Ladies and gentlemen, good day, and welcome to the Supreme Industries Q2 FY24 earnings conference call, hosted by DAM Capital Advisors Limited. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aseem Bhardwaj. Thank you, and over to you, sir.
Thank you, Enzo, and good evening, everyone. On behalf of DAM Capital Advisors, I welcome you to Supreme Industries Q2 results analyst call. From the management team, we have, as usual, Mr. M.P. Taparia, Managing Director, Mr. P.C. Somani, CFO, and Mr. R.J. Saboo, Company Secretary. Over to you, sir, Mr. Taparia, for your initial thoughts and comments.
Thank you very much, Mr. Bhardwaj. I am M.P. Taparia, Managing Director of Supreme Industries Limited. I, along with my colleagues, Sri P.C. Somani, CFO, and Sri R.J. Sabu, Vice President, Corporate Affairs and Company Secretary, welcome all the participants who are participating in the discussion of the unaudited stand-alone and consolidated financial results for the quarter and half year ended 30th September 2023. The stand-alone results and the consolidated results are already with you. I will give brief on company product operating performance and other highlights.
The company sold 137,763 tons of plastic goods and achieved net product turnover of INR 2,274 crore during the second quarter of the current year, against sale of 111,803 tons of plastic goods and achieved net product turnover of INR 2,047 crore in the corresponding quarter of previous year, achieving volume and product value growth of about 23% and 11% respectively.
The company sold 286,307 tons of plastic goods and achieved net product turnover of INR 4,614 crore during the first half of the current year, against sale of 220,725 tons and net product turnover of INR 4,216 crore in the corresponding half year of previous year, achieving volume and product value growth of about 30% and 9% respectively. The consolidated operating profit and profit after tax for the second quarter of the current year amounted to INR 380 crore and INR 243 crore as compared to INR 166 crore and INR 82 crore respectively for the corresponding quarter of the previous year, recording increase of 129% and 196% respectively.
The consolidated operating profit and profit after tax for the half year of the current year amounted to INR 723 crores and INR 459 crores as compared to INR 493 crores and INR 296 crores respectively for the corresponding period of the previous year, recording increase of 47% and 55% respectively. The business scenario of all the product segment of the company for the second quarter ended 30th September 2023, as compared to corresponding quarter of previous year, has been as under: Plastic Piping System business grew 30% in volume and 17% in value term. Packaging Products segment business grew 12% in volume and 7% in value term. Industrial Products segment business grew 4% in volume and decreased by 3% in value term.
Consumer Products segment business remains at same level in volume and decreased by 6% in value term. The overall turnover of value added product increased to INR 942 crore during the second quarter of current year, as compared to INR 798 crore in the corresponding quarter of the previous year, achieving growth of 18%. The company has a total cash surplus of INR 583 crore as on thirtieth September 2023, as against cash surplus of INR 738 crore as on thirty-first March 2023. Business outlook. Polymer prices remained range bound during the quarter, but witnessed a sharp downward trend during first fortnight of October, affecting business sentiments. Now the prices have started stabilizing and business activity have started picking up. The company acquired the pipe manufacturing unit of M/s Parvati Agro Plast
Situated at Sangli, Maharashtra, on a going concern basis, with effect from 7th October 2023, at its aggregate consideration of which is INR 151.38 crore, this unit a total installed capacity of 36,000 tons per annum, comprising of 15,000 tons of PVC pipe, 18,000 tons of HDPE pipe, and 3,000 tons of oriented PVC pipe, and spread over 13.48 acres of land. Oriented PVC pipes has good market potential, and the company working to expand oriented PVC capacity to 15,000 per annum at Sangli. The company is also signing agreement to purchase adjoining land, amounting 7.76 acres from the family, which will enable the company to expand its operation at the same site. Various capacity expansion program of Piping Division are progressing smoothly.
Construction work is in full swing at all the sites, namely Kanpur Dehat, UP, Erode in Tamil Nadu, and Malanpur in Madhya Pradesh. Orders for equipment have been placed, and increased capacity during the operation during fourth quarter of the current year, one after another. Construction work for expansion in Gadegaon, Maharashtra, is completed, and arrival of production equipment has started. The newly launched polyethylene, aluminium polyethylene piping system and electrical conduit system has received an encouraging response. Expanded capacities of bath fitting, along with environment-friendly surface coating process for enhanced durability and better aesthetic, and particularly is in good place and fully operational. The complete plan to put up a manufacturing facility to make PVC window and door is taking shape, and effective execution will soon start by end of November 2023. It is expected to take about 12 months to commence production time.
The company continue to commit to new investment to increase the range of value-added product, enlarging the product basket in its piping business. With completion of all the expansion plan undertaken, installed capacity of the Piping System Division shall lead to 780,000 tons per annum by end of fiscal year 2024, from 600,000 tons, as on March 31, 2023. The company's strategy to focus more on medical product in Cross Laminated Film Division is yielding positive results. Overall, relations have also improved, and company has been able to handle the spurious competition effectively. Work on the plan to set up 2,500 ton per annum plant to manufacture newly durable cross laminated film is progressing well. The company expects to launch the same during the fourth quarter of the current year.
The company has introduced new variant in its cabinet range in smaller, smaller sub-segment, and received a good response from the market. The division is continuously adding showroom to improve awareness of this range of premium product. Total strength of such showroom is 283 by end of September 2023, from 244 showrooms as on March 31st, 2023. The Industrial Component Division has witnessed decrease in demand during the quarter. Although auto sector is doing good, but with more dependency on appliance and white goods, overall market scenario doesn't look to be so encouraging. Company expect better prospect with the impending festival season. The fisheries and fruit and vegetable sector in the Material Handling Division are seeing good demand and expected to grow in double digit in volume for the year.
There's good demand from the soft drink industry for ensuing summer season. Sales of newly introduced dustbin are encouraging, and the division should continue its momentum of growth, both in volume and value term. For Composite LPG Cylinder, execution of all orders received from Indian Oil Corporation is taking place and shall be completed during the year. There are no new orders from domestic oil marketing companies. There are serious inquiries from overseas, and once successfully converted, would yield better capacity utilization of the plant after recent expansion. The Protective Packaging Division has enhanced its capacity utilization and the strategy to work more on fabricated product has improved profitability. The division has acquired prestigious order and customer, and working on expanding certain capacity to meet the customized demand. The division has also made inroads in the export market and extended distribution network for the same.
The Performance Packaging Division continued to utilize its capacity optimally and work on post-extruded value-added product. The division is also exploring further export opportunities for improved profitability. With increased business opportunities, CapEx plan of the company is also increasing. Total commitment, including carry forward commitment of previous year, may lead to around between INR 900 crore, excluding the amount committed for acquisition of details of Parvati Agro Plastics. However, total cash flow, cash outflow is not likely to exceed INR 58 crore, and the same shall be entirely funded from internal resources. This is a brief and overall summary for the quarter and the year ended under reference. Thank you for your presence. Now, I and my colleagues, Shri P.C. Somani and Shri R.J. Sabu, are available to reply to various queries raised by all of you. Thank you very much.
Thank you so much, sir. 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 Venkatesh from Axis Capital. Please go ahead, sir.
Yeah, congratulations for a good set of numbers. My first question is, what is your... You had given a certain guidance for the full year earlier, you know, pipes growth of 23%-25% and, overall growth of 20%+. Are you making any changes to your guidance for the full year, in terms of volume growth for plastics and, and just plastic piping and also the margins? So that would be the first question.
My overall guidance, I improve now to overall volume growth of the company is going to be 23%, and for plastic piping, it is going to be over around 28%.
28%. What about margins?
Overall margin guidance for the full year is around 14.5%.
Okay. Okay. Now, are you expecting some kind of a slowdown in the fourth quarter because election season kicks in? Or it doesn't matter that, you know, the government would have already given most of the orders before the election season kicks in, and actually, we might have a slowdown in the first half of next year.
We are not in government business much.
Okay. Okay.
Elections are already going to occur in this quarter only.
Okay. Okay.
In January month, there's no election.
Okay. Now, and also, how would you look at next year? Because, we are what? We have grown 29% volumes in FY 2023. We are expecting 23% volume growth in the current year, FY 2024. Is it like something we need to keep in mind while we are making our estimates for FY, 2025, because you're coming off an extremely high base, or you think you can still continue growing at, maybe 15% for FY 2025?
This year, super growth is going to be because of poor base of last year.
Okay.
Now, this year is normal, so we anticipate growth to be around 12% next year.
Okay. Okay.
Growth, we have forecast next year. Growth, we will talk only properly in April. We'll give you a clue for.
Okay. Okay. Thank you very much. All the very best.
Thank you so much. The next question is from the line of Rahul Agrawal from InCred Capital. Please go ahead, sir.
Yeah, good evening. Thank you for the opportunity, and congratulations on a good quarter.
Thank you.
Sir, first question on the Maharashtra state government contract. How much of that is already supplied out of the INR 480 crore?
We are continuing supplying the goods. There's no issue. We are supplying the supplies were to complete in 31 time, so still not 12 months are gone. So it continue to remain in, we continue to supply as per their order received, and we are very committed, and things are going smoothly.
Should I assume INR 150 crore worth of material is supplied?
I don't recall correctly now. What it might be, I don't remember correctly. We only can say the order is going very smoothly, and they, they placed when they gave a contract, they said it will take between 24-30 months.
Got it, sir. Second question on packaging, division. You mentioned on your TV interview that you've got new export orders, and hence the margins are higher. Could you elaborate, sir, you know, in which division within packaging, you know, across protective performance or laminate films, which is doing better and, and what are these export orders to you?
The packaging is a three-segment, cross-laminate film, protective packaging product, and performance packaging film. In all the three segment, our whole aim is to go on boosting export of all the product. Fortunately, all the products have got good acceptance, and we are increasing our export month after month in all the three segments. When the year will be out, in April, we will tell you exactly how much exports have gone up in the current year and how many new customers we added in the segment. We are putting more resources to boost export business of this segment.
Sir, this INR 30 a kg of EBIT, for the segment, is this sustainable going forward?
There's no big reason, no, no negative reason.
Okay, sir. And one question was on the appliances and white goods. You said the quarter is, you know, the demand has been slow. I just wanted to know, consumer durables, you know, how much do they account in terms of revenue for industrial sales, and what is the outlook for second half?
...Out of our industrial division, about 60% revenue come from the industrial component, and of that, 70%. So overall, from the industrial, segment, if you look at, close to 40% revenue come from the appliance sector.
Got it, sir. Any outlook, like, who are your major customer, and what is really wrong with this in the first half?
There's nothing wrong. The demand is low of consumer appliance. We are seeing in Supreme Petrochem also, we supply polystyrene and raw material. The demand is growing slow. Now we anticipate that now festive season is coming very shortly, demand may revive maybe in the month of November, December. Season is there also, so we hope for the best.
Got it, sir. Last question, sir: so you said there's a big export inquiry for cylinder. Could you help us understand? Because you also said that the capacity utilization could be better than what it is, and my understanding is that capacity is one million. So which geography and which customer are we talking about?
When the order comes, then only we can share. We are negotiating only.
Okay, sir. Got it. I'll come back in the queue. All the best, sir. Thank you so much for answering my questions.
Thank you so much.
Okay, very welcome.
The next question is from the line of Chandrakant Dhanuka from CD Equisearch . Please go ahead.
Thank you for taking my question. So, sir, how easier is business scalability for you all, given that you are in several product segments and have several of products in that segments? So I wanted to know, how is the business scalability for you, like, how are you looking like it is?
Yes, scalability in terms of product, because ultimately we are all into plastic products only. So raw material procurement, everything is similar, and we have multiple product complexes nowadays. So as such, scalability is not an issue, only certain products where we need to put up the capacity near the customer, particularly for industrial component. It is only we require a specific dedicated facility. Otherwise, within the present production environment only, we can scale up the production facility wherever required.
Okay. Sir, don't you think, like, these businesses can be spun off as separate companies so that company could draw focused investors?
No, whichever business we are doing, we remain focused on that business.
Okay, sir. So, like
There are separate resources look after each segment, and they remain fully focused on the segment which they look after.
Okay. Okay, sir. Okay, okay. Thank you for taking my question, sir.
Thank you so much. Ladies and gentlemen, in order to ensure that the management will be able to address the questions from all participants in the conference call, please limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Rajesh Ravi from HDFC Securities. Please go ahead.
Yeah, hi, sir. Congrats on good set of numbers. My first question pertains to, could you throw color on how has been the CPVC volume growth in this quarter?
No, CPVC volume has degrowth overall in first six months, first five months. Last month, we were growth up to 3%. So overall, in six months, we had a growth of 1.25%.
What is the reason for this decline, given that the PVC volume is in strong traction?
To our mind, principal reason must be that now PVC price will come down dramatically.
Okay.
PVC prices were quite high, so instead of PVC, people started using CPVC.
Okay.
After number, we are seeing in the country itself, the first six months, CPVC might have a degrowth between 14%-15% volume growth in the country.
For the industry, okay. Sir, what is the outlook for the second half?
Sorry?
Yeah. So you're mentioning the industry would have seen a 15% decline in the CPVC in first half, right?
CPVC, because of PVC price have come down dramatically.
Correct.
Wherever people were using CPVC or PVC, now CPVC prices have come down, so people don't use CPVC. CPVC is expensive than PVC.
Correct.
PVC, mainly one application, the plumbing.
Yes. And sir, what is the outlook for second half on CPVC?
Second half, the industry doing well, and CPVC prices have also come down, so we see that now the second half, there should be growth.
Okay. In terms of margin outlook for full year, 14.5%, sir, do you see any inventory loss risk in Q3? You know, given that we have seen the PVC prices pulling off 7-8% in the first fortnight.
No, it is gone down more than 7%-8%.
Right.
First, it has gone down by 12%.
Okay, so any inventory loss there?
No, it's part of business cycle, so some inventory loss may be there.
Mm-hmm.
Rising also, so then we may recover also. So today, we may say some small loss will be there due to inventory.
Mm-hmm, mm-hmm.
In first half, we around 14.79%, and for the full year, we are forecasting around 14.5%.
Okay. Okay, that's all from my side. Will come back in queue. Thank you.
Thank you so much... The next question is from the line of Chirag Lodha from ValueQuest. Please go ahead.
Yeah, sir, I have two questions. First question was on, what is driving the strong demand in PVC pipe? Is there any specific segment which is where you are seeing very hyper growth?
We don't deal only in PVC. We see our growth in plastic pipe, not PVC.
Right. So in plastic pipe, is there any particular segment where you are seeing hyper growth?
Can I reply, sir? So that there, we are seeing big growth in our polythene pipe business. So we had earlier low base of polythene pipe. We put up more capacity seen in Jal scheme. So we are preferred supplier for Jal, because we make very high quality product. So good order for polythene pipe, yeah, we need polythene pipe, and we are large supplier of polythene pipe for Jal scheme.
Okay. And, is the profitability similar, versus PVC there, or there's a big difference?
Overall profitability you have seen already, now if you coming maybe around what we in 14.5 or 14, whatever, overall.
Yeah.
Piping, piping is a very low margin business. But we, we supply system. In system, there are segregated fitting, there are solvent, there are molded fitting, there are roto molded item. So many items, we are out today with more than 12,000 SKU in plastic piping system. So pipe is one small segment of the 12,000 system. That's our SKU.
Got it. And sir, just lastly on your guidance, just wanted one clarification. So H2, you know, whatever guidance you have given for full year on basis that there's a 18% volume growth expected in H2. And, if I just look at realization, which should be lower compared to, say, H1, or say equal to H1, then our top line would be like 10%-11% growth in second half. So full year will still look at 10%. You are guiding for 15% top line growth. Just trying to understand.
Okay. We said 15%, we say around INR 10,500 crore.
Correct. So yeah, so 10,500 implies 15%.
We are adding many value-added items also.
Okay.
We are now comfortable to track only the volume growth, because value growth is very risky to track, because value growth is dependent on the raw material price.
Got it. Got it.
Can't forecast the raw material price for next six months, not possible.
Got it. Thank you.
Thank you so much. The next question is from the line of Sneha Talreja from Nuvama. Please go ahead.
Congratulations on great set of numbers, sir. Just two questions from my end. Firstly, when you, you know, revise your guidance, does that include Parvati Agro or that does not include both for this year as well as next year?
It includes Parvati Agro, but Parvati Agro will be, has been taken over by us now only, and it may run very properly only beginning December only. Because we need to get BIS for the, our production at Parvati Agro. So Parvati Agro production will come in our fold properly only from December, that is four months.
Understood.
Second half of October, and we will get production will be counted only for four months from then.
Right. But that includes those four months, your guidance?
I said that includes, now it is our unit.
Right. Understood. So secondly, on this Jal scheme, just wanted to understand a couple of aspects. Firstly, which other government orders do you have? Maharashtra is something that you have declared over the public domain. Is there any other large, government-based order that you are supplying to? Secondly-
We are supplying to government through contractors.
How much of the proportion does it fall? I think last quarter you said somewhere about 10%. Where do you see this portion going?
Oh, this is purchase by business is growing much more than 10%, and I don't-
No, as a percentage of revenue.
Percentage of revenue.
I don't know. No, no, not, not immediately, I can't reply you what percentage revenue.
These are basically polythene pipes.
We are supplying polythene pipe, and we are supplying to various governments, but all through some contractors. Only Maharashtra, only we are supplying direct to government, otherwise we don't supply direct to government.
Understood, sir. But just wanted to understand what percentage of revenue does it form today, and where do you see this going, ahead, like maybe 2-3 years down the line, what proportion can it become? And what's the visibility here? Till what can, you know, till what time can these orders continue for us?
Maybe out of INR 7,000 crore turnover of piping system, maybe 7%-8% may be this polythene pipe business, maybe 8%.
What's the visibility, and till what period can these, you know, orders continue, some sense there?
I think the Jal scheme should be over by end of 2024. Then we are working on the gas piping system, so that will continue. So once we stop using for water, then we go for gas.
With similar visibility even there, like the numbers that today, 7%-8%, even gas can make up 7%-8%?
We hope so, because we have a good business in our company, and this it should continue.
...Understood, sir. That was helpful. Thanks, thanks a lot, sir.
Thank you so much.
All the best.
The next question is from the line of Udit Gajiwala from Yes Securities. Please go ahead.
Yeah. Hi, sir. Congratulations on a great set of numbers. So firstly, can you highlight what is the dealer channel inventory right now? Are we seeing restocking happening again since the prices have come down sharply?
No, restocking started in second half of this month only.
Okay, sir. So, is there any element that in Q2 the numbers could have been better, but there was some element of destocking like what your peers have highlighted?
We don't think so. This is not possible to... We are not taking the stock inventory of our converters or our distributors. We have no clear idea.
Understood. Understood, sir. And sir, largely, what will be our, plumbing mix, and what will be the agri mix for the quarter?
It's so complicated now because people are using HDPE pipe for plumbing also.
Fairly. Fairly. Okay, thank you.
Thank you so much. The next question is from the line of Rehan from Equitree Capital. Please go ahead, sir.
Hi, sir. Thank you for taking my question. I just wanted to understand more on the cylinder business, the composite cylinders. So what kind of growth are you expecting in it going forward, and how do you see the demand picking up for the same?
On composite cylinders, as I mentioned in the call also, right now we are executing the orders what we have received last year from the Indian Oil Corporation.
Correct.
As of now, there is no further visibility from any of the oil marketing companies for any further orders.
Okay. And-
What we expanded, our capacity is remaining underutilized.
Mm-hmm.
We are working with the oil marketing companies also, as well as we are also working on the export market inquiries.
Okay.
Something gets certified, then only we'll be able to tell you in the better position.
What percentage of your Industrial Products does this make up?
Pardon?
What percentage of your industrial products does the composite cylinders make up of? Like, how much percentage of industrial product revenue?
It's hardly less than 10%.
Okay. Thank you so much.
Thank you so much. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Yeah. Hi, sir. Congratulations on a good set of numbers. So a couple of questions. First is, sir, working capital has increased on 12-month and 6-month tables. Can you please explain for all the 3 variables, inventory, receivables, and payables, please?
No, our inventories have increased. No, there's no decline in the inventories. If you look at from March 23 days, our inventories are higher, our receivables are also higher in absolute numbers, and payables have come down.
Correct. Sir, any specific reason for the inventory and receivable days to increase?
The receivable days have not increased. By one day, it was 16 days, now it is 17 days.
It has moved from 17- 20, if I look at it from September 2022 to September 2023.
You are looking at September. I'm looking from March point of view.
Correct.
Of course, income has increased so, and because there's a government business involved, where we are giving 30-45 days credit for the Maharashtra government order.
Okay.
Otherwise, normal trade inventories or trade receivables are in the similar line.
Okay.
Payables are reduced because our export volume, export, import volumes have decreased since the prices were falling, and we are buying mostly domestic purchases against the government only.
Sure. This is helpful. Sir, my second question is, was there an element of inventory gains during the quarter? If you could please quantify that across polymers.
No, no. No inventory gain. If prices are falling, how can there be inventory gain?
Okay. So was there any inventory loss, any material number on either side?
No. Some inventory loss may happen in the third quarter. We don't know today. In second quarter, it was neither gain nor loss kind of situation.
Okay. This is helpful. And sir, last question for Taparia, sir. Sir, you indicated on gas piping systems. Can you please detail what the product is like? What is the scope it actually offered us? Thank you so much.
No, we made the pipe, and demands were approved by the government authorities. We anticipate that we may get the clearance within 2-3 months. Once we get all the clearance, then we will come back to you what business we are aiming to make for gas. We anticipate good demand to come for gas demand, gas application also.
Sure. Sir, lastly, would you like to comment on the toys business if there is a PLI? We have exposure over here, we can be a beneficiary. So how are we looking at the toys segment?
No, no. We are not in toy business.
We are not into real toy business. So something we are doing only from the base of foam, where we are manufacturing polyethylene foam, so we are making some kids' puzzles, yoga mat kind of things, but not really into the toy business.
We are not in toy business. Not really.
Okay.
Sorry.
Perfect, sir. This is very useful, sir. Thank you so much. Thank you, sir.
... Thank you so much. The next question is from the line of Mr. Achal Lohade from JM Financial. Please go ahead.
Good evening, sir. Thank you for the opportunity. Sir, is it possible for you to kind of give us some sense for first half, how much is the PVC consumption for India and for us, for Supreme?
Oh, India, I can say India has a growth of maybe 20%, I think. You see, consumption India, so I don't have the number. India, I can tell you. We count the dimension based on the 18%. First quarter, the growth was 9.57%, second quarter, 20%. So overall, it is grown by 19%, first half.
This is for India PVC consumption, right?
Yeah, yeah. India PVC share, where 75% will going into piping.
Okay.
35% growth in non-piping.
Understood.
If you check what your imports are taken, are taking place and domestic sales, it is always considered as a consumption.
Correct. Correct, correct. Would you, and for us, it would be higher than that, right? I mean, we would have definitely gained market share in the PVC.
It would have grown that much more than that.
Right. The second question
INR 1.628 million was the last year first half.
Okay.
1.628 million, first half last year, and this year, 1.926 million PVC. So again, 1.9, again, 1.628 million this year, consumption sworn by maker of PVC in India to 1.926. So how much? 18%. 13%.
Got it. So second question I had was with respect to our capacity. Can you help us with the total plastic piping capacity as of thirtieth of September? And is it possible to get a broad sense as to how much is in north, west, south, and east?
No, actually, available can be supplied to anywhere in the country. We are not restricting to that. They will not supply. Presently
No, no, sir.
We are supplying goods from all parts of India.
Correct, correct. No, I get that. I'm just trying to understand the spread of the company in terms of the presence of the capacity.
Not possible. Not possible.
Not possible.
No.
Okay. Okay. Just one more question. You know, in terms of the growth, is it fair to say that the growth was substantially in the, in the southern pocket or, you know, or north or anything of that sort for the second quarter?
We are all India players.
I'm sure, sir. I'm just checking in terms of the growth for second quarter for plastic piping, was that particularly driven by any particular geography?
No, growth was throughout the country.
Throughout the country. Got it, sir. Thank you so much.
Thank you. The next question is from Venkatesh, from Axis Capital. Please go ahead.
Yeah, thank you for this opportunity. Can you share what was the inventory loss, which you had in the first half of the year? I think after the first quarter, you had said first quarter inventory loss was around INR 40 crore.
That, that's all. That's all. We didn't say second quarter, there's no inventory loss, no inventory gain.
Okay, there's no inventory loss or inventory gain. But you... And what is your outlook on PVC prices? We have largely bottomed out, and it should rebound from here, or there is a difference in opinion in terms of how demand, supply dynamics are in the Asia Pacific region.
Our share prices are stabilized, but having said that, I can only say commodity prices never stabilize.
Okay.
They may come down by INR 20/kilo, they may go up by INR 20/kilo, they may go down by INR 5/kilo, they may go up by INR 5/kilo. Commodity prices never stabilize, that this level will maintain up to mark. No, it's not going to happen.
Okay. Okay. Just one more thing. Usually, earlier you used to put out an annual presentation where we used to give out the annual size of the market, each of the subset bits. But I think you've stopped doing that over the last couple of years. Any particular reason for that?
Look, precise data are not available. You see, we try to get from the manufacturers of the polymers. We will try this year, after this FY 2024, if we can get some precise data.
Okay. Thank you. Thanks. All the best.
Thank you so much. The next question is from Bhavin Rupani, from Investec. Please go ahead. Hello, Mr. Rupani, are you there? Hello, am I speaking with Mr. Bhavin Rupani? Can you hear me, please? This is the operator, sir. Unfortunately, we cannot hear you, so I will be disconnecting. If you can hear me, and you wish to join, please rejoin the queue. Thank you. The next question is from the line of Shubham Agrawal from Axis Capital. Please go ahead, sir.
... Congrats on the good set of numbers, sir, and thanks for the opportunity. Sir, my question is just on, on Jal Jeevan. You mentioned that in Q1 you've done about 12,000 tons from the-
Yes, yes. Can you talk loudly? Please. Hello?
Am I audible now? Am I audible now?
Now audible. Yeah, please.
Okay. Okay, thank you. Thanks for the opportunity, and congrats on the great set of numbers. I just wanted to ask you on the Jal Jeevan Mission. You said in Q1 you did about 12,000 tons from the scheme. And you believe, and we believe that, the whole order is expected to conclude by FY 2024. Can you give a number, like, what, how much, volume are we expected to supply to Jal Jeevan in the whole of FY 2024? That's one.
What, what is it? Polyethylene pipe supply for the Jal Jeevan?
I believe Nalco Se Jal is both HDPE and PE, right? Is that correct? Is the volume that you supply to these?
No, Jal Jeevan Mission is mostly in our polyethylene pipe.
Okay, sir. So what is the volume from Jal Jeevan for FY 2024?
We supply various segments, you see. Again, apart from Nalco Se Jal, we supply in trade market also, so we cannot say precisely how much going for Nalco Se Jal. We are a large supplier of polyethylene pipe, making it at eight locations in the country.
Okay. When you said that in FY 25, this volume that will go out of Jal Jeevan.
For instance, like both for Nalco Se Jal, we supply for various systems.
Okay, so it's not right to quantify that, okay, this probably for the whole year we'll supply, let's say, 40,000 tons to Jal Jeevan Mission. We can't really say that, right? That's not the right way.
We tell you how much we might be supplying this. But, it's a specific application we don't know clearly.
Okay, sir. Okay. So just, you said that this Jal Jeevan, Jal Jeevan order will get completed in FY 2024. Can you please reiterate for my benefit that what will you expecting? What will, you know, take, what government orders expected in FY 2025, which will help recoup this lost volume of Jal?
Yeah, okay.
Sorry?
Sir, you mentioned the Jal Jeevan spend will be over by 2024.
We told the government made announcement they want to do it by 2024. They didn't say FY 2024. They said, "We want to do Jal Jeevan Mission by 2024.
Okay.
Now, there may be some spillover. It may not be completed by 2024. Maybe may go on to 2025 also. That's why only some government depart-, states are there. I we know it clearly. But they demand it properly, then only we know.
Okay, so and just my last thing, can you give a broad split of revenue from PVC, HDPE, O-PVC, and PE pipes separately? Is it possible?
That's right.
Okay, thank you, sir. That was all from me.
Thank you so much. Ladies and gentlemen, just a reminder, if you wish to ask a question, please press star and one on your touchtone telephone. The next question is from the line of Abhishek from DSP. Please go ahead, sir.
Yeah, hi, sir, thanks for the opportunity. So just wanted to confirm your current capacity will be something like 8.5 lakh tons, including Parvati?
Company or pipe, piping company?
Sir, overall company.
Company, maybe close to 900,000 tons.
Okay, and this will move to almost like million by end of next year. Would that be a fair assumption, sir?
1.1 million ton by end of March 2024.
1 million by March 2024. Got that, sir. And sir, the other thing is, you know, what we see is in the current quarter, your proportion of value added has moved up significantly to almost about 41%-42%. That is largely because of packaging segment doing well. Would that be the major mover there?
Partly, partly because the packaging segment are doing quite well now.
Sorry, sir?
Yes, because of made by furniture division, by packaging division, by trucking division, all the division contributed.
Okay. Okay, okay. And sir, your packaging segment has seen very healthy improvement in margins. You spoke about the export opportunity. If you can just help us understand, is it like the distribution model where the packaging segment is gaining traction in export, or is it on the OEM model? If some color you can provide as far as the export opportunity of the packaging segment is concerned, sir.
We are making various products in packaging segment. We will now be customer base throughout the world.
Okay.
We are making the product as to the requirement of the customer, customized product.
Okay.
We are getting better margin on customized product. It's not any of our proprietary product.
Got it. Got it. So is it fair to assume, sir, that the competitive scenario or landscape in packaging in domestic market is stable, it is the export market which is driving the incremental margin? Is, is that the way to look at the business?
Domestic market also, especially like item, we are getting proper price.
Okay. So there is improvement at both. You're seeing domestic plus exports?
Yes, you are right.
Okay, got that. And so just a couple of other things, you know, the, through Parvati, you've also acquired this O-PVC. Would you be able to help us understand the applications of O-PVC pipes? Where does it get used and the overall opportunity size?
O-PVC is supplementing the iron pipe.
Okay, so-
Pipe which will use to carry the drinking water.
Correct.
Pipe market, 3 million tons.
... Okay.
O-PVC is completely economical compared to ductile iron pipe. Capacity in India is very small, so market is growing, and we will supplement ductile iron pipe to this.
Okay, sir, you will need to get your O-PVC pipes approved by the government. Is that a process that you'll have to go through?
They're already approved. Parvati approved by the government.
Okay. Okay, so you will keep on adding capacity based on whatever demand you get on the DI replacement part of it. That's the way to look at it.
You are right.
Okay. Okay, okay. So just one last question on the PVC window profile business that you have started and you're likely to commence operations in about a year's time. The distribution, will that be different, right? Will the distribution of that business will be different from the current distribution that you have for the piping system?
When we are ready, we will give all details.
Got it, sir. Got it. Okay, sir, thank you so much for answering my questions, and wish you all the best. Thank you so much.
Thank you so much. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead.
Yeah. Namaskar, sir, and thank you for this opportunity. Sir, just dwelling on the last answer which you gave on O-PVC as a supplement to ductile iron pipes. So the ductile iron pipes diameter ranges. It's a long range. So how are these O-PVC aligned to them? Any last mile connectivity that will happen through O-PVC, or they... How will they work with ductile iron pipes?
Oh, we can connect O-PVC to ductile iron pipe, there's no problem. Because you can, I still join, there's no issue about it. And our department is able to make only up to 400 mm diameter, or, ductile iron pipe is made up to 1.2 m diameter. So some portion of ductile iron pipe is supplemented by O-PVC. O-PVC, people are now trying to build a pipe up to. Our company will be producing up to 400 mm only.
Sir, how is the cost component being advantages for O-PVC?
O-PVC economical compared to DI pipe.
Okay. But they will always act as a supplement. They cannot be as, act as a replacement to ductile iron. That is what you are saying, or is it very nascent stage as of now?
I did not say replacement, I said supplemented.
Yes, yes, sir, you did say supplement. That is my reason. Why, why would, I mean, only for the cost efficiency part is the one reason that O-PVC will act as a supplement or, what could be the other reasons, sir?
I say the DI pipe, large requirement is 1.2 meter. 1.2 meter, everyone today not produce in India. India is producing mostly 400 millimeter. Some plants have come for 630 millimeter also. So the market for GI pipe is more in the larger diameter.
Okay. So there O-PVC will come into play.
So O-PVC, our small scale, our very small scale.
Okay. Okay, sir. And, sir, post our this expansion, what is our current value-added product as a percentage of sales? And, what should be the percentage going ahead for, say, one or two year down the line?
Our current is around 36.5%, which is hovering between 36%-39%. It all depends, which is a dynamic definition, the product which can get 17%+ EBITDA margin only classified for the basket. So something goes out, something comes in. Our focus remains to replace the new products continuously. Somewhere 37%-39%, 40%, this is the range in which we are operating.
Okay. So for the value-added as a % of sales?
Correct.
Okay. Sir, now, last point will be raw material basket. We are expanding capacity, even other players are there. How do you, I mean, what, what, how are the raw material being aligned in terms of the capacity? And I think the, they are the PVC resins, only the key raw material or what constitutes the major part of our raw material basket?
We are very comfortably supplied by all our raw material suppliers, domestic and international. We have no issue of raw material.
Okay, and what portion do we source from the domestic and how much is sourced internationally?
Maybe around 40%-45% domestic, and the rest is imports.
The rest is imports. I think the new capacities have been installed for the PVC segment, so that will be more, that will suit them the things, more companies like us going ahead. Some large capacity for PVC have been planned earlier also.
I don't know. But anyone, just I can tell you that Reliance has announced and Reliance is implementing a very big expansion of PVC.
Okay, sir. Thank you. Thank you for all the elaborate answers, sir, and all, and all the best. Thank you.
Thank you so much. Ladies and gentlemen, in order to ensure that the management will be able to address your questions from all the participants at this conference, please limit your questions to one per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Navid Virani from Bastion Research. Please go ahead.
Hi, sir. Am I audible?
Yeah, you are audible, please.
Okay, sir, thank you for the opportunity. So my question is regarding the overall exports.
Yeah.
Can you give us regarding the overall export sales?
No, I know.
Let's say we see 3-5 years down the line, can you give us what kind of opportunity size are we, you know, looking at in each segment in terms of exports?
Well, we see now we are working also very strongly how to push exports. So as of today, our exports are less than 3% of turnover.
So, do we see export opportunity in each of these segments?
More to boost export. As of today, as I told you, we are less than 3% of turnover, but with so many exhibitions now we are participating in the international market, and we get trust and more resources we are providing to boost exports. We hope that our exports will go on rising.
So, let's say 3-5 years down the line, do we see our exports going to, you know, 10% of our sales?
I can't give any percentages. I can only say company focus remains to go on increasing export. Company put resources to do that.
Thank you. Thank you for the answer. All the best.
Thank you so much. The next question is from the line of Ritesh Shah. Please go ahead.
Hi, sir. Two questions. Sir, first is historically, we have never-
Sorry to interrupt you, sir. Due to time constraints, can you please ask just one?
Okay, sir. Sir, historically, we have always, we have always grew by organic growth, but it is for the first time what we are hearing is, Parvati, Parvati acquisition. Sir, what is the change in thought process? Why are we doing this now? Why have we not done it before? How should we understand this?
We wanted to go into all new line.
Okay. So incrementally for new products, we will be open to inorganic growth? Is that how one should read into it?
We are open to even the existing product, also inorganic growth. We, we have never closed our mind.
Okay. That helps. Thank you so much, sir.
Thank you so much. The next question is from the line of Rahul Agrawal from InCred Capital. Please go ahead.
Sir, thank you for the follow-up. The question was the Parvati acquisition, the net cost, final cost is about INR 150 crore. This is INR 20 crore lower than what we announced in August. Why is it different?
No, Rahul, INR 20 crore we have to stick for the adjoining land. So Parvati acquisition is one part of the deal. What we announced was the combined consideration of the adjoining land also.
Got it, sir.
Amount remains same, dear friend.
Got it, sir. Thank you so much. All the best.
Thank you so much. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hello. Thank you for the opportunity. Am I audible?
Uh, yes.
Yeah. Audible, please.
Yeah. Yeah, thanks for the opportunity. So just want to understand, we have guided EBITDA margin of 14.5%. H1, we have already done 14.5% in spite of inventory loss. Normally, H2 is more stronger. So is it a more like a conservative guidance or you have factored in some inventory loss in your guidance?
You see, as I told you in October, first half only, the PVC price has gone down by 13%. Going forward, you can't forecast your past trend. And with the world economy in such a, not robust shape, we don't know what fall can take place. So better to be conservative.
Keeping inventory losses aside, 16% would be the right margin to look in H2?
Yeah, 14%-15%. Without inventory losses kind of thing, we can say 14%-15%. It all depends on the product mix.
Okay. Okay. Understood. One last question from my side: 1 million ton capacity, which will be by the end of this year, can you give the segmental breakup?
70,000-80,000 tons will be plastic pipe.
Okay, and remaining?
Plastic pipe only. As you recall that we say that we increase capacity by 200,000 tons this year. Out of 200,000 tons, 180,000 tons is in the plastic pipe. The remaining 20,000 tons is spread over so many segments.
Understood. Understood. Okay, that's it from my side.
Thank you so much. As there are no further questions, I would like to hand the conference over to the management for the closing comments. Over to you, sirs.
Thank you very much for very analytical question. We were enriched by the various questions raised by our partners. We thank all of them for the same. Now, my colleague, Shri Somani will close the line. Yeah, please.
Thank you, DAM Capital, for organizing this conference, and thank you to all the participants. Thank you very much.
Thank you, Aasim, for the conference, and thanks to all the participants. Thank you.
Thank you so much, sirs. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may disconnect your line.