Hi-Tech Pipes Ltd
NSE:HITECH
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
98.5
205.61
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Hi-Tech Pipes Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of Hi-Tech Pipes hosted by Ambit Capital. Hi-Tech Pipes will be represented by Mr. Arvind Bansal, CFO. [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Mr. Dhruv Jain, analyst from Ambit Capital. Thank you, and over to you, sir.
Hello, everyone. Welcome come to 4Q FY '22 earnings call of Hi-Tech Pipes. To the management side today with us, we have Mr. Anish Bansal, Whole-time Director; and Mr. Arvind Bansal, the CFO of the company. Thank you, and over to you, sir, for your opening remarks.
Good morning, and welcome, everyone, for our Q4 FY '22 earnings conference call. I'm joined on the call by Mr. Arvind Bansal, CFO of the company. I hope everyone has had a chance to go through our results and updated Investor Presentation uploaded on the exchange.
We are delighted to report double-digit net profitability in Q4 FY '22 continuously for third quarter in a row. EBITDA per tonne of INR 3,511 in Q4 FY '22. The proportion of value-added products has increased to 27% in Q4 FY '22. It is continuously growing quarter after quarter. Strong profitability despite of volatile market conditions led by Ukraine and Russia crisis.
In the reported quarter, volume has increased by 26%. Primary reason for increase in volume is focus of the company on sale of value-added products, growing demand in the market and aggressive branding activities.
The sales realization has improved considerably year-on-year basis, primarily led by increase in steel prices and higher stock value-added products. Though the raw metal prices have increased on Y-o-Y basis, we have been able to improve our operational efficiencies, which has benefited us in margin improvement.
Now I would like to go through the 4 major developments and initiatives during the ongoing year. Firstly, Sanand Phase 2. The company has started commissioning of the large diameter pipes, LDP pipes project at Sanand, Gujarat. Capacity of this new greenfield project will be 60,000 tonnes per annum. LDP pipes to be manufactured at this facility will be used for transportation of water, gas and oil. There is a big demand of these specialized pipes, especially for the city gas distribution network. And this upcoming facility will cater demand for the sector. Trial production for this project is expected from Q3 of FY '23.
The second development, color-coated roofing sheet project at Sikanderabad, the company has started commissioning of color-coated PPGI roofing sheets at the Sikanderabad facility. This project is the forward integration towards existing core rolling and continuous galvanized line facility, to manufacture value-added products. Capacity of this new value-added product will be 50,000 tonnes per annum.
The roofing sheets are being used for rooftops, domestic, industrial, wall cladding, metros, infrastructure, railway stations, et cetera. Trial production for this project is expected from Q2 of FY '23.
The third development, production of Hi-Tech solar torque tubes. The company has started commercial production of solar torque tubes. These steel tubes are used specifically for solar trackers. Quality and service of these tubes is very well accepted in the market. Going forward, the demand for these tubes are going to increase exponentially in the times to come.
Torque initiatives is the corporate branding. The company has started aggressive corporate branding and product branding activities on various social media platforms, including Facebook, Instagram, LinkedIn, YouTube, et cetera. The company has also started aggressive advertising campaign over various radio channels on pan-India basis.
The company is also doing a lot of BTL activities such as fabricator needs, dealer needs and customer needs on pan-India basis.
All the above 4 developments should contribute significantly towards top line and bottom line growth in the coming years. We are also committed and focused to optimally improve the capacity utilization of our existing brands and also increase the value -- also increase the proportion of value-added products.
At the same time, we have a clear vision to reach 1 million tonnes capacity from current 5.8 lakh tonnes. With robust demand, we are very optimistic that the company will achieve good volume growth in FY '22/'23.
I will now hand over the call to Mr. Arvind Bansal, our CFO, to take you through the financial results for Q4 FY '22. Over to you.
Good morning, everyone. I will take you through the financial results of Q4 FY '22 and FY '22 for full year. Quarterly performance of Q4 FY '22 versus Q4 FY '21. Our revenue from operations for the quarter grew by 52% on a year-on-year basis to increase INR 595 crores as against INR 392 crores. The revenue growth was primarily driven by significant increase in our sales volume of value-added products and higher realizations.
Sales realizations has improved by 24% to INR 70,000 per tonne as compared to INR 56,500 per tonne.
EBITDA for the quarter increased by 55% to INR 29.86 crores as against INR 19.31 crores. EBITDA per tonne for the quarter stood at INR 3,511 per tonne as against INR 2,861 per tonne, which is an increase of 23% on a year-on-year basis.
Our PAT increased significantly and stood at INR 11.22 crores as against INR 6.52 crores.
Now I will take you through the yearly performance, FY '22 versus FY '21. Our revenue from operations for the year grew by 40% to INR 1,879 crores as against INR 1,341 crores in FY '21.
Our EBITDA for the year increased by 42% to more than INR 100 crore as against INR 70.84 crores in FY '21. EBITDA per tonne for the year stood at INR 3,634 per tonne as against INR 2,861 per tonne in FY '21, which is an increase of 39%. Our PAT increased significantly and stood at INR 40.34 crores as against INR 20.8 crores in FY '21.
Current ratio has improved from 1.37x in FY '21 to 1.43x in FY '22. Interest coverage has improved from 1.96x in FY '21 to 2.52x in FY '22.
Debt-to-equity ratio has improved from 1.45x in FY '21 to 1.42x in FY '22. ROCE has improved from 13% in FY '21 to 16.3% in FY '22. ROE has improved from 12% in FY '21 to 17.4% in FY '22. Net working capital days has improved from 71 days in FY '21 to 67 days in FY '22.
With this, I would like to open the floor for questions. Thank you.
[Operator Instructions] The first question is from the line of Nikhil Chowdhary from Kriis Portfolio.
Yes. Congratulations on a great set of numbers. I wanted to understand in this volatile environment where prices, raw material inflation has been concerned for even the bigger players. What has been your sense like on the demand outlook, considering the situation that we are in? Will it be probably robust going forward what we have seen in the past 3 quarters or something that probably you are seeing? It can be challenging if the inflation doesn't cool down from here on.
As we've all seen the last financial year was full of volatilities, first, it was the COVID. And then there will be extended monsoon period, and then we had the Ukraine-Russia crisis to end with. So basically, the volatilities may remain there for another like 3 to 4 months. Because now the China lockdown is causing impact on the prices of all the major commodities. So we see the pricing being to stabilize in Q2 of FY 2022. So once the prices are stabilizes, I think then it's more conducive towards growth of the volumes. So we expect prices to be rated down in Q2. And whatever prices will be [indiscernible], they should come in line national markets and as with the domestic expectations.
Understood. Sir, just probably I didn't probably dwell a lot into your dealers. But in respect of the other pipe companies, I was getting a sense like dealers are probably not stocking enough because they are probably not comfortable in stocking it [indiscernible] stock. Is it something that we are also witnessing or probably our industry is altogether different and that is why it doesn't impact us a lot because it is more driven by what happens to the construction space and all? Just wanted to get a sense on that.
So Nikhil, what happens is the consumption is already there, only the inventories with the distributors, they may increase or decrease with the price for fees. So right now, we are facing like a little bit destocking from our distributors, but once the prices are stable for this month, we are expecting a sharp correction in steel prices. So once it's done, the restocking will start. So overall, a weak quarter should not be affected.
Okay. Okay. And sir, last thing, since I'm new to this company, I wanted to understand how probably our customers are willing to accept the price hikes, like, is it easy for us to probably pass on the price hikes or we do face resistance -- like I understand this is a [indiscernible] phenomenon and everyone knows, but how easy it is for us to probably pass on the price -- price hikes?
So basically, the price hikes, they are done across the industry by all the players. So once it is done by all the players, then it is not as difficult to pass on the price hikes. We are convertors in conversion space, and we are increasing these value-added products so that the product basket is rich so that like there is no dependency on one particular segment.
Understood. Understood. What probably, sir, do you feel can be demand under in this year or you are really confident like we will do a very good, like what we saw in financial year '22, financial year '23 will also be something similar. I wanted to understand the antithesis.
So from the demand side, we are very, very optimistic. The demand should remain strong for this financial year, the projects they are there, the demand from the domestic consumption. So it is going to go up. So we are not concerned about like demand. So having said that, we are confident of doing at least 20%, 25% volume growth for this financial year.
The next question is from the line of Abhishek Ghosh from DSP Mutual Fund.
A couple of questions. If we look at the -- if I look at a broad margin profile on a per tonne basis, you were broadly at about that INR 2,000, INR 2,500 of EBITDA per tonne which in the year of FY '22 has moved up to almost about INR 3,600. So broadly, if you can just help us understand the reasons for these increases? And if steel prices to correct, I'm more talking from an annual basis, is there a risk to that margin that you have been earning?
Yes, Abhishek. The increase in our overall blended EBITDA per tonne is due to the increase of value-added products in our total contribution. So earlier, we were having around 15% to 17% contribution from the value-added products, which has risen to almost 25% to 27% for FY '22. Eventually, our focus is to increase the share of value-added products up to 50% going forward in the coming years.
And when you refer to value-added products, you're largely referring to the GP pipes and the GI pipes, right, and not the MS and the hollow round?
Yes, coated pipes and certain SPUs and black tube also are upcoming the color-coated sheet segment, the LDP pipes. So these all will contribute towards the value-add products.
Okay. Okay. so even if there is an element of lower steel prices, which has moved in excess of INR 70 per kg, even if it was to fall to INR 50, INR 55 per kg pre-crisis, you don't see per tonne basis, your EBITDA per tonne to meaningfully decline. Is that a better option?
Absolutely.
Okay, fair. Sir, the other thing is you've started this new product line of color coated tubes. Can you just articulate in terms of how big is the market size? What are the opportunities? Who are the key players? Just some thoughts around there will be helpful, sir.
We are starting the color coated sheet segment, not the [indiscernible].
Yes. Sorry, my bad. Color-coated roof sheets, yes.
Now looking fee. So this is a big market. This may be as big as the tube and pipe segment. And this market is also growing by at least 12% to 14% per annum, because earlier, there was in roofing in the rural segment, it was all as the stores and cement sheets, but now these are being replaced by the metal roofing.
Okay. So who caters to this segment today? Like tube there are...
So this space has also like consolidated to a large extent. So only primary players are there in the steel now, majorly.
So all those who are making the steel, those players have only forward integrated and make the roof sheets also color-coated?
Correct.
The market should be healthy...
A handful of players.
Okay. And do you think the margins also here will be fairly healthy?
Yes, absolutely. Like we should expect EBITDA per tonne of INR 5,000 to INR 6,000 per tonne from this segment.
Okay. Got that. And just a couple of questions. You also spoke about the solar opportunity which you are doing it with your product. How big is that opportunity? Again, what's the competitive scenario, like if you can just help us understand that.
So this is a fairly very new product from the Indian context. And earlier, the penetration of solar trackers were very less. But due to the increase in the solar module prices and other balance of plant systems, so basically, solar tracker helps in increasing the generation by 20% to 25%. So now the tracker is inevitable for all these solar developers because 20%, 25% generation means a lot. So that is the only way to set out the price hikes in the solar modules.
And we are seeing from last year, there's a shift from the fixed structures towards solar trackers. And also, there is a huge export potential from the Indian subcontinent from -- for the solar trackers, so we see a very, very active demand from this space in this financial year. But to quantify will be really difficult once it is there, but we are very confident that we'll do good volumes in this segment.
Do you think this can be a 1 million tonne market overall?
Yes, could be between 0.5 million tonne to 1 million.
And are all the ERW players also present here in terms of products?
Only a couple.
What I'm trying to understand is the process of making solar tubes, which is going into these trackers, is it very difficult? Is there an entry barrier or tomorrow looking at the opportunity, all the ERW players will come into the system is my question.
No, there are a lot of a lot of -- the standards are really high. The -- this is a special SKU and the raw material is entirely different. We need to have a good amount of integration in our processes, like we are doing it from scratch, from HR and then we are doing galvanizing in-house, and then we are doing the tube in-house, so it's all in-house and very 2 players have been integrated [indiscernible].
Okay. Just, 2 last questions. Your volumes are also a function of price differential between tubes made out of primary and secondary. How has that gap been trending?
So that gap Abhishek, is varying during the year. Sometimes it is high, sometimes it is low. But once the steel prices, they moderate and they come to at the rational levels, I think then this primary -- eventually, the primary market has always sustained. The secondary is -- it comes and goes. So once the prices stabilize and the price differential goes down, then all the share will be primary players.
But do you believe the differential has increased a fair bit. And if that was to normalize, your volume growth can be much higher. Is that something that you kind of have a view on?
Yes, differential has been high over the last full year, in fact.
Correct.
So like as the price is moderate and they come down to the reasonable levels, then I don't think the second -- because the products made from secondary are very, very, there's a big gap in the quality between, from the secondary and the primary. Secondary, the tubes and pipes are basically, there is hardly any consistency in the chemical composition, and there are a lot of defects in the -- so it's -- basically it's a very, very cheap version of MS tube and pipes.
Sure. And just one last question from my side is, in terms of -- you mentioned that in the month of April, May, or particularly in the month of May, there has been some amount of destocking. So typically, what is the broad inventory level that you'll sit at in terms of days?
So basically, the raw material inventory is around 20 to 25 days. And finished is also about 20 days.
That finished is 20 days.
Yes.
Okay. And receivables also would be around 30, 35 days? Or how does it differ?
Yes, 30 days.
And what was it in pre-crisis, your receivable days?
Approximately between 35 to 37.
So it has remained stable.
Yes.
[Operator Instructions]. The next question is from the line of Dhiral Shah from Phillip Capital.
Sir, by when do you expect this price differential to get normalized, between primary and secondary [indiscernible].
So we expect this price differential to narrow down significantly by June and July.
And sir, what is the ideal spread that you're talking about between primary and secondary, which is historically isn't there?
INR 5. INR 5 to INR 6.
Okay. And sir, lastly, what is an outlook for this working capital for FY '23 and '24?
So right now, our total net working capital days is 67 days. And we are targeting to bring it down under 60 days for this financial year.
So this will be led by inventory correction or maybe any further reduction in the receivable days?
Both. Both.
The next question is from the line of Akshay Chheda from Canara Robeco.
So you did mention that the color-coated sheets gives you a INR 5,000 to INR 6,000 per tonne kind of EBITDA per margin. So sir, what will happen if the steel price is correct as you are indicating. So can there be pressure on this? Because I understand that we work on the percentage margin. So if the HRC has to correct then, wouldn't this number go down? Or sir, how should we look at it?
So in case of price correction -- steel price correction, it would happen like over a month. So basically, if there is at all, there is an impact, it will be a run, but then it will stabilize. And ultimately, it will help us in pulling up more demand if prices will come down a bit and rationalize a bit. So like their dealers and distributors, they'll also restocking. There'll be fear of further price correction. That will go away.
But sir, this understanding is correct, right? If HRC goes down, then the margin should come down, but then operating leverage would help us to improve it. Is the reading right?
Absolutely.
Okay. And sir, this happens across all our products, even in the GI price that we do because I understand there also we make around 4,000 kind of EBITDA per tonne. So even there, the same logic holds true?
Yes, if the prices come down, like our margin in terms of percentage, that will go up but ultimately, we are focused towards our EBITDA per tonne on different products. so if prices come down, the percentage -- the margin percentage, that will go up.
Sir, this is more kind of also you operate on a cost-plus model. Is that the right thing then?
Yes, yes, because we are in the conversion space. So cost plus is our model and the industry model as well.
Okay. Okay. So I mean, even if the HRC goes down, then EBITDA per tonne should be at least minus is what we are looking at. Okay.
Yes. In fact, it should become better.
The next question is from the line of Akshay Kothari from Envision Capital.
I had a couple of questions like on which geographies in India, are we focusing more? So can you give a sense of that?
So basically, our current focus is in 3 major geographies. That is North India, West India and South India. And this is where we maximum demand and consumption from these regions. And our local manufacturing plants are also located in these locations, north, west and south. So our focus is predominantly in these markets, and there is a big opportunity in these markets in coming few years, and we'll be focusing actively to push all our products in these 3 major geographies.
Okay. That's great. And any -- what we can say, plans to expand our distribution network? Currently, I think we have 390-plus distributor, so any plans?
Yes. This would be going up sequentially and gradually. So -- but increasing the distributors is not a challenge. Once our products are there, we'll be taking more on a case-to-case basis.
Okay. Okay. And we did volume. Correct me if I'm wrong. So if we did a volume growth of around 2% this year. And I think you mentioned that we would be growing around 20% to 25% in the coming years. So what would be the drivers for this growth as such. The prices -- steel prices coming down and volume expanding. So what would be the basic drivers?
Yes, a lot of -- there are a lot of factors. First, the demand should be robust, and the volatilities and the variations we have seen last year, we are hopeful that they will not be there this year, like the early lockdowns and the supply cycle change led by Ukraine and Russia prices. So all these things, they impacted the overall volumes for the industry.
But having all these things, if they settle down, I think the volume growth will be there. There are a lot of -- there's a big demand from the Jal Jeevan Mission which will take shape in this financial year. A lot of demand from the city gas distribution, lot of demand drivers from the infrastructure and construction side. So all these things, they will help us in achieving 20% to 25% growth.
Okay. And you also did mention about that Sanand plant and supplying to CGD companies?
Absolutely.
Yes. Do you think that your working capital cycle would be elongated? How are we looking at that because these companies are a handful of them and so they would be...
In CGD, it is -- the working capital does not get straight because there is no credit in that segment.
Okay. Okay. And what would be the share of revenue from government entities or PSUs as such, if you can give a sense of that?
So for this year, I think it shall be between 5% to 10%.
Okay, that's great. And last question. So what would the time cycle we take price or pass on the prices to the channels or to the customers?
So basically, price difference transmission is fairly very quick. It generally is under 10 days.
The next question is from the line of Abhishek Ghosh from DSP Mutual Fund.
Sir, broadly, you have sold about 2,77,000 tonnes last year, right?
Yes.
So how should one look at your broad market share?
So in this, you can like assume industry sales of approximately 6 million tonnes.
This includes both primary and secondary?
Yes.
Okay. And how would the -- how big would be secondary in this?
Secondary, would be approximately you can [indiscernible]. If it is just a ballpark figure between 5 lakh tonnes to 8 lakh tonnes.
Okay. So you are broadly at about 4%, 5% market -- 5%, 6% market share.
Yes. Yes.
Okay. Okay. And if you look at financials of all the companies, right, everybody seems to have a margin improvement on an EBITDA per tonne basis in the last 1, 1.5 years, and everybody is executing the reason for that to be value-added products. Now is the market construct itself changing where the demand for value-added products is much higher or there is a replacement because everybody seems to -- there's a lot of growth, how should one look at it from that perspective?
So Abhishek, like we have done like for certain things, like over the last 5 to 6 years, so which has helped us in achieving this higher EBITDA per tonne. And going forward also, we have done a lot of integration backward and forward integration across all the plants. We have enriched our product offering also. We have -- like we have a very, very good, localized presence in all 3 geographies in north, west and south. In west, we are catering from 2 different locations in Maharashtra and Gujarat. South, we are at Andhra, Karnataka border, which is step into 4, 5 states. So all these initiatives that we have taken, it is there to ensure that our EBITDA per tonne goes on sequentially.
And going forward also, our 2 major projects of color-coated and the large diameter pipes and the solar tubes. So all these initiatives, they are in the direction of increasing this the EBITDA per tonne [indiscernible].
Okay. And just 3 other things. What is the scrap price differential today?
About INR 20,000 per tonne.
It's almost at a very high price today. It's almost at its historical high, right?
Yes.
So your April, May volumes would be weaker to that extent?
Let's see. The quarter is still there.
Okay, fair enough. And the other thing is, do you see -- because when we see from our lens, we see everybody seems to be announcing capacity on their base. So do you envisage a situation where there's higher supply addition into the system or there's an overcapacity? Or will kind of demand outpace the supply. Any thoughts around this?
Abhishek, our capacity expansion is going into very, very niche segments like last large diameter pipes, there is a like big [indiscernible] in there. So we are [indiscernible] roofing, there is a big [indiscernible] in the roofing segment. And the applications of the color-coated sheet is increasing day on day.
So we are very, very focused where to put up the capacities. So our base capacities, I think they are enough to fulfill our demand. And we are now expanding in the areas where the growth potential is really, really, really high over the next coming years.
My question was more not just from Hi-Tech's perspective, but generally for the industry, do you see your competitors peers everybody adding capacity because everybody has made cash flows in the last 2 years. So more from that perspective.
So broadly, if we talk about like on a very, very broader level, like the consumption and the demand will certainly go up in the next 4 to 5 years. So in India, from the country perspective, we are targeting a 3 million -- 300 million tonne production and production capacity. There's a big export opportunity that should open up for the Indian players when the logistics and the freights get rationalized. And we are seeing a demand growth of 10%, 10% per annum in our segment. So all these things, they will help in achieving the volumes.
Got it. And one last question. Is export also a big opportunity for you?
Absolutely, absolutely. It definitely is. Since China has withdrawn itself from the international market. So the next big opportunity lies with the Indian players.
And how are export margins?
They are good. But right now, we are facing acute logistics issue because of the Ukraine and Russia crisis. And earlier to that, the lockdowns, and right now, also like even the lockdown, so basically, the rates are going up on a quarter-to-quarter basis. They have still not [indiscernible]. So once they come down and they get rationalized, I think it will be a big opportunity for the Indian players.
Thank you to, the next question is from the line of Nikhil Chowdhary from Kriis Capital -- Kriis Portfolio.
Sir, wanted to understand on the solar plant a bit. Like have we started testing or like is it in the development stage? Have you started dispatching for probably testing how the product is moving off among the consumer like who would be our end consumers? Would it be the solar module size or the EPC guys? Like I understand it should be the EPC players who will be installing the solar modules on the roof?
So basically, our targeted customer would be the EPC guys. Because we give the whole turnkey EPC -- to all the EPC guys, there are plenty of them. And this production has started, and we have supplied a decent volume in the Q4. And going forward also, we have a very, very specialized team for production and market of this product.
Understood. Understood. And sir, on the EBITDA margin front, just like we alluded earlier, we are intending increase the value-added products in the mix. So supposedly, if it increase up to 50%, which you are expecting, what should be the EBITDA margin that we should be probably thinking ballpark number would be really helpful?
So see, our target is to increase our EBITDA per tonne year-on-year. So we'll be growing this by a couple of hundreds every year.
Thank you. The next question is from the line of Vikash Singh from Phillip Capital.
I want to understand one thing, sir. Our capacities are already double of what we have produced last year. So considering we want to grow at 25% or more, is it safe to assume that the next couple of years, we don't need to add any further capacity when the cash flow would largely be if you like to pay down debt?
Yes, because our major CapEx has already been done. In terms of further forward integration also, it is completed for LDP pipes is also fairly done. So further, I think all the major CapEx has been done, and the focus will be on the utilization and increasing the share of value-added products. So these 2 are our focus areas for next 2 to 3 years.
Understood, sir. Sir, one more question regarding the overall industry capacity of the construction with ERW, it is expected to be ranging somewhere around 8 million tonnes or slightly more. Sir, I just wanted to understand [indiscernible] capacities are not reducing or exactly what the [indiscernible] because everybody else into still adding capacities while you said the market size is close to 6 million tonnes. So just wanted to understand all these capacities are just [indiscernible] and actual capacity is much lower or this is the general trend which would have been followed in the last decade or so.
There are -- actually the capacities what are coming up, they are in different, different segments. So we can't really pinpoint say it is for this, it is for this. The steel tube is being a very diverse product. The applications are numerous. So everybody is expanding in a particular segment not on general levels. Like our focus is towards the large diameter pipes, the gas pipes and the roofing -- the roofing sheets. So we have identified certain areas where there is a huge scope of growth. So we are expanding in those directions.
Okay. Sir, just one last question. In terms of raw material procurement, we are still a little bit lower overall. But what is the level do you think that the volume level do you think at this you should get a little bit of negotiating power, getting a little more discount than what is prevailing in the market, which would add up to your margin?
Vikash, I can confidently say that the normal pricing for our entity is among the lowest in the industry.
So basically, you're already there where you have some negotiating power with the...
Yes. there's no like large gap, but there is like certain number, which will be eventually, we would like to bring it down to.
[Operator Instructions] The next question is from the line of [indiscernible] from Dhanki Securities.
Sir, I just had one question on your capacity. In your earlier presentations, you had mentioned that through debottlenecking, you intend to increase your capacity from current 5,80,000 tonnes to around 7 lakh tonnes, so that is largely through debottlenecking or this includes the current 50,000 tonnes in Sanand, which you have expanded and also 50,000 tonnes in color-coated roofing sheets.
Yes. So this includes in these 7 lakh tonnes, these two developments.
But sir, this color-coated roofing sheets is a value-added product. So does it actually increase your capacity? Or it is -- the capacity remains the same and it's just value addition?
It's the value addition. The overall capacity will remain the same.
So then your overall current capacity, if after both these expansions, will not be like 6,80,000, it will be 6,30,000. Am I correct?
Yes, 6,40,000.
6,40,000. That is 60,000 tonnes of ERW pipe for the Citygate distribution. Okay. Overall capacity is 6,30,000 and earlier I guess that your value-added products capacity was 2,20,000 tonnes, which will now increase to 2,70,000, am I correct?
Absolutely.
Okay. So now the like 6,40,000, you intend to take it up to around 7 lakh through debottlenecking?
Yes. And that will happen in due course.
Okay. So just my second question is on the volume front. So with the 7 lakh tonnes, as you have stated that you would not go on expanding further. And on the 7 lakh tonnes, you will intend to scale up the utilization and share of value-added products. So what kind of utilization do you expect in, say, not this year, but say, FY '24 over the next 2 years out of the 7 lakh tonnes?
It will be ranging between 60% to 70%. 70% is the peak utilization possible.
The next question is from the line of [ Vaibhav Kapoor ], an individual investor.
Sir, I just wanted some understanding on the working capital cycle. How do you see it playing out for the next 3, 4 years from a longer-term perspective? And another linked question to that would be -- would there be any change in the days payable in the terms of trade as well?
Net working capital days, last year, what we have seen is acute supply side shortages, which forces to have higher raw material inventory because we have seen like acute shortage, so the supply chain got disrupted. So we were forced to have like a little higher inventory levels to ensure the steady supply to all our plants.
But this year, we are seeing the prices getting rationalized, and they have already picked out. So we don't feel like a need for a higher inventory from here on.
So firstly, the inventory days will certainly -- they should come down. And regarding the payables also, I mean, the creditors. So overall, this year, our target is to bring them below 60.
And going forward, in the next 2 to 3 years, as the utilization and the value-added products and all these things go on, so this will certainly go down in the coming 3 to 4 years.
And sir, with respect to your payables, it's ranging between 15 and 20 days. Do you see a monthly possibility? Or it would be difficult to get to that kind of a number in the long haul?
You mean like increasing the number of the pay grade like more credit from the suppliers?
Yes.
Yes, this is very much possible. We have had -- very recently, we had a rating upgrade also from A- to A. Now I think we'll be in a very, very -- we are in a much better portion to take advantage of this, and we can take more LDPs and take credit through the channel financing [indiscernible]. So that is on the card. And let's hope in this financial year, it should get materialized.
And sir, the second question I have is with respect to the CapEx that you have incurred, I just want to know what is the total CapEx that you have recurred for this new 60,000, and what will be the remaining CapEx that's not in the March '22 books or numbers?
So approximately, there is a INR 30 crore CapEx for the color-coated sheets and the same amount for the LDP pipes. And with this, we'll be fair like 80% to 85% of the CapEx has been done and will be approximately around INR 10 crores.
You're saying after the March numbers, about INR 12 crores to INR 15 crores of CapEx is remaining.
Approximately.
Approximately. And sir, the last question that I have is slightly broad-based, I've been looking at your annual reports, and there's some color with respect to your targets to increase the capacity. But if you look at your investor presentation, from FY '19 to FY '22. I mean in the past 4 years, the volume has been still in a particular range, even though we've been aggressively expanding the capacity.
Is there a dichotomy in being expanding our capacity, but is the volume growth still remaining the same. Are we being a little too aggressive there? Or are you anticipating something which is not coming to our mind?
Vaibhav, the initiative that we have taken in last 3, 4 years, is essential for the growth and the stability of the business, because these initiatives if we won't have taken in last 4 to 5 years, it would be difficult to be in this market. So this was essential in terms of capacity. Last 2, 3 years, the volumes are there where we have seen like in 2 financial years, 2 quarters being impacted by the lockdowns. Major lockdowns.
And this -- in the last quarter, Q4, despite the Ukraine Russia crisis, we are still able to achieve a good utilization. So going forward, from here on things more or less, they have stable down, and I think there is a scope for a good volume growth from hereon.
So what do you see the numbers that you have received in terms of volume in the -- in the last quarter, what would be an average, blended average for the next year, would that be at to do?
Yes.
The next question is from the line of Rikesh Parikh from Barclays Securities.
Congratulations on a good set of numbers. The first question is on the EBITDA margin per metric tonne for the quarter, we have seen some deep in the EBITDA margin per tonne. So any specific? Is it price movement or the mix been changing?
I think the EBITDA per tonne improvement, particularly through focus of the company on value-added products and through better operational efficiencies. You can say due to better for us mix?
Sequentially, quarter-on-quarter, I'm seeing that the EBITDA was from INR 3,853 has move down to INR 3,511 as far as you're climbing the tree.
There's only a marginal decrease in quarter 4, the volume of the company has increased. And so there's a little bit of pressure on the pricing also.
I just want understand because of the combination mix or it was the price, which has reduced realization?
Basically, due to price growth.
Okay. And going forward, what kind of value-added mix we would like to have like to maintain or plan to achieve in our...
In FY '22, we have achieved a value-added product proportion of around 25%. And if in FY '23 and '24, we are targeting it to be to 25% to 40%.
35% to 40%. Okay. Secondly, is on the volume front. I think the fourth quarter, we did an impressive 87,000 metric tonne of volume -- sales volume. So how far is this sustainable? And by any chance, does it include any export component in it?
It includes some export component also. And as Anish Bansal had mentioned for FY '23, we are targeting a volume growth of 20% to 25%. And as per the current market scenario and as per our product basket, that seems to be very much achievable.
Can I have some breakup in what -- an export probably we did for the first time or that is a sustained export we have been doing until now?
Export of pipe, we have started for the first time. Although we are facing some logistics issues at present in this segment. But in the times to come, we hope all these issues should be sorted out, and we should achieve some good volume in export also.
So my understanding is that export is largely of the GI, lower value-added product as such? Or do we have a higher -- over there in export, we have a value-added product also?
Export-only valued products, export.
Export-only value-added product.
Yes.
Okay. So probably the 87,000-odd tonnes what we did. So will it be safe to assume that we'll be able to achieve the same kind of volumes for the next year going forward, sustainable this levels of volumes?
Yes, certainly is.
Okay. And lastly, on the, sorry, I joined a bit later. What will be the CapEx for the current year and next year, what we have already planned?
So currently the CapEx will be around INR 15 crores to INR 20 crores. And next year, there will be only a total CapEx around INR 10 crores.
Certain more of maintained CapEx. Last one. You mentioned into the solar plant, so any meaningful tie-up or volumes have we started on the solar side?
Actually, we have just started this new product and as Anish Bansal has mentioned, there is a good potential in this product. So we are doing tie-up with all these [indiscernible].
Anywhere accretion or accruals or internal required or something of that kind?
It is already done.
It is already done.
Already done.
Okay. And then my last question on the roofing sheet what we had last introduced last year. So how is the traction? And I think, sir, it is more of a B2C kind of thing. So how the volumes are happening?
Volumes are picking up step by step and the quality of the product is well appreciated in the market. And hopefully, in the current financial year, we should see a good volume growth in the product.
As there are no further questions from the participants, I now hand the conference over to Mr. Bansal for closing comments. Over to you, sir.
I take this opportunity to thank everyone for joining on the call. I hope we have been able to address your queries. For any further questions, kindly get in touch with us over email. Thank you.
Thank you. Ladies and gentlemen, on behalf of Ambit Capital, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.