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Carysil Ltd
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Ladies and gentlemen, good day, and welcome to Carysil Limited Q2 and H1 FY '24 Earnings Conference Call.
This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Chirag Parekh, Chairman and Managing Director of Carysil Limited. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on the Carysil Limited Quarter 2 and H1 FY '24 Earnings Conference Call.
I hope everybody had a chance to view our financial results and investor presentation, which were posted on the company's website and stock exchanges.
I'm accompanied by our CFO/COO, Mr. Anand Sharma, and SGA, our Investor Relations Advisor, on this call today.
Allow me to begin by providing you some key economic updates. In the first half of the fiscal year, the global economy began to recover, showing a stable performance in both the Indian and global economic sectors without any major surprises.
Notably, factors like rising inflation and energy price increases improved the path of economic growth. However, some sectors of the global economy have demonstrated impressive resilience, particularly those not closely tied to direct consumer demand. As a result, the consequences of economic slowdown have been milder than usually into the group.
The market for home improvements have been expanding rapidly in recently years, changing preferences, customers pre-deposition towards improvement, and that is a desire for comfort important factors of influence. As a result, consumers are placing a greater emphasis on designing kitchens, bathrooms would be at homes and lifestyles.
We have carefully aligned our strategy to make India the world's premier manufacturing hub and top alternative destination. Demand for luxury and premium growth have been propelled by shifting consumer preferences, accelerating urbanization and emerging new lifestyle products. Despite the unstable geopolitical circumstances, we continue to witness an improved inflow of new orders and potential prospects that we expect to tap in the near future.
Similarly, the cost of raw materials have been stable, and we anticipate this trend should continue. As discussed during the last quarter, we have started the assembly line of the profits. We showcased our capabilities in our trade show in Mumbai [indiscernible] exhibition, received an overwhelming response from the audience. Additionally, we intend to create a global impact by hosting exports in the coming year via distribution channels.
We see potential branding prospects in countries like United Arab Emirates, South Africa, Australia, and new markets, such as Oman, Saudi Arabia and Turkey. To develop the brand identity, we will participate in a number of exhibitions in UAE and United States, where we shall focus [indiscernible] credibility, dedication and reliability to earning products.
The industry risks are considered inevitable and cannot be overlooked. Risks are unavoidable and must be taken seriously in every field. However, the impact can be controlled or mitigated. Our company's adaptability, the resilience of our staff, our team willingness to embrace change enable us to readily accommodate new circumstances.
We, at Carysil, are well positioned to take advantage of the multiple existing market opportunities using both organic and inorganic growth strategies. Organic growth is accelerating as we strengthen the existing capacities to meet the demand of more domestic and international markets.
Furthermore, we are actively exploring adjusted segment, exploring new opportunities for future expansion and making strategic acquisitions in order to strategically expand into our top markets, where our presence was previously [indiscernible]. This combination approach allow us to leverage our manufacturing capabilities and wide product basket, unlock growth potential and serve as a strong market presence.
Following three successful acquisitions in the U.K., we made our fourth acquisition in the United States called United Granite LLC. This acquisition will be complement to our existing product range and first-of-its-kind organized fabrication business with seamlessly integrated kitchen tops with workstation, kitchen faucets and accessories.
This will simulate the growth of wide-range product, architect and customers. We're pleased to choose prefabricated kitchen tops from a variety of brand, each of which includes a complete integrated, full [indiscernible] accessories.
Post acquisition of United Granite, we have retained the entire team, except the promoter. The current senior management would lead their business in the future. At present, the company's capacity utilization is 60%, but we are confident that we can increase utilization to 90% level in coming quarters with improved efficiency.
Our goal is to expand our business network across the United States. Currently, we operate in three regions: Washington, D.C., Virginia and Maryland. The United Granite EBITDA has always ranged between 7% and 11% over the past 3 years. We estimate this to increase to more than 15% in the coming quarters, with increased capacity and better material sourcing and operating leverage.
We always look for acquisitions with strong cash flow and profitability. And through the acquisition, debt can be serviced, straight from the acquired entity's cash flow. United Granite has sufficient cash flow to pay the interest and sort of the debt rate for acquisition without putting any strain on its parent company.
United States market is huge, and we believe that they offer complete -- includes costing, [indiscernible], appliances, [indiscernible] countertop, fab business, we can expand our market base, and then [indiscernible] in the United States.
For the home, we'll be introducing technology of India post acquisition, allowing us to backward integrate our production processes, ultimately lowering the cost of production. As we believe that the technology is critical for growth, and we are committed to showcasing modern design to successfully combined form and function cutting-edge technology.
We have designed new chimney, which will be in the best of the class. We are committed to improving our recent development efforts to achieve this excellent dedication not only to ensure long-term success of our company, but create more value of our stakeholders.
Now I would like to hand over our call to our CFO, Mr. Anand Sharma, to update you on the company's financial performance. Thank you.
Thank you, sir. Good afternoon, everyone. Let me take you through the consolidated financial performance of the company.
Quarter 2 FY '24 performance. Consolidated total income stood at INR 164.5 crores. For quarter 2 FY '24, it grew by 18.1% year-on-year and 15.2% on a quarter-on-quarter basis. EBITDA for quarter 2 FY '24 stood at INR 33.9 crores, grew by 48.7% Y-o-Y and 23.9% quarter-on-quarter basis.
EBITDA margin for quarter 2 FY '24 stood at 20.6%, increased from 19.2% quarter-on-quarter and 16.3% on Y-on-basis. Profit after tax and the managing interest stood at INR 15.4 crores. Q2 FY '24, grew by 67.1% on Y-o-Y and 33.4% quarter-to-quarter basis.
Coming to H1 FY '24 performance, sales volume for quartz sink stood at 253,000 units. Stainless steel sink stood at 54,000 units. Kitchen appliances and others stoods at 28,000 units in FY '24.
Consolidated total income stood at INR 307.3 crores for H1 FY '24 as compared to INR 310.6 crores in H1 FY '23. EBITDA of the company for FY '24 stood at INR 61.3 crores as compared to INR 57.2 crores in H1 FY '23, growth of 7.2% Y-o-Y.
EBITDA quarter 4 H1 '24 stood at 20%. Profit after tax and margin interest stood at INR 27 crores in FY '24 as compared to INR 27.9 crores H1 FY '23. Gross debt stood at INR 216 crores as of December 30, 2023. Debt to equity stands at 0.66 as of September 30, 2023. Cash and bank balance stood at INR 12.5 crores.
Thank you. Now I open the floor for question and answer. Over to the operator.
[Operator Instructions] Our first question comes from the line of Gareth Goel from Invest Analytics.
Congrats for a good set of numbers. My first question is on the domestic operations. So despite a substantial expansion in our distribution network, there appears to be a disparity in the growth of domestic revenues, like current outlook for domestic revenues in H1 FY '24 stands out at 66 cr. That is falling short of our projected yearly guidance of 160 to 170 cr for FY '24. So can you please provide the insights into the factor impeding the growth? And how the outlook is going to be in H2?
Yes, sure. All right. So let me answer this. I think the first 6 months, we've been -- honestly, we've been trying to expand our dealer network. We're trying to -- so we kind of consolidate efforts in domestic. And I think the realization you seek start coming from quarter 3.
Secondly, we also are reorganizing our distribution network. Our pricing strategy inside data domestic, I think, so that kind of took us about 45 to 60 days time. I think we are all set. We already closed a good October. And I think the domestic sales, you'll see a sharp increase starting from quarter 3.
So are we still intact to the guidance of 13% to 14% growth in domestic revenues over FY '23?
Yes. So our -- we will have no efforts left to try to achieve this. Yes.
Okay. And on the topic of EBITDA margin and tax margin side. So do you anticipate that EBITDA and tax margins, which are currently at 20% and 10%, respectively, for the quarter, will be sustained in the upcoming quarters as revenue increases? Or alternatively, are there any expectations of a decline possibly influenced by the ongoing consolidation of the U.S. acquisition in Q3 and potential rise in marketing expenses, as you highlighted in the presentation?
So I believe there is a potential of margin expansion. If the revenues grow, which we expect it to be. Second thing, I think the raw material prices are stable. Rest of the other input costs are stable. So this -- so I think the company is doing their best to try to maintain at least 20%.
Yes, the U.S. consolidation will come into play. And -- but as also same time with the revenue growth, the -- we are still quite confident that we're able to maintain and sustain our EBITDA margins around 20%. I think we've always given a range of 18% to 20%, but our efforts will be always then how can we sustain at 20%.
[Operator Instructions] Our next question is from the line of Chandra Tanaka from CD Equity Search.
Sir, how have you been able to grow exports despite the stress in the Western markets?
Yes. So I think it's a good question, and I told this last time that there would be more opportunities for us because the manufacturing, where most of our competition were 90% completion comes from the West. So we have been able to grab a lot of market share from our competition.
We've been doing -- as far as our company is concerned, we had explained last time doing everything. We try to be very cost-efficient products. So I think that's coming into play. And we've been able to grab a lot of new customers. We've been able to increase our market share. And I think we are very confident that, moving forward, the momentum is going to be on.
I think we are probably the worst of the home improvement scenario. And still, I think our company is doing quite well. And I think we still have more opportunities in the coming quarters.
Okay. So sir, the -- if we see like in fiscal year '24, we have around INR 129 crores export revenue. And in Q2 fiscal year '23, we had INR 106 crores. So the increase of INR 23 crores is mostly from which part, like the market share increase or new customers or something like that?
So both. We have increased our market share and we have our new customer base.
Okay, sir. So sir, my second question is how much is the gestation period for court zinc orders in the new export market?
I'm trying to make sure -- another new export. So I think the [indiscernible] takes about 90 to 120 days.
Next question is from the line of Baidik from Monarch Networth Capital Limited.
Congratulations on [indiscernible].
Sir, may I request you to use your handset, please?
Am I audible now?
Yes.
Congratulations on a good set of numbers So my question is that despite of gross margin improvement of 369 bps on a Y-o-Y basis and EBITDA margin improvement of 200 bps on a Y-o-Y basis? And also, we can see that the volume numbers for costing has also increased by 17%, 17.5% this quarter. But the realization in costings have not shown such an improvement. Like on a quarter-on-quarter basis, it has decreased by around 7%. So any comments on that?
So I think it's alarming. I think this product mix, so it depends upon which country to -- it depends on that. I think that's a result of a product mix. So it may also happen until the next quarter if [indiscernible] go up.
But sir, I still can't understand why there is such a sharp dip on Q-o-Q because we are seeing an improvement in the gross margin and EBITDA margin. So is there -- so have we taken any price cut or something? Or are there any discounts going on to increase our sales in [indiscernible]?
No, I don't think.
Sorry, I think on the realized side, the numbers that we have, we have not seen any decline if I go an average rate also. So our average rate is INR 560 what happened when there is FOB pricing and CIS pricing. That depends on which customers we are serving. So there may be some variation quarter-to-quarter. But if we compare Y-o-Y, already -- there's an increase.
5.27 to 5.63.
Yes, I agree to that, that on a Y-o-Y basis, there is an improvement. But on a Q-o-Q basis, there is a sharp decline of 7% [indiscernible].
On -- that is what I'm explaining. It depends on the customer. If there's a CIF pricing, then the [indiscernible] will go up. If the FOB -- normally U.S., what we are doing in FOB. So when there is a more than in the U.S., you'll say that -- you'll see the prices are lower. When it moves to the European country, their contract will go up. But it has nothing to do with the profitability EBITDA [indiscernible].
So sir, you mean to say that our exports in the U.S. have increased? And over there, the realization is less whereas in -- whereas our sales in Europe, over there, our realizations were higher? So that is the reason behind it?
Yes.
A higher contract. Because once we have FOBs, usually, the prices will be lower. whereas [indiscernible] insurance and freight is added to the price, it will go up. So otherwise, it has no impact on any in EBITDA profitability.
Our next question is from the line of Pritesh Chheda from Lucky Investment Managers.
So the past 4, 5 quarters, you were talking about inventory overhang in the system, which was curtailing your sales growth. And what we see this quarter, you are virtually back to your peak number. So should we assume further built on these numbers as we go ahead? And that inventory overhang as it got resolved and we had added a lot of customers. So can we expect growth momentum to pick up from these numbers?
Yes, absolutely, Pritesh. I think that overhang of the customer stock is over. We also have a lot of new customers over the horizon with large -- so we are in advanced stock for a very large quantity for coming quarter 4 and coming year. So we should be -- we have a good tailwind. And I think looking at what the current position, I think we are looking at a good growth in the coming quarters.
Okay. What is the cost volume that you recorded for quarter 2? Was it about the 1.5 lakh [indiscernible] number?
Yes, it was -- granite sink was close to 1.5 lakh. Yes.
So basically, quarter 1 was 1 lakh, quarter 2 was INR 1.5 lakh, and we see numbers building up over this 1.5 lakh, right? That's how we should look at it?
Yes, yes, yes.
Okay. Then on the progress -- on the India side of the business, what kind of growth do you see in the India side of the business for FY '24?
So I think the internal plan within us as the company is definitely next we want to INR 200 crores next year. We had started the first initiative by launching a lot of new products in the [indiscernible] exhibition. That is basically for the FY '24.
It takes about -- gestation period takes about a couple of months. So we got an overwhelming respond to the stack. And I think we are all distributor excited architects projects. We also, as last time announced, we have a new B2B team, which is focusing only on architects and projects we are also able to grab a lot of new project orders. So I think we are quite confident next year that our aim would be to cross INR 200 crores in domestic next year.
Okay. So between now and, let's say, in 2 quarters, we will actually see the costing utilization of your capacity going up towards 11 lakh type of capacity. We will also see the process export building up and you have the stainless steel capacity. I don't know whether it is up and running. If you could just comment there on the comments on [indiscernible].
Yes, I think yes. So you're right on our force 1 and 2 points out of [indiscernible]. Also, we have started assembling for India. There's also a lot of export opportunities, which have got inquiries as you plan to back it [indiscernible] a thing kind of facet in a box.
So as far as the -- your question was on for the appliances, right? The stainless things. So the stainless tilting side, the IKEA business will commence in Quarter 4. We also have this new customer, which we have been awarded with large volumes in stainless stell. Also should start from quarter 4. So I think we are also looking at a good business coming FY '24 win for the stainless steel sinks.
Next question is from the line of BalaMudlikrishna [indiscernible] from Oman Investment Advisors.
Regarding the CapEx, I think we have been [indiscernible] CapEx plans. Can you please an update on the [indiscernible]?
Sorry to interrupt sir, maybe the question...
Regarding the CapEx of homebuilding appliance [indiscernible]. So could you please update on the state or better? I think we do it earlier a little bit delayed by 3 quarters. So what could be the step up now?
No. So the build in appliances factory, I think you're talking about. We already started assembling in quarter 3. We already started our project. We already started manufacturing and assembling the built-in appliances. So the project is already starting.
A follow up on that. So can we expect some contribution to the top line in Q4?
Yes, both of profit built-in appliances, you're able to see some contribution coming from quarter 3.
Got it. And by Q4, if we can achieve this utilization level of 80% to 90% in quartz sink. So we can expect around 200,000 quartz sink from Q4 onwards? And then maybe we might need to go for some other CapEx in expansion costs into expansion. Do you have any plans on that? Still, [indiscernible].
So I would not comment on the 200,000 sinks. What I can only comment is that we have some -- we are in advance negotiations further. We already have good order booking. But for Q4 FY '24, we are already in advanced talk with some large customers for bulk quantities, very large quantities. Then I think that should come into play. So we are just doing -- hoping of that. Obviously, our aim is to utilize our capacity as much as we can in FY '24.
[Operator Instructions] Our next question is from the line of Udit Gajiwala from Yes Securities.
Congratulations on great set of numbers. So firstly, sir, can you explain, I mean, of the U.S. acquisition that you have made? So when do you expect it to get consolidated into our financials?
So it will start from quarter 3.
Okay. So this basically puts you on the road map to achieve your INR 1,000 crores revenue for '25, correct?
Yes.
With this acquisition, so on a blended basis, I mean, you are there in your near term. So are you planning that 2 lakh capacity that we had deferred last year? So once you just mentioned that the order book is until Q4. So are you planning to make that live again, the 2 lakhs that we had doubled?
See, I'm like, again, I think I want to say I cannot confirm this. I think our idea is to use the increase in capacity utilization for the granite sink and the stainless steel sink in FY '24. Companies putting tremendous efforts.
Also repeating, we are in advanced talks with some large quantities, with some very prominent customers next year. I think everything gets realized. I think will be to maximize the capacity utilization in FY '24.
As far as the U.S. business is concern, we started listing there from quarter 3, and we are very confident. We have some more potential opportunity coming forward -- I mean, coming in, in the coming quarters. And we feel that we are all in track for 2,000 next year, which will start seeing coming from quarter 3.
That's great, sir. And on stand-alone basis, sir, we have seen the margins going up to 23%. So just on the stand-alone front, are these margins sustainable? Or there also, you just want to keep your guidance of 20% for consolidation?
You see, I think our -- you see our guidance of 30%. We could have always there, but I think the company has done a great job. Our team has done a great job be able to control our cost. And so I think potential, yes, I think 20%. Yes, I think is a good, safe thing to do, always margin 18%, 20% because we need to understand we are still in a very, very uncertain environment. But if the volumes grow further to this, yes, there is a potential that the margins will expand.
We move to the next question from [indiscernible] from Crown Capital.
So just wanted to know what guidance do we give for FY '25 And for FY '24 with the consolidation of subsidiary coming in? So what kind of revenue [indiscernible]?
[Technical Difficulty]
Yes. so just wanted to know with the U.S. subsidiary consolidation happening, what kind of guidance do we give for H2 FY '24? And will our margins take a bit of a hit in FY '25 because U.S. business is a bit lower margin? So how do we see FY '25 and the remaining FY '24 panning out in terms of revenue and margins?
So I think as far as the U.S. business -- controlling business, I think that's not a very large. It's less than 10% of our business revenue. So even if you console that, [indiscernible] would not have much impact on the margin. That's number one.
And your second question on the U.S. margin, I don't think so. That's a correct statement. What I think the previous gentlemen answered, it was on the price year. There has been value because Europe is [indiscernible]. On an apple-to-apple basis, on the FOB prices, the U.S. business is the most profitable business. So the more U.S. business increases, the more possible it is the margin expansion.
Sir, I just wanted to confirm FY '25, we are on track for INR 1,000 crores revenue with 20%-plus margins?
Yes. I think so. Based on what I commented on earlier statements I had made, that company is putting every effort to be on the track of 1,000 next year.
Okay. Any sort of risk that we see for that like any [indiscernible] pump that we need to be aware of [indiscernible] for that? So any speed bumb that we see for that target.
The world is very an uncertain business. So it's nothing that what you and we can do. But there are this geopolitical situation is the cloud is on our head at this point of time. So we don't know the U.S. elections are coming up. There's a lot of uncertainty around the world. So those are the geopolitical risks.
Second is, I think, on the other side, the inflation is very high. The interest costs are very high, but also I think the -- what we see on the sunshine on the horizon is that -- also that it seems that the interest rate should soften by coming 2024. And if that softens, then the housing market can boom again, at least signs of recovery.
So what we are showing you the growth is probably the most adverse times in home improvement business ever. So yes, as I cross my single next year, it's been [indiscernible] go down. I think you may see a better demand coming India and globally.
Next question is from the line of [indiscernible] from [indiscernible] Jersey.
So my question is, if you can please help me understand how is the demand panning out, especially in the export markets? Like is it improving? What are we further -- what are the other growth levers which we are seeing in export markets?
So like I said, that we've been maximizing our market share by taking more -- adding more customers, expanding our product range. So I think overall, globally, we are maximizing our market share since most of our competition was 90% comes from Europe, which we are quite it's quite -- having challenging times in terms of production costs. So yes, there are more opportunities.
Second, we have -- we are in advanced talks with some with large export customers. So that can come to realization quarter 4. So I think we -- if that all comes into play, yes, you will see a bulk of upside on the export sales coming from quarter 4.
Okay. And my second question was, in which markets are we seeing a slowdown in the demand for quartz sink, whether it is domestic or exports? And when you think can we get back to historical growth rates in this segment?
So I think one thing is we are very clear. We want to stick to the fundamentals of our business that the granite sinks are on the rise globally. So not a single market is right now on a decline. It may happen because of geopolitical situation, like Israel and Jordan and some of the Gulf countries. But across -- I think there's a demand and the demand is only increasing. It's not going down. Second question was on the historic -- what was that?
Historical number.
Historical growth rates in the segment.
Historical growth rates in '22, '23.
Yes. So the one thing that, like I said, that I think our -- we are on track on our 1,000 growth for next year. We have large opportunities coming in our way, and I think we are on track. I think we would be doing our best to reach historical numbers, yes.
Our next question is from the line of Nikhil Gada from Abakkus AMC.
Congrats on a great set of numbers. Sir, my first question is on United Granite. So you mentioned that we are running this business currently at 60% -- as in the business was running at 60% utilization. So is it fair to assume that at peak utilization, this business can deliver somewhere between INR 150 crores to INR 170 crores of revenue?
So I think [indiscernible] on the peak, you can go about $15 million to $16 million of [indiscernible]. So I think could be around INR 120 crores, INR 130 crores.
Yes. Understood. And sir, this business, basically, is it just the technology of doing the entire fabrication together? Or is there some assets as well, which are being used to make this product -- entire product in-house?
The entire product? What is the technology we are using. So these are all completely CNC machine so you get a drawing and then you customize. I mean it's all based on bespoke. So every kitchen gives us design and we do the CMC and [indiscernible].
Understood. Sir, so what kind of...
And they still take what United they can make the fully integrated seamless integrated tops with the post thing.
Sir, what I wanted to understand, so I got that. So what is basically the asset and this is the gross block in this, if you can give.
The asset-light model, gross block is around INR 20 crores.
Understood. Got it. Sir, my second question then is on [indiscernible] INR 200 crores of a plan that we want to achieve in domestic business. What kind of margins range are we targeting to achieve this INR 200 crores? Are we trying to work around 15%, 20%? Or do you think that it can be much lower than the export market margins?
No, no. So I think we have always said the domestic business with the -- with our growth expansion, the margin also range between 17% to 18% EBITDA. But I think we are -- because the new product launches is a good high validation-- high diluted products. And with the growth in the revenue, the margin expansion also happen in the domestic market.
So we believe 17%, 18% is possible with this INR 200 crores revenue?
Yes.
Okay, sir. Just one last question, sir. This prospect and appliances, now that you have commenced in the INR 1,000 crores of estimates that we have for FY '25, how much was this to sort of categories point of view in our assumption?
Yes. So right now, I think what we have, the current breakup is 50% granted, out of the total [indiscernible] 50% [indiscernible]. And I think [indiscernible] services. 2021 offices, and then you have 15% of the industry and 12% of our building appliance. So that's the breakup [indiscernible]. We assume that this year I think the granite sink share should slightly improve this coming year and on the next year.
So basically, the 60% includes profits as well in the granite sink. So [indiscernible] will be remaining 2%, 3%?
Those are on -- so the process right now 2%, 3%, which is a very insignificant number we added in the sink.
Next question is from the line of Nithya Shah from [indiscernible].
Congrats on a good set of numbers. So I just wanted to understand, I saw a big spike in the receivables of H1 of this year versus H1 of last year. So could you throw some light on that, please?
So receivables -- we have improved on the receivable number of [indiscernible] look at. We have improved on the numbers.
No, I'm saying, as a percentage of sales. So you've done say around about INR 300 crores of top line in H1 of this year. The receivables against that are quite high. It's close to 40% of sales. So I just wanted to understand that.
So it's only something -- it depends on the country to country export market. Like if we sell in France, number of days are high. If we sell on the U.S. there are number of days more. But it's -- overall, it's on the decline trade because we have -- on the domestic side, we have reduced our trade number of days. So it's only a rightly -- and it is nothing in number of days have not increased.
Okay. [indiscernible].
Sorry, is just the effect of the consolidation because the new consolidation of the company [indiscernible] also came here, which was not there earlier.
Okay. Fair enough, sir. And my second question was on the dealer network expansion. So now your dealer network has reached around about 3,200 dealers. So how has been the response of this entire network? And how is the competitive scenario in India? Just to understand the consumer preferences in India. What has been your experience so far with the expansion?
So I think whichever whatever the galleries, we need to upgrade our current galleries last 2 years we've been talking about. [indiscernible] upgrade to increase galleries from 10 galleries to more than 60 galleries now. And now from quarter 3, we have, again, started expansion of the dealer network, which I -- one of the gentlemen asked. So first on quarter 3, you will see that there'll be a sharp increase in the domestic sales.
And second thing, I think, on the consumer preference, more and more inquiries we are getting to open up franchisees, order displays, as the same kind of build-in appliances. So we can see that our Carysil brand is emerging to be a very prominent brand, [indiscernible], but also built-in appliances in India. And I think this was the same feedback we got on the [indiscernible] Bombay also.
Third thing on the preferences, I think we see a great shift that people are moving from stainless steel sinks to the granite sinks. So I think that platform is coming into play. The more sellers are coming into play now. And this idea of a one-stop solution on one service by a click of a button on a WhatsApp, we can service your Carysil kitchen sinks and the built-in appliances. I think it's going to ease the customer pain. I think they absolutely like it. So I -- so we believe that Carysil is strongly emerging as a very prominent brand [indiscernible].
The next question is from the line of Ankur Kumar from Alpha Capital.
Congrats for a good set of numbers. Sir, my question in, for next year, you have given a guidance of INR 1,000 crores. So any guidance you would like to give for this year also?
In my last call, I said that we are going to be in the annual rates -- we want to start hitting the annual rate from this quarter around INR 727, INR 750 crores. I think we are quite in line with that. Yes.
So from the Q3, we expect that 727?
Yes, yes, yes.
Got it, sir. And sir, on the demand side, how are we seeing -- because it's like a mixed signal. We are seeing a lot of issues in export side and -- but our company has done well. So can you comment on that, please?
So number one, fundamentals of the business. Again, I'm saying that granite sinks are the fastest-moving category in the home improvement section at this point of time. Second is that India, especially Carysil, has a massive opportunity in terms of maximizing their market share as well.
We have lots of inquiries -- global inquiries. People want to come and source installment there. Because our 90%, which is about 4 million to 5 million things of competition comes from the Western countries, which they are finding very challenging times to the increase in costs.
So we absolutely believe in coming years, we can not only to be as strong, but there is a large potential for us to become one of the strongest player in the world in terms of granite sinks manufactured from India. So that's what the flavor is right now.
Got it, sir. And sir, in this quarter, we have seen a reduction in the COGS. So gross margins have expanded this quarter. So can we expect this kind of numbers to continue?
So the material prices for this quarter was still down and currently stable. So I think we believe that this material cost will remain in same [indiscernible] for quarter 3.
So let's say -- and the margins should sustain. Because if the material prices are remaining stable, I think we should have the same kind of margin.
We move to the next question, from the line of Sampath Nair from Tiger Asset.
Congratulation on good set of numbers. So my question is mainly on like United -- U.S. acquisition. So sir, can you give numbers on like FY '23 sales and EBITDA numbers for the U.S. acquisition?
Yes. You're talking about FY '23 project, sir? So I think the -- so like the FY, how much was the FY...
FY '20 is 12 million.
No, the end of 6 months.
6 months, around 4.8.
Yes, almost 4 points. So it was about 5 -- $4.8 million to $5 million. Based on that rate, I think you're looking at about close to $9.5 million to $10 million sales this year. We obviously got a console from end of October only. So I think we will get the benefit to that extent in quarter 3.
Yes. And it's also like will be like improving EBITDA margin from 7% to 8% to 15%. Can you throw some light on how exactly you are planning to do that?
So I think this company had issues with a lot of working capital and is why they've been able to sourcing the materials locally only. While we've been able to strategized that to buy bulk quantities at a lower rate, so I think that's going to start soon. So moving forward, you will see improvement in the EBITDA margin.
We move to our next question, which is from the line of Aditya Jadhav from Motilal Oswal.
Congratulation on the good set of numbers. Just have a couple of questions. So when we look at exports, so exports have really grown well. So just wanted to understand geographies are the growth pockets coming from?
Opportunities....
From where the growth is coming?
Yes. So the opportunities right now, I think across -- mostly, it is coming from the United States, but it has also the countries around the world also showing kinds of improvement. So there will be the more momentum should come more from the U.S. In Europe, there are some large bulk opportunities, which we are looking forward coming in the horizon in quarter 4. But overall, I think the trend is improving across globally.
Okay. But if you were to pinpoint a particular geography or a bunch of geographies where the growth is coming from and to where the growth -- where the management is seeing the opportunity is coming from?
I see that the #1 large growth coming from the U.S. That's one. Number two, all the more opportunities in the emerging countries, like I mentioned in my speech, that our new dietary UA, Australia, Turkey, all are doing -- they are doing quite well, including Australia, South Africa. And also I think that's where we're going to see a very strong growth. That's two.
Three is that the acquisition in the U.K., which we have done with the tap factory and the [indiscernible] offices. So that distribution is coming into play. So if you would have seen the U.K. sales, they are almost in par with -- during the COVID time we had [indiscernible] sales.
So [indiscernible]. Carysil Products Limited is at about 4.8 million pounds, which has grown about 30%, if I'm not wrong. So that's where basically we would expand the customer base by as more as 30% in U.K. So yes, so I think the next will be the Germany and the U.K.
Germany, U.K., Denmark, Sweden, IKEA is now bouncing back with some new orders, with some new models. They started in India. So I think that would be the growth we are looking coming from those countries and those customers.
Ladies and gentlemen, that was the last question of our question-and-answer session. I would now like to hand the conference over to Mr. Chirag Parekh for closing comments.
Thank you, everyone. I hope we have been able to answer all your questions satisfactorily. However, if you need any further clarifications or want to know more about the company, please contact SGA team, our Investor Relations advisers.
On behalf of my colleagues in Carysil Limited, I wish you all a very happy Diwali. I hope the year -- and the new year brings a lot of happiness to you and your dear ones. Please be safe. Thank you.
Thank you. On behalf of Carysil Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.