Somany Ceramics Ltd
NSE:SOMANYCERA
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
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 |
570.8
832.4
|
| 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.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Somany Ceramics Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Q4 and FY '22 Earnings Conference Call of Somany Ceramics Limited. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Agrawal, Head of Institutional Equities at SKP Securities Limited. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen, and thank you for attending this conference call. On behalf of Somany Ceramics Limited and all of us at SKP Securities, it is my pleasure to welcome you to this financial results conference call.
We have with us Mr. Abhishek Somany, Managing Director; along with Mr. Saikat Mukhopadhyay, CFO; Mr. Sunit Kumar, (sic) [ Kumar Sunit ] AGM Finance. We'll have the opening remarks from Mr. Somany, followed by a Q&A session.
Thank you, and over to you, Mr. Somany.
Yes. Thank you, and welcome, everybody, to the earnings call of FY '21/'22 of Somany Ceramics Limited.
This has been a year of unprecedented issues, which we faced right from the beginning of the year, pretty much the same as the year before this. We started with the Delta wave, and then we started with huge pressure on energy cost, on paper cost, on freight cost, et cetera. Many of the costs went up. And then came to the last quarter, and we had the geopolitical issues with the war and that put further inflationary pressures on all of these 3 costs and more.
While we were facing this, I think we've been able to grow the company at about 27% -- 27.2% and 27% on a consol basis. We had certain disruptions in the last quarter. We had one of our lines shut in Kadi, where we were doing -- augmenting some CapEx and also because of certain pressures of that particular lines product, where we had a little extra stock coming in from December. And then we had a disruption in Kassar plant, which is our north plant, where we were making way for 1 of the 4 million square meters expansion. So that 2 million square meters had gone down. If it wasn't for that, we would have been able to get another 2.5 million square meters of tiles on our 57.8 million, which we've done for last year. So that's something which would have added. Approximately INR 70 crores, INR 80 crores of revenue would have been added to that figure, if we would have that plant. But that plant has now started.
So the economy -- on the economy side, I think the economy has picked up clearly. Of course, there are inflation pressures, but the economy has picked up in terms of growth, especially in the real estate sector. The real estate sector is coming out of a 10-year recession, and we've seen reasonable traction there, both in terms of new housing, new projects being launched and also more importantly, for us, the renovation market and the replacement market and also new application for [indiscernible]. All of this combined, it's a good momentum, which we are seeing from the real estate sector. Obviously, with the steel and cement prices going up, there has been a little delay in their purchases, which is also affecting tiles. But other than that, there is a good offtake there.
We continue to spend more money on our branding. You would have seen us fairly visible across television and cricket and also the airports, et cetera, a lot of BTL activities. We added a net dealer of approximately 150 -- 200 dealers we added, out of which -- out of the 200 dealers, a good 100 of them, a good 50% of them, were exclusive dealers of [indiscernible]. We have 3 formats of exclusives, Exclusive -- Somany Exclusive, Somany Grande, Somany Studio. This year, we plan to add another 200 dealers to that number and which again would lead to a lot of exclusive dealerships coming up, at least 50% of that would be then Exclusive. So the dealer penetration and the market penetration goes on.
The economy has also faced certain challenges in the last quarter, which has affected our EBITDA pretty sharply, where prices went up extremely sharply on a 15-day basis, and we were not able to pass on anything last quarter because, no, we didn't pass on anything last quarter. However, the October, November, December pricing, which we had taken, was factored about 85% of the pass on. But then the further price increase because of geopolitical, we could not pass on. The last increase has been approximately 1.5 -- or actually 2% in the end of April is what we've taken for this year. Again, this is not enough to pass on the inflationary pressures, where the gas continues to go up. So because of that, we sharply lost the EBITDA, and added to that loss was the 2.5 million square meters, which we were not able to put them in the market, although we had the market. So -- and then we could not source it from Morbi, owning to the high freight cost. We could not really source that material for the northern market.
Going forward, as far as Q4 is concerned, our Q4, like I mentioned, our value growth was decent in terms of consolidated revenue, it was 9%. But we took a hit on our EBITDA. This could have been a large -- a big quarter for us. Had we put the 2.5 million, it probably would have been our best quarter, if you would have put the 2.5 million. But anyway, that probably would happen now.
Sanitaryware also did reasonably well. We've had issues in the beginning of the year with the sanitaryware capacity utilization. But November onwards, we are at full steam ahead. And I think this year, we would be at 100% capacity utilization in both the plants. In fact, the Bathware plant would probably -- we've done some augmenting -- we've augmented some capacity there, so that should be even more than 100% over there. We've done a lot of balancing equipment. While we did that, we kept a keen eye on our balance sheet. If you see across numbers in terms of inventory, in terms of debtors, DSOs, debt, all of that we've got a keen eye, and we're probably one of the best in the industry as far as overall working capital is concerned and also DSOs are concerned for our size of operation. So that's been extremely encouraging.
Morbi is now again facing a good upturn for exports, where the energy costs, which have gone up in India, have gone up even more in Europe. Therefore, a lot of the buyers who were there for Europe -- the European products are now flanking towards India. So we do believe that the export of Morbi will again pick up very, very buoyantly. The plants, which we had announced last year, we had announced about 11 million square meters per annum of expansion. The expansion was 12 million, but it was in lieu of 1 million, which was going down. So the net expansion was 11 million square meters per annum. One of those plants started at the end of March, and the other 2 plants, which could have started in April itself, they could not because of the gas outage, we did not have any gas, and GAIL had and GSPC both had put a restriction of only utilizing 80%. So it didn't make sense to start off those plants. But those plants have now started. Both of them have commissioned. So we should start getting the material from that next month.
The south plant still is facing the maximum gas pricing. So that still is under the most pressure from a gas perspective. So this is as far as the economy is concerned. This is as far as our quarter 4 and our FY '21/'22 is concerned. We are looking extremely positive for FY '22/'23 in terms of volume. The 11 million, which we've put in, we would be able to increase our sales to that extent and even more. Last year, whatever we did, we did on the basis of no capacity additions. So if we went from approximately 49 million, 50 million square meters to 58 million, so that was added with no capacity expansion. But now that we have 11 million and we have access to capacity for more products, we should be -- we're looking extremely positive as far as the volume growth is concerned.
So over to you for question and answers. Thank you so much once again.
Sir, should we open for Q&A session now? Members of the management, should we open for Q&A session now? [Operator Instructions]. The first question is from the line of Ritesh Shah from Investec.
Sir, two questions. First is, how -- how should one -- how are you looking at volume growth versus margin? Specifically, you touched upon margins, just trying to get a sense on the pricing power, given you indicated that Morbi might be looking more towards exports.
I can't really comment on margins because there is absolutely 0 handle on the gas pricing. We have taken a 2% -- approximately a 2% increase in the end of April for across our products, whereas gas prices have gone up plant-wise. But this is a general price increase, which we've taken. What I can say is that the volumes will start picking up. Obviously, first quarter is generally muted. But volumes will start picking up, and we're very confident of volume. But margins, I have 0 outlook because it may go up sharply. It may -- it probably won't go down because it's already at a threshold, unless it's 50 basis points, 80 basis points, that's a separate issue if the gas further escalates. But I don't see that happening, hopefully. But I really don't have a handle on margins because the gas price, on a 15-day basis, it keeps going up.
Right. Sir, if I put it the other way around, if hypothetically we had to cut pricing, would that be a lever for volume growth? Or is there any good demand at the current price point as well? What I'm trying to understand is the construction cost overall has moved up. Is it something which is impacting demand? Or is it the bottom of economics, which is actually a larger variable?
Yes, I think it's the latter. There is no issue of tiles being sold. It's actually Morbi who's being foolish not to increase pricing to put it carefully. Every time there is something, they only increase their [ evasion ]. But otherwise, let's not forget that in the last 10 years, prices have come up more than 100%. So if the prices had to go up a couple of percent, 10%, 15%, even at the maximum, it's not going to affect the tile demand because even at this price, plus another 50% price increase also, there is no comparative product to a tile. So there is no substitute. The tile happens to be the most economical product for wall coverings and floor coverings, where there is no real replacement for tile. So I don't think that's an issue. I don't think price reduction also is a possibility. It will only go up. If Morbi increases, like I said, Morbi has not increased any price, but the organized players have taken a 2% price increase across the board.
Sure. Perfect. Sir, my second question is the [ cost curve ]. Normally, you give gas prices region-wise, if you can please quantify for Q3, Q4 on spot for each of the region that will be great, sir.
That is at south plant, we're getting pricing at about INR 90, approximately. In the Morbi plants, which is our joint ventures and also our -- the Kadi plant, which is in Ahmedabad City. At there, we are getting a price currently of approximately INR 68 to what I remember last -- and I'm zeroing it -- rounding it off to the last 50 paisa, so INR 68. And in the north plant, as we sit, it's gone up to INR 58. It has gone up very sharply. It was INR 52 just in the beginning of April. And by the middle of May, it's already gone up to INR 58.
[Operator Instructions]. The next question is from the line of Pankaj Tibrewal from Kotak Mutual Fund.
So I had a couple of questions and an observation. When I look at the last few quarters, last 3 quarters, to be precise, the gap on the revenue growth of us versus our leader has significantly widened. And that's also reflective on the margins. And we used to be close to the leader at some point of time and always on the second spot as per margins were concerned. But last 3 quarters, the margins of [ H & R ] Johnson has also exceeded more than us. So just kind of trying to connect the dots, that what's going wrong in the last couple of quarters, which has led to this gap widening? Or is this just an aberration in a short-term phenomena? And probably it will correct itself as we move ahead? Even in the fourth quarter, we saw most of the companies now declaring results. We have not fared that well on margins compared to some of our peers. So any clarification on that would be helpful.
Yes. So you're absolutely right. The gap has widened between the volume between industry leader and us, and that's because he's been able to tie up some capacity in the south early on, and that extra 3 million, 4 million he was able to get from the south. For us, that 2.5 million which has not been available for us in the northern plant. So between him, he grew by about 15 million square meters over last year, from 75 million to 91 million. And we went from 50 million to 58 million, so about 8 million. So he's doubled the gap. On that -- you're absolutely right on that, of which 4 million, 4.5 million square meters we were not able to tie up in the south. He was -- he had a first-mover advantage there, he tied it up. But that -- we should be able to gain some ground on that.
And the 2.5 million, which has come back on in Kassar, in my northern plant, will anyway we get added. The other way to look at it is that at 75 million -- at 91 million square meters, which he has put into the market, he's added capacity by 11 million or 10 million, and at 58 million, I have added capacity by 11 million. So from that point of view, I am catching up in terms of percentage. So it should -- this gap should not widen going forward. We probably would like to bridge it little by little.
On the margin front, I really can't talk about any other brand because in the fourth quarter how a couple of brands have shown an upward trend absolutely beats me because if you've seen the margin erosion as far as we are concerned and also industry leader is concerned, it's more or less the same. In fact, we are slightly less than that. So to that extent, how they've done that absolutely beats me because the prices have gone up for everybody. Unless -- so I'd rather not comment on exactly what they've done. So for us, we are seeing that the volume will come back. We should be -- we're looking at a 15% to 20% volume growth for this year, if not more. And the value growth will be actually uncertain because if the gas prices go up, the value can be even more. If gas prices sharply go down, it could be less, but that will obviously better the margins. So value would be a wrong benchmark today. But on the volume, we're looking at a 20% growth on volume or more.
Okay. And on the margin side, you expect the trajectory to bottom out in first quarter and then see an upward revision. I'm sure that it depends on the gas pricing. But what's your sense which you're getting now from a Morbi perspective?
You are largely correct because April, we did not get any benefit of the price, this 2% price increase. So probably first quarter will be seriously under pressure. But with this 2% increase -- and also, we are seeing that a lot of costs have started coming down. So we are already getting early indications that by July, we believe that the new contracts, which -- or new supplies, which the government has got of gas is at a cheaper price. So at least the south plant, we would see a reduction, if not everywhere else. So we would see a reduction in gas price. So unless something different happens geopolitically, I think this is kind of peaking out. Of course, in the north plant, we are at the lowest price at INR 58, and that works on a 3-month average. So it's taken -- its time to come up. We probably are currently at INR 58. We're probably looking at INR 60, INR 62 before it peaks because we've seen the Brent at range bound between $100 and $115 per barrel.
So we're thinking that this would peak out, and even the rupee-dollar is at 78, 79. So that also for the year seems to have peaked out. So from that perspective, we're looking at maybe a INR 60, INR 62 within the next fortnight. And then we would again see a downward trend over there, if the barrel had to start softening because here, we're looking at a barrel of $100, $125 also, which it reached at one time. So I think we've peaked here. Quarter 1 should be under pressure. Quarter 2 onwards, should looking -- everything should look better, unless something very, very different happens geopolitically, which obviously we don't have a handle over.
Fair enough. And on the cash flow side, if I was to ask you how you're looking at the cash flow perspective in the last year and as you move ahead. You guys have done an excellent job on the balance sheet management over the last couple of years. How should we expect things to move forward?
So I think we have a keen eye on that. We probably will hopefully shave off another couple of days. We will try to -- on the receivables, on the stocks. It's not piling up. We've been able to sell what we are producing. And as far as the expansion is concerned, I think we still have a decent amount in the bank. We want to use that partly this year, and probably first quarter next year, it would be used for the new slab plant, which we had announced last quarter, if you remember. So that we are going ahead with it in Morbi because we don't have a slab plant currently, and that's something which we are doing. So I don't think we would be taking a very significant amount of debt for that. We would be using internal. But otherwise, I don't see any pressure on the cash flow.
Okay. Great. Just last one, the leader has called off the new slab plant recently as per their press release, and this was based on the comment of unviability because of high gas prices. And they are probably planning to outsource more. Any thoughts on that and why we are going ahead from a viability perspective?
So they have just put a slab plant, which has gone on stream this month in the south. So I guess they already have that supply off the slabs in their pocket, and we don't have it. So therefore, we're going ahead with the expansion plan of this particular slab plant. I guess that's the reason where -- at the end of the day, there's only so much you can sell off this slab. Unlike in Morbi, this slab plant sell to everybody. We are also outsourcing from them. So we thought it is important to have a slab plant because the bigger sizes still have a decent margin. So therefore, we're going ahead with it. And this would only start by May, June next year. I do believe the gas price by that time either would have started going down, or if this becomes the new normal, then Morbi cannot survive without price increases, how long can they bleed. So they would also have to increase pricing. So either or will happen. So I don't think the gas volatility would be reason enough to call off the expansion. It probably would be that -- they want to -- they probably have enough capacity of the big slab from the south, probably sell that, and then next year, take a call of putting this plant.
Okay. Okay. Great. Wish you all the best. And hope to see you back and leading -- industry-leading margins and growth.
The next question is from the line of Shrenik Bachhawat from LIC Mutual Fund.
So my first question is, could you please explain me about the price rise scenario. Sir, in the last 1 year, how much price rise we have taken? And how much would have the Morbi players taken over the last 1 month?
So whatever Morbi took in October and November, they rolled back by February -- by January, February anticipating that the gas prices would go down. Obviously, they didn't envisage that there would be a geopolitical situation of this nature. As far as we're concerned, we've taken approximately an 8% price increase last year and then we added the 2% now. So if you talk of -- until date, it's approximately 10%.
And sir, could you throw some light on the Bathware business? How is it faring, like what are the developments there? Are we on track on the product innovation and active front? What is the next 3 years growth that we see the Bathware business?
So we're looking at a -- this year, we're looking at a Bathware growth of approximately 30% to 35%. So we should be close to anywhere between INR 280 crores to INR 300 crores of Bathware sales this year. And by then, we would have -- probably next year, we'll have to announce an expansion because we would have utilized our entire capacity at the INR 275 crores, INR 300 crores level.
And sir, are SKU -- on the [ SKU ] front, are we in line with the market leaders in Bathware industry versus the last year?
Yes. Obviously, the market leaders have a larger selection, especially in the Bath Fitting and Sanitaryware. They obviously have a larger selection. To that extent, they have 4x the size. So that -- as and when we grow, that keeps catching up. But do we have the entire solution for a homemaker? Yes, we do. From a selection point of view, let us say, a wall-hung WC, competition, the industry -- 2, 3 industry leaders, argument sake, just put a number to it, just to give you a flavor, would have 100 different options of that particular product. We would probably have 50, 60 options of that particular product. So just to give you a flavor as to -- we have the entire portfolio, but obviously, smaller in numbers compared to the larger players.
And just last question, sir, on branding front. As the market leader is differentiating on branding on each segment of the business, are we also differentiating in marketing separately for Bathware business? Or because I know you are [indiscernible] branding, but what I see is like a blanket branding for all the segments.
No, no. Our Bathware division, of course, our product is -- the branding is Somany, but Bathware division has a completely separate branding budget. The Bathware, for that matter, even for the showrooms, they have a complete separate showroom budget. So it runs as a separate -- you could literally -- it's sitting in the same balance sheet, but it almost runs like the wholly-owned subsidiary.
The next question is from the line of Nikhil Agrawal from VT Capital.
Sir, could you tell me the average gas price across all your plants in quarter 4 and [indiscernible] plants as well?
So the gas price in south haven't moved. They're at that INR 90, INR 92 level. In the -- you're talking sequential or you're talking only quarter 4?
For quarter 4.
Okay. So last year, quarter 4, for example, the gas price in the south plant used to be in the region of INR 30-something, it's climbed to INR 90. The western plants, the prices used to be again in the mid-30s, which has climbed to INR 68, quarter 4 to quarter 4. And in the northern plant, it used to be about INR 32, INR 33, and it has climbed to INR 48 at the end of quarter 4. And as we sit, the southern plant remains exactly where it is at the INR 90 level. The western plant moved up in quarter -- in April from INR 62 to INR 68, and the northern plant moved up from INR 48 to INR 58 as we speak today. But what's going to happen on the 1st of June, we have no idea. We have no handle.
Okay. Okay, sir. Sir, on your power and fuel costs for the quarter, if we compare it to the previous quarter -- to quarter 3, it has come down. Sir, any reason behind that, considering you got like the sales volumes have improved.
Yes. Like I mentioned, there was a shutdown of 1 plant in Kassar in my northern plant to make room for the new expansion. And in my west plant, in the Kadi plant, had 1 line shut because we had a little excess stock in January. So for 1 month, we had put that plant down, which has gone back on in February.
Okay. Sir, so the total sales that was lost from the Kassar plant was 2.5 million square meters for quarter 4?
Yes. I mean, overall, it was 2.5 million, but most of it was attributed in Kassar.
Okay. And sir, just one last question. Could you highlight on the sales mix between PVT, GVT and ceramic volume and value both for quarter 4 and for FY '22?
Yes. So FY '22 was 38% for ceramic, 33% for PVT and GVT was 29%. If you take quarter 4, it was 37% ceramics, PVT remained the same at 33% and GVT improved by a percent to 30%.
This is the volume?
Yes.
Okay. And in value terms, sir?
I mean it really doesn't hold good because different plants took different price increases from different areas. GVT gives a better value, ceramic gives a low value. So that's really not even a discussion point right now.
The next question is from the line of Achal Lohade from JM Financial.
My question is when you say that you were not able to sell that 2.5 million square meters of volume because of the lack of production capacity, you also mentioned that you couldn't source that volume from Morbi, and there was a comment about the freight cost. If you could elaborate, a, how easy or difficult is to get that incremental volume from your vanilla outsourcing vendors? And b, what is the freight cost...
Yes. So this particular volume, which we lost -- so we lost approximately 4 million square meters, I've just given you an ad hoc figure of about 2 million, 2.5 million from the north. And the balance from the south, where south, I said that we were not able to get capacity because the southern plants were already fully sold out. Kajaria could get that capacity. We could not get it and it was rolled out by the time we went knocking on the doors. And this also happened -- generally, we could have sourced this capacity from Morbi, but because of the high freight cost going from Morbi to the south was not an option.
In the similar breath, I'm saying that in Kassar, when we put down the plant, which was producing 2.5 lakh square per meter per month from December onwards, mid-December onwards, that went down. Again, a normal cost. We could have grossed the material from Morbi and somehow subsidize the freight and put it in, but that was not possible because of the freight cost being so high because of the glass -- sorry, the fuel prices, the diesel and petrol prices. So this was more of a 1 quarter issue. I think that has been nullified now with these plants going on stream. We now have enough capacity for our north plant. We have enough capacity in our southern plant -- sorry, in our western plant. Southern plant, the amount which -- the ceramic items, which has been already outsourced by some other players, we are still unable to get that. But then in southern plant, our 4 million square meters vitrified plant has started. So we should be able to get back on our capacity.
So just to conclude, so the selling ability is not compromised? It's just a matter of the availability and the freight cost, which impacted the [indiscernible] is that understanding right?
Yes, yes. Absolutely. Absolutely. Correct.
And one more question I had. You were saying basically Morbi hasn't taken a new price hike, while we have taken about 8% to 10% -- 8% until March '22. So that means the gap between us and Morbi has widened for the similar SKUs? Or you think there would be some increase in the specific SKUs Morbi has taken?
No. The -- overall, if I had to say, obviously, SKU-wise, it makes a difference. I mean, line-wise, it would make a difference. Somewhere the gap has widened, somewhere it is not widened as much. But yes, you're absolutely right. The gap has widened between the unorganized Morbi players versus the organized industry.
And just a clarification, sir. In terms of the pricing, I suppose, at INR 68, INR 69 for standard cubic meter, actually Morbi is bleeding. So I'm a bit puzzled as to if the demand situation is healthy, why is it that Morbi is deferring the price hike? Do you think the demand is shaky and that's why they are not sure if it will get through or not? Or is it just that some of the players are acting too tough and not allowing the price hike in Morbi?
No, the price hike in Morbi is being compromised because of the smaller players in Morbi, who are shaky about the demand side if they had to further increase price. So -- but beyond that, it beats me as to how people can bleed and not increase pricing, completely beats me. So really, I have no answer for that.
And sorry, if I may, sir, just a related one. Morbi had taken some shutdowns line by line, month-wise shutdowns. Has that completely reversed? Or you think it is still ongoing?
No, obviously, it's become better because that 80-20 cut, which was there from GSPC, has gone now. So to that extent, Morbi -- more lines have started from April onwards. But at the end of the day, Morbi is running at 75% capacity utilization, nothing more than that.
The next question is from the line of Girish Choudhary from Spark Capital Advisors.
Firstly, on the demand side, while you saw a focus in decline and you also had a loss of production for you, but even some of the others have grown only in the range of 2% to 3% this quarter. So generally, what explains the slowdown because some of the other building material categories have seen a better growth? So which pockets you're seeing a slowdown, like builder market, retail or commercial? Also as a follow-up, what gives you this confidence of 15%, 20% volume growth in the coming year?
So we've not really seen a slowdown. We've seen some part of a little bit pressure on deferment because people have deferred their purchase looking at cement sale going down. But other than that, we've really not seen a major slowdown. I mean this kind of volume being put in by all across industries in the building material have been fairly healthy. So there's not been any serious slowdown.
Because if I look at the volume number, it's just 2%, 3% even for some of the other peers. So would you...
You're talking about us?
Yes. Not -- so you had [indiscernible] decline. But some of the other peers, like they also had a growth in the range of 2% to 4% in terms of volume. But if I look at some of the other building material categories, they have seen a much better growth, like the private companies or India, foreign-type companies.
I'm sorry, I can't comment on that. But I think probably it would be owning to the high base we had from last year. But otherwise, there's not been any serious pressure. Yes, of course, there's been a deferment. To that extent, volume did get compromised across the board.
Okay. And then in terms of the volume growth guidance. So looking at, let's say, the fourth quarter, what gives you the confidence of 15%, 20%? I know you are seeing new capacities coming in, but outside of that at the market level, how confident are you?
Sorry?
In terms of this volume growth guidance, which you have given, like 15% to 20% in the coming year, right?
Yes.
Yes. So what gives you this confidence? Because also that...
[indiscernible] million square meters. Even if you take the amount we sold last year, which is approximately 57.5, if I had to put a 20% to it, that approximately is 11 million square meters. So I'm pretty sure of selling by 11 million square meters.
Perfect. And then secondly, on the slab plant, if you can just give us more details on the plant size, the CapEx and also the revenue potential?
The plant size would be anywhere between -- we haven't really got down to the nativity, but it would be approximately 4.5 million square meters per annum. And the CapEx would be in the tune of about INR 165 crores, INR 170 crores.
The next question is from the line of Rajesh Ravi from HDFC Securities.
I have a few questions. First one, coming to the net dealer additions, which you mentioned that around 200 got added and 100 Exclusives. So could you give the -- what would be your showroom count and dealer count end of FY '22?
Sunit, do you want to take that? Showroom count and dealer count.
So as we speak, our showroom count on 31st March '22, it's 400 plus. It is 405 -- 404 precisely, which include our 18 pan-India Experience Centers across the various major cities. And out of that, the 200-plus dealer addition is a part of that.
Okay. And end of FY '21, there were around [ 383 ] showrooms. So how has that number grown for you?
Yes, that 382 number went up to 404.
Okay, okay. Second, coming to this volume loss when you're talking 2.5 million square meters, most of it in Q4. In Q3, we see there is a large inventory number in the P&L. So was that whether not sufficient inventory created, which could have taken care of the demand from that plant? Or even despite that you had a...
That particular brand product was anyway oversold and therefore we were doing the expansion. So we were literally hand to mouth on that plant when we shut it down. But it had to be shut down because the new plant was coming in place of that plant.
So if those volumes would have come to 2 million, so you would have grown at 9%, 10% like sort of a number that you're indicating in Q4?
I haven't done the numbers, but yes, you can add 2 million to...
So 16 would have been around 18 versus [ 16.8 ] something so...
Yes...
So given this is -- no, why I'm asking this is, if this is the sort of number which you have missed out for a technical reason. So in this quarter, are you -- can we expect a similar run rate closer to your Q4 adjusted numbers?
We would have been able to. You're absolutely right. We could have been able to, but April was a tight spot. Our 2 plants, which started, had to go down. In fact, one of the other lines was down because of the 80-20 gas cut. So that had a little bit of an issue in April. We didn't get 100% capacity. We were at 100%, but only with 80% gas. So to that extent, again, quarter 4, April, it's been hit, but not the rest. So yes, had it not been, obviously, we may not have been at Q4 number, but close to that.
Okay, okay. And CapEx, now FY '23 -- start of FY '23, you have a major CapEx, 3 plants getting commissioned. Next year is a slab plant, any other big CapEx that you're looking at for FY -- to be commissioned in FY '24?
No. In '23 -- we are in '22/'23. We don't see any CapEx in '22/'23, other than the CapEx of the plant, other than the routine CapEx. Yes, I do believe that next year, we have -- probably, we'll have to look at CapEx for one of the Bathware divisions to augment capacity there. But that is too early for me to comment exactly where, when, how and what amount would that be. Probably, we could discuss that in Q4 of this year.
Okay. So like if you grow 20% this year, you would be short of capacities in FY '24, from your own factories?
Not really. Not really. We would have capacity from Morbi. We can outsource some capacity. And then again, we would keep putting in tile capacity between brownfield and greenfield, any which ways.
And sir, the slab plant, what is your potential -- revenue potential around that INR 170 crores?
Also the slab plant next year will add 5 million any which ways of...
And what is the revenue potential and time line for the same, expansion time line?
So I think next year, same time, we should be in production, maybe in May or maybe June. And the revenue potential is approximately 4.5 million square meters into -- there's about INR 250 crores, INR 260 crores. Let's just say, INR 250 crores.
INR 250 crore, much higher margin compared to your current margin profile?
No, it's a higher value product. So therefore, it is a higher revenue product.
Okay. And no -- and I mean in terms of margins?
Also it's better.
Okay, okay. Yes. I think that is all from my end for now. And great numbers on the working capital, for sure, given that you are continuously outperforming the market leader on your working capital management.
The next question is from the line of Alisha Mahawla from Envision Capital Services.
So this may sound slightly repetitive, but just wanted to understand volume guidance. But yes, while we are adding about 11 million of capacity and we're expecting it to be sold in the year. But I believe there's capacity addition happening at the industry level also. So is the demand -- domestic demand is strong enough? And where are we expecting this growth to come from?
So the capacity expansion is only at industry leader who's put in the same capacity. Otherwise, there is really no capacity addition, which has happened in Morbi. I think about 15 plants are yet to be started. That's the only capacity addition. So that's -- on the entire number that 15 plants is insignificant. So this year, I don't see any capacity addition. In fact, for the next 18 months, I don't see any capacity addition. [indiscernible] industry leader.
Understood. But are there enough real estate projects, which are the near completion, because normally after project is announced about 24 to 30 months down the line is when the demand for our kind of products come into picture. So are there -- I'm just trying to understand is there enough industry demand for all of this capacity to get used?
Yes. So I think the branded -- there has been a branded shift between pre-COVID and COVID now -- sorry, pre-COVID and post-COVID. So there's been a clear branded shift. So we do believe that we would be able to put in this capacity. And as far as Morbi capacity expansion is concerned, the capacity expansion of the 60 GVT plants, which were done was clearly looking in view of the export. Export went down from INR 12,500 crores to INR 7,000 crores, and it's back to INR 12,500 crores this year, even though there's been serious pressures of freight.
And now that there's been a serious increase in gas and energy prices and various other prices in the European markets, for the European players, we do believe that the export should climb in Morbi going forward from the INR 12,500 approximate crores of FY '21/'22 to anywhere between INR 16,000 and INR 19,000 crores, could be anybody's guess, would be the export. So a lot of this expansion would also go into the exports. So let's not forget that. Plus the demand of the real estate is also decent.
Understood. And also wanted a clarification for the 2% price hike that we have taken towards the end of April, has Morbi taken any price hike in April or May?
Not yet. They are wanting to. So we're very hopeful that with this further increase in input costs, this should be planning a price increase within the month, which would get affected probably 1st of June.
Understood. And what has been our ad spend for the year? And what are we targeting for next year?
The ad spend for the year was approximately 2.6% -- [ 2.5% ], and we are targeting approximately the same for the next year.
The next question is from the line of Sneha Talreja from Edelweiss Securities.
Just wanted to clarify, is the ad spend for the entire year was 2.5%. What was it for the quarter 4?
Sorry?
Just wanted to know what was the ad spend for quarter 4. You, I think, clarified that ad spend for '22 was 2.5%.
Yes. So quarter -- I mean, quarter -- the highest ad spend is in quarter 3, so that gets reflected in quarter 4. So the ad spend, I don't remember how much it is, but it was disproportionately higher to quarter 1 and quarter 2. So generally, quarter 1 is the lowest, quarter 2 is a little more, quarter 3 and then quarter 4 is the highest, although the spend of quarter 3 gets reflected in quarter 4, if you know what I mean. The bills come in a month, 45 days later. So approximately, INR 10 crores, INR 11 crores would be the quarter 4 to that extent.
Got that, sir. And sir, secondly, I wanted to understand, you said you've taken around 2% price hike in April end. Last time when you took price hike in November, you said that was around 80% to 85% of the increase in the cost. This 2% takes care of how much increase in cost? Or are we like passed on and how much of it is still pending to be passed on? Just wanted to get a sense there.
I can get back to you with the figure because the gas price just went up today in Kassar. So it's so volatile. I'll have to recalculate as to this 2% gives me how much of pass on. But I really don't have the numbers. I don't think about -- I don't know.
Okay. With the current price increase then, what has taken place in Kassar, any further price hike plans that you have? Or will we still continue to be somewhat dependent on Morbi to take further price hikes?
No. I mean, we were really dependent on Morbi. If you look at it from the other way, the 8% of last year, Morbi has rolled back 100% of it, and we were able to still hold on to that. And this 2%, we had taken in May, thinking that Morbi would also take, But Morbi didn't take. So probably, this gives us a window. If Morbi takes another price increase now, we probably will be able to push a smaller price increase again, but that yet to see as to what they do. We're just hoping for the same.
Okay. Which in that case, then we will be able to pass on the entire raw material cost increase for us, in case that happens?
The next question is from the line of Karan Bhatelia from Asian Market Securities.
Am I audible?
Yes.
Sir, is it correct to assume that those 60 new units you have commissioned have restricted the price growth in Morbi?
Have what?
Have restricted the price growth because there is oversupply in the market?
Not really. There was no reason for the ceramic players not to increase the pricing because there was no increase in ceramic production, so why would...
[Technical Difficulty]
Ladies and gentlemen, we lost the line for the management. Request you to please stay connected, while we join them back to the conference. Thank you.
Thank you for patiently waiting. We have the management reconnected. Over to you, sir.
See, I -- could you repeat the last question, please?
Yes, sir. Is it correct to assume that the 60 new plants, which have come in, in Morbi and created some oversupplies, those have restricted the price increase for Morbi?
For the GVT segment, yes, probably. But why would the ceramic segment not increase, beats me because that not mutually they have exclusive products. It's completely separate products, separate applications. So I really wonder why not.
Yes, yes. And sir, on the stand-alone side, our loans and advances have increased from INR 43 crores to INR 145 crores for FY '22. So what is that?
Sorry. Can you please repeat? Sorry.
On the loans and advances on the asset side, that increased from INR 43 crores in '21 crores to INR 145 crores for FY '22.
Yes, that's primarily towards the greenfield expansion, which we are doing in wholly-owned subsidiary. So it's just a capital restructuring decision, which we have taken partly with the equity investment and partly with the unsecured loan. So it's towards that only.
Right. And the absolute revenue number for sanitaryware, faucet for FY '22? That's it from me.
So absolute revenue for sanitaryware, faucet together is INR 202 crores for the full financial year '22. So [ INR 125 crores ] is Sanitary and balance is faucets.
The next question is from the line of Vivek Tulshyan from Newmark Capital.
Yes. So I just have a question on the margin. So would it be fair to say that because we have a lower revenue share from north, where the gas prices are lower, it is impacting our margins more than you compare to that year?
Yes, absolutely. 50-something percent of the lower gas prices advantage was taken by the payers because that is the amount of production they get from the north. And for us, it is only 27%. So that also is a big reason.
And we obviously don't know when the gas prices will start going down. But when that happens, then would it be fair to say that we will get some advantage on the margin side because our gas prices will go down faster compared to them?
That depends on where that gas price goes down by how much. So it will really depend on that.
Understood.
So Vivek, if I understood you correctly, you mean to say that if the GSPC, the Morbi gas price and the spot gas prices, which is in southern market, if that [indiscernible], yes, that should benefit us. But it depends, if it happens so.
But mind you, our 27% has gone up to about 30% because we've put in 4 million capacity in the north.
The next question is from the line of Rajesh Ravi from HDFC Securities.
Sir, I just wanted to understand the impact of Morbi cluster in the domestic market. So of the total domestic consumption, domestic revenues, how much would we be the Morbi share in the total domestic sales and at industry level?
If I understand your question correctly, what is branded and what is unbranded, in other words. Branded being outside of Morbi and Morbi being the unbranded. That is what you're asking?
Yes. Not branded, unbranded because you would have some capacities even at Morbi. So I just wanted to understand of the total revenue or total sales in India, yes...
I understand. I understand that. So the market is approximately INR 35,000 crore market, right? Out of which INR 12,500 crores is something which you take out, INR 35,000 minus INR 12,500 would be -- so there's about INR 22,500 crores is the domestic market approximately, right, out of which Morbi would be approximately 60%.
Okay. And when you say Morbi 60%, does it include even your production -- your another leaders production from Morbi? Or are you...
I'm talking pure Morbi. No, no, I'm talking pure Morbi. If you had to add -- in other words, if you had to add INR 3,700 crores of Kajaria, INR 2,100 crores of [ Mine ] and then another INR 2,000 -- INR 1,800 crores of Johnson and plus another 3, 4 plants at [ INR 600 crores, INR 600 ] crores that would come to about INR 9,000, INR 9,500. So again, it's more or less figures I've given you. So INR 22,500 crores, 40% of that is about INR 9,000 crores, 10,000 crores. So if you add up that way also, it will come to the same thing.
Okay. So at what level of -- when you say that the exports should improve significantly from 12,000 to around 17,000, and this even the other market leader are using, too, anything by when you see the exports pick up will have a positive bearing on the domestic pricing?
This is a presumption. The presumption is based on a very, very sharp increase of energy prices and input prices in the European manufacturers, which have made them that much unviable compared to India. So what I hear from Morbi is there's a lot of inquiries, which have started flowing in, far more number of inquiries, which have started flowing in from March, April onwards and even in this month. So it should start picking up. I mean, we would know the quarter 1 figures when they come out.
So one indication would be a price increase happening from the Morbi cluster, that would be an indicator that there is a good part of the volume is getting consumed in the export markets?
Yes. But another way of looking at it is that the export market, last year, we are already at a trajectory of about INR 14,000 crores because let us not forget, there was a month of complete outage because of the Delta variant in Morbi. So even if I had to divide the INR 12,500 number and multiply it by 12, it will come to INR 13,500 crores, INR 14,000 crores. So INR 14,000 crores, we are saying it will be anywhere between INR 16,000 crores and INR 19,000 crores, that any way should happen for sure because we...
[indiscernible]
Yes. So we're not talking a very large number if you look at it from a run rate point of view. This quarter, we'll clearly get an indication as to how it is. And we are very hopeful and logic only supports our presumption that exports should become anywhere between INR 16,000 crore and INR 19,000 crores.
Okay. And sir, one last question on this. We have seen around 6%, 7% Morbi capacity increase FY '22. And we are targeting -- we are hoping that export will grow by 20%, 25% in FY '23. Would it be possible that a good chunk of new capacities coming up in Morbi would dilute that impact in terms of domestic pressure?
No new capacity has come up. There is nothing in Morbi. In fact, the Morbi industry has not grown. A number of plants, which have come -- the equal number of plants have got shut also. So if you talk about INR 34,000 crores, INR 35,000 crores, we've been at this figure for the last 2 years. So from that point of view, I don't think there would be an issue. If the exports climb, they would -- we will have room for the Indian manufacturer.
Okay. So this year '23 also, you're not seeing major capacity additions by Morbi cluster, net additions?
Yes, yes.
[Operator Instructions] The next question is from the line of Ritesh Shah from Investec.
Sir, just one question. Sir, when we decide on incremental capital allocation, sir, how do you think of the fuel costs given there is a difference, right? I think for companies, which are based out of north, the price is more linked to crude as compared to Morbi, which is now [indiscernible]. So typically, if one is based out of north, there will be a benefit on the cost -- or there will be [indiscernible] when it comes to the cost. So when you decide upon your capital allocation, I think the end market is important, logistics is important. Sir, how do you think of this particular variable?
No, I think we look at market. The gas prices, at the end of the day, we look at it from an overall perspective and not specifically plants. So if you're saying that why not put in more money in a particular plant, but let's not forget that these contracts are not for life. For the last 7, 8 years, the most cheapest gas was in Gujarat. In fact, north was slightly more expensive. And then before that, north was cheaper than Gujarat. So really can't base this on that presumption because the government keeps changing their contracts from one to another other than the -- this gas -- the RasGas contract, which also is now nearing completion. By 2028, we would be done with that contract.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand the conference over to Mr. Somany for closing comments.
Thank you so much for joining us. Like I said, we are extremely bullish on the volume growth for next year. And on the margin, it's going to be very tentative because there are going to be serious pressures of energy prices. No gas prices -- the gas prices have gone up unprecedently and the prices have not been passed on accordingly. So we do see pressure. But with the volume coming in, we are very hopeful for getting better market share. So until next time, thank you so much once again.
Thank you. On behalf of SKP Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.