic piping.
Correct.
Many investments are taking place to increase our value-added share. Normally, we get 42% value-added share, which we want to go and increase.
Okay. Okay.
Commodity prices are very low.
What is low?
We want to improve our return on capital employed and want to improve our operating margin.
Okay. And sir, looking at the EBIT per ton, if we want to compare, I think consumer product has the highest EBIT per ton, followed by packaging product and industrial product. Plastic piping comes last. However, when we look at the revenue contribution, plastic piping product has 65%, industrial and packaging 15%, and consumer 5%.
Will the expanded capacity change the revenue mix per se?
We go by return on capital employed.
Pardon me, sir?
We go by return on average capital employed in a company.
Okay. Not on EBIT per ton.
Last year, return on average capital employed was second to furniture. Our return on capital employed was quite good. As you have seen, our balance sheet overall, we earned more than 40% of our money. So the criteria only which business gives us more return on our capital.
So better is to look at ROCE rather than EBIT margin, EBIT per ton.
On ROCE.
Okay. Okay. Fine. Thank you. And lastly, on the margin front itself, we achieved 20% annualized margin in FY 2021, and we are around 16% or so. So what timeframe can we look to reach that margin level again, operating level margin?
Margins were not the normal margins.
Some inventory gains. You see, in those times, during COVID times, the PVC prices or the polymer prices went up so high. In the increasing prices, you tend to get inventory gains. Those are not the regular margins. So 16% operating margin would be in the range of 14%-15%.
Okay. 14%-15% regular margin.
Again, I conclude we work only on one criteria, return on average capital employed.
Got it. Got it. Thank you. Wishing you all the best.
Thank you.
Thank you. Next question comes from the line of Rohan with Turtle Capital. Please go ahead.
Hello. Yeah. Thanks for the follow-up opportunity. I just wanted to know, how does the distribution of OPVC work? Is it distributor-led business, contractor-led business, or it's a tender-based business? Because there's a lot of dealing with government.
We supply to some contractor who are supplying to government.
Okay.
So it's more of a contractor-based business. You supply to contractors.
We're getting orders from government. We hardly supply anything direct to government. We supply to a contractor who gets payment, who supplies to government.
Okay. Okay. Okay. That was from my side. Thank you again.
Thank you. The next question comes from the line of Deepak Lalwani with Unifi Capital. Please go ahead.
Hello, sir. Thank you for the opportunity. So my question was on the infra segment. What is the reason for the weakness? And as we speak, have things improved? And can you share your outlook for this segment?
As you are aware, in the first six months, central government spent only 29% of their budget on infra. And we don't think much expenditure has been boosted in the third quarter also. I have no idea. Normally, government spent money in the last quarter.
So it's coming only from central government budget or state government budget. I think the government spending is lower. We have seen that when the local producer who was supplying the high-density polyethylene, they had a decrease of 28% by volume in the first nine months. We saw that across all the application for infra, high-density polyethylene raw material used in infra, one of the raw materials, and there is a decrease of 28% by volume in the country for the first nine months. So we hope that now hopefully and our own government may spend money on infra more. We have no idea.
Got it. Thanks.
Thank you. Next question comes from the line of Aasim with DAM Capital Advisors Limited. Please go ahead.
Yeah. Hi. So I just wanted to understand on your pipes volume growth guidance.
So when you say Q4 will be 24%-25% growth so that you can meet your annual guidance expectation, is it actual ground-level demand that has suddenly improved that is giving us the confidence? Because as of late December and early January, our channel checks did not pick up any robust demand indicators. Your own Q3 volume also suggests the same. And we are 20 days done in January. So has demand actually picked up materially?
We believe each quarter we will sell more than 200,000 tons. This is what our distributor has given us. They have given us their revised target. And if nothing adverse happens, this is usually happen also. If nothing adverse happens, suppose they unpredicted some cyclone or some big rain, it doesn't happen in January-March. Also, unusual thing happens. So when some line order problem happens, who knows that? We are normally optimistic.
Now, January to 10th June, the demand will remain better on the plastic piping system. We have normal experience. Beginning January or more so after the Pongal, on 14th January. After this Pongal, Sakrat, Vishu, Lohri, all the festivals over, the demand up to 10th or middle of June, demand is going to be better for plastic piping system. This is normal happen every year. So there is nothing unusual this year.
So 200,000?
I cannot say.
Sir, I can understand what's not in our hand is not in our hand. But to get the 200,000 tons metric tons sales in Q4, you will have to run at capacity utilization almost 100% in Q4 itself.
You use stock lying with me. There's no issue. I can supply there's no issue. I will use capacity lying with me. I can give 25,000 tons for my stock also.
Material availability is a lot of material.
Okay. And because the other thing is there is a gap between international PVC prices and domestic prices, domestic being higher. So that also is a factor, right? So when you say 200,000 metric tons, clarity is there from your channel. It is eventually going into basically the end consumers are still consuming. That's the level of clarity we have, right? Not inventory stocking.
We will sell in the distributor only. Distributor will be passing to the market. We have normal experience.
Okay.
Our sales are quite good in the last quarter.
Sir, so that's it. Thank you.
Thank you.
Thank you. Ladies and gentlemen, as there are no further questions, we have reached the end of question and answer session. I would now like to hand the conference over to the management for closing comments. Thank you very much. Thank you all.
Thank you, DAM Capital, and thank you all the analysts. Thank you, sir. Thank you, Aasim. Thank you, DAM.
Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.