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Somany Ceramics Ltd
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Ladies and gentlemen, good day, and welcome to Somany Ceramics Limited Q4 FY '24 Earnings Conference Call hosted by Asian Marketing Securities Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call.
These statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ from such expectations, projection, et cetera, whether express or implied. Participants are requested to exercise caution while referring to such statements and remarks.
[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhatelia from Asian Market Securities Limited. Thank you, and over to you, Mr. Karan.
Thank you, Anuja. A very warm evening. On behalf of Asian Market Securities, I welcome you all to Somany Ceramics fourth quarter FY '24 results conference call. We have the senior management team with us to take us through the results and then Q&A.
With that, I hand over the call to Abhishek ji for his opening remarks. Over to you. Thank you.
Should I begin?
Yes, sir. Please go ahead.
Good evening, ladies and gentlemen, for the earnings call for FY '23, '24 and also for Q4. First of all, let me apologize for the delay. Our board meeting ran a little longer than expected. And therefore, the delay on uploading the results and we got delayed by half an hour. So apologies for that.
I will go through the market dynamics and also the way forward and the year gone by and then leave the financial discussions for Q&A. As we all know that this year has been a very, very tough year, and it's been probably one of the toughest years for the building material industry. The demand has been sluggish, both in the domestic and in the export front. Export because of the various issues around freight and the war and the domestic because all the building construction, which was ready has been delivered and all the new construction trials comes at the last leg. So therefore, we expect that H2 and even beyond is where the tile demand will start picking up.
So it's been a very, very tough year where there was an additional pressure on the domestic market because of the lesser than expected export sales, so more geopolitical. The positives have been that the pressure on our raw materials, specifically gas has been not there. We've had -- we've seen gas prices going down. Just to point out, in FY '23, the average gas price across the year was INR 59 a standard cubic meter. And in FY '24, it came down to INR 45 a standard cubic meter. So there's been a reduction in that respect. Other than that, we've also done a lot of work on efficiencies, on production efficiencies and various other cost taking -- cost measures, which has led to a better EBITDA.
However, if I take you through the numbers of FY '24 and also Q4 '24, we've done a sale of INR 709 -- sorry, INR 732 on a consol level, and INR 2,575 on FY '24 level. EBITDA on Consol level is up from 9% to 10.9%. And on the entire year from 7.7% to 9.8%. Similarly, the PAT and the PBT has also gone up subsequently.
The capacity utilization has been approximately 86% for the FY '24, down by 1.5% from FY '23. Q4, we were up a little bit Q-on-Q and also Y-o-Y by approximately 1% on the Y-o-Y. So capacity utilization comes at 89% for the quarter and 86% as far as FY '24 is concerned.
The segregation between ceramic, PVT, GVT. As mentioned earlier, our focus is on GVT and we've been able to increase the GVT share by 2% overall on FY '23 to FY '24. So from 32%, now GVT share in our portfolio is 34%. And if I talk of FY -- sorry, if I talk of quarter 4 only, it is up from 32% last year quarter 4, up to 36%, so a 4% increase on GVT in quarter 4 FY '24.
Gas, as I have already spoken about. As far as the brand spend is concerned, we have spent approximately 2.5% of revenue on the brand, most of that has happened in quarter 2 and quarter 3. Capacity utilization in the sanitaryware segment is at about 70%, and the faucet segment is run at 100% capacity utilization.
The other highlight is the -- or not a positive side is the ASP. Our ASP has gone down a little bit due to the added pressure and the sales incentive schemes, which we've given to promote sales. The guidance for next year is that we are looking at a low double-digit growth, largely fueled by volume on the back of the new mass plant which has started and all the other plants also which are running at capacity.
We have a total capacity of approximately 78 to 79 million square meters of installed capacity. This year, we sold approximately 68 million square meters. So therefore, we have enough capacity in hand to get our growth for next year. The EBITDA target for next year for the forward statement for EBITDA is an improvement of another 1% to 1.5% on EBITDA subject to a stable input specifically gas pricing, which is extremely volatile due to the various wars, which are continuing in the world.
The other third point I would like to specifically mention here, the brand spend also this year, we expect to increase to closer to 3% of revenue.
I would now let open the floor to Q&A and welcome any questions on the FY '24 or the quarter 4 numbers. Thank you so much.
[Operator Instructions] The first question is from the line of Keshav Lahoti from HDFC Securities.
Congrats on a strong set of numbers. So I want to get more sense on the Bathware business. So if you look at this Bathware business has just grown 9% year-on-year in FY '24, just a single-digit growth on such a low base. So how do you see this business growing in FY '25 and in upcoming years?
We are again looking at a double-digit growth over here. I think Sanitaryware is one place where we have struggled in the last year, bath fittings has done very well. I can give it to you separately for bath fitting and sanitaryware offline. But again, the same reasons, I think the whole building material industry, which is the front of the wall has suffered entire last year in the sanitaryware industry and also the tile industry.
So I do understand it's a low base, but again, we are not the strongest players in the Bathware like we are in tile. So there is a lot of other multinationals and also big players like Parry, Hindware, Cera in the domestic market who also have kind of struggled across here for double-digit growth.
Understood. Sir, what would be your sense on what sort of Morbi thing in the domestic market? Are they dumping? What has happened because export has sort of weakened. So how you see that scenario?
Yes, a little bit of dumping has happened in the GVT because a lot of the plants which came up in Morbi were primarily export market and export kind of crumbled in quarter 3 from an average of about INR 1,800 crores to INR 1,900 crores a month, it crumbled to about INR 1,300 crores. Even in 1 month, it was INR 1,200 crores. So that extra -- not everything came into domestic market, but in that put pressure in the domestic market.
Got it. What is the plan on the CapEx side, what sort of CapEx should we model for this and next year?
I let my finance team answer that.
We are not planning much any major CapEx in the next financial year. It will all be routine CapEx, routine in nature, so maybe now INR 50 crores to INR 60 crores is what we are planning for next year. .
Unless we undertake any modernization project, that's something which we will decide in due course.
Okay. And how is the progress happening on the Nepal project front? .
Pardon?
On Nepal project, Nepal project you had in pipeline?
Nepal project is again due to issues over there, rains and other, that is delayed a little bit. It will probably only be in place next year. And even from that point of view, Nepal market is estimated to be a 25 million square meter market. Last year, it slowed down to approximately 13 million to 14 million. So currently, we have enough material to sell in Nepal. So we are no major hurry to bring that plant up to stream. It's kind of -- it's better that it comes in next year.
Okay. So next year will be it in H1 or H2?
H2.
H2. Okay. Got it. One last question from my side. So how many dealers you have added in this year? And what are your future plans?
So we have added almost 110 net dealer addition this year. Gross number is much higher, but there are certain divisions as well on the various regions.
Call performance dealers.
Yes. So net addition of 110 dealers during this fiscal year.
And I think we would add anywhere between 100 to 150 dealers next year. But also we are going to try and see as to how the net addition goes up a little more where we have lesser number of nonperforming dealers coming up.
Okay. Understood. That's it from my side.
The next question is from the line of Rohan Shah from Valorem Capital.
Sir, my first question would be what do you see the demand in the next 2, 3 years, considering that real estate is booming and people are wanting to renovate their houses or buying new houses. And the tile demand not just on floors now, but on walls as well as on dining tables. So do you think we should see a good growth after H2, as you said, for the next 2, 3 years?
Yes, Rohan. Absolutely. And I think you have touched upon 2 separate items. You've touched upon a segment which is very nascent in India, which is the furniture and the table top segment. That will grow in time. Obviously, the figure is very low, but that's a separate animal altogether. But obviously, it will aid a little bit of value and also a little bit of demand for the tile industry, which, for example, a lot of wooden strips have replaced -- the ceramic wooden strips have replaced the normal wooden strips in the industry. So the same way the table tops, there will be a little bit of cannibalization where we will try and replace marble, the granite in that market. But it's not a very, very big thing in terms of today's market size.
But yes, it's later to grow in a very big way. But you're very right, the real estate market is booming, and a lot of new construction is going to be happening, both in terms of buildings with the better builders building more and more and also the IHB, the individual home. So in both, that will come more in Tier 2, Tier 3 town.
So our concentration is on both accounts, on the projects and the government projects in the big town and the small IHBs in the Tier 2, Tier 3, Tier 4 towns. So both places, we are concentrating retail on the smaller towns project on the bigger towns. We do believe that probably Q3, end the Q4 onwards, there should be a huge traction in this demand.
As far as the total tile demand is concerned, I think the industry domestically is slated to grow at about 5%, 4% to 5%, maybe 6%. And to that extent, we will grow almost double that rate. Having said that, we are thinking of low single digit. The industry as far as export is concerned, is volatile, it depends on many factors, but export also is slated to grow in a big way. So we expect an addition of approximately INR 2,000 crores to INR 3,000 crores if not more, on the current base of approximately INR 19,000 crores of exports.
So closer to INR 23,000 crores, INR 24,000 crores of the export. The total tile market, we believe, is about INR 56,000 crores to INR 58,000 crores, out of which about INR 19,000 crores is export and the balance is India. So that is the growth slated. And let's see how the building -- how the real estate market chugs along in India, but we are very sure that next 2, 3 years are good years for the total building materials industry.
Okay. That seems encouraging. And sir, you touched upon exports as well. So that was just a small question from mine. What is the current situation of exports because if that goes to a good amount, and we might have no dumping from Morbi because they all would be focused there. So currently, what is the scenario you're seeing in the export market?
No, I don't have exact scenario. But what I have -- what I do here is it is up from the INR 1,300 crores to approximately INR 1,700 crores track rate right now. .
The next question is from the line of Jyoti Gupta from Nirmal Bang.
Good set of numbers, sir. I would like to underhand realization in terms of GVT, PVT and ceramic. Is it possible to get those numbers?
Jyoti, we could not hear you. You got cut off. Could you please repeat? .
Sir, could I get the breakup of the realization of PVT versus GVT and ceramics?
So that confidential data, I would not like to discuss it openly. .
Okay. The other thing is -- my next question is then on the GVT side. I mean it's understood that possibly the realizations that are coming from GVT are higher compared to the other 2 segments. So where do we see GVT in the next 2 years from 34%, does it go to like 40% or 36%. What's the kind of guidance would you like to give on that?
Jyoti, I had given a guidance last couple of quarters, considering that we [indiscernible] GVT. Can you hear me? .
No. Actually, your voice is breaking in the entire conversation. So even in the mid, I have not been able to hear your talk actually.
Okay. If somebody can just warn me if the voice is not clear because here it's everything is completely clear. Moderator, is it clear? .
Yes, sir.
So Jyoti, I had guided even last couple of quarters. If you see our expansion which have happened, we put a GVT plant in our plant in West India, which started in 2023 for Q4. And then we put an expanded capacity around the same time in our South plant for expanding our GVT capacity, the last GVT capacity addition has been this remain max, which started in January this year in 2024. So all put together, the GVT capacity is now adequate for the next 18 months. From that point of view, currently, we are at 34% share of GVT of our portfolio. We do believe that next year, this will be notching up closer to 38% and going forward to 40%. If you see quarter 4, we are already at 36% share.
Yes. Yes. So -- yes, that's why because obviously, since they're increasing and the rest of the 2 are actually decreasing. So obviously, which means that the realization from here is better and which has also reflected in your numbers? So is there any component of premiumization as well which is factoring in your realization number as well?
Yes. In fact, because of the premiumization, we've been able to not substantially go down on the average sales price, if you see, considering that the market was far more under pressure than what our ASP has gone down. So going forward, GVT, of course, in gas better realization and the mats plant will give us even better realization when it sells more of that product. But having said that, GVT is the segment, which is also under the maximum pressure in terms of pricing because by seems to be making only GVT.
So it's not going to be easy route forward. But very clearly, our ASP will only go up in more and more the GVT goes up.
Okay. One last question. I would like to understand like FY '24, do we see such kind of pressure in terms of exports? And do you think is that going to really spill over the market -- domestic market in any material way, I mean, negatively impact the market in any material way?
Due to exports? .
Yes. We had a decline in exports market, right? Do you see that...
We had a decline in the export market in the quarter 3. But since February, March, it's again back up from INR 1,300 crores, INR 1,200 crores a month to about INR 1,700 crores a month now. .
Okay. So you think that from here, the export market is only going to build and the -- any negative impact of it will not have -- will not be in the domestic market for FY '25?
So you know what the negative impact, I mean, it export was not the only reason for the negative impact. The market also has been sluggish. Quarter 3 was extremely sluggish. So we cannot only point fingers at exports that only added to the worries. But yes, export is at INR 1,700 crores and growing. So from that perspective, hopefully, more capacity would get consumed in the export market. But having said that, in the domestic market also, it was, I think, more than the price pressure, it was also our extra incentive and discounting which we gave, which brought down the ASP. So it was not -- it was a host of everything put together.
The next question is from the line of Keshav Garg from Counter Cyclical BMS.
Sir, firstly, I wanted to congratulate you for outperforming the industry in the fourth quarter of this -- of last financial year. And also, sir, the performance of the company is very commendable in terms of our working capital management, the debt reduction and also the cash flow is -- has very strong. So I hope that the company continues on this growth path.
And sir, just wanted to understand that sir, now if we see that our -- since 2017, our EBITDA is more or less stagnant even though last quarter, the EBITDA has increased. So basically, our operating margins have reduced from 14% to 9%. So what will it take for the margins to again go back to the earlier mid-teen levels?
Yes, thank you, Keshav, Sunit here. So thank you for your compliments, I would say. And yes, the performance is increasing trend that already mentioned. What I would like to clarify is that there is some pressure on the receivables, and that's predominantly because of the March phenomenon because -- this year in March, we have reported a better growth as compared to the preceding year March, and that's why the balance sheet number, you could see there is 3, 4 days of aberration. .
And coming to your EBITDA question on '17 versus now, if you see last 2, 3 years' EBITDA trend, that is something which is consistently on an upward trend, and we have been maintaining our guidance that our EBITDA margin is something which should be around 11% or so plus minus plus 1%, 2%. And we are reaching towards that normalized trajectory of EBITDA. So I would say going forward, also, this year, we closed around close to 10%, and we are expecting 1.5% -- around 1.5% improvement going forward on EBITDA.
I would also like to highlight that other than us, I think pretty much everybody in the industry has had no serious EBITDA growth. Understand that there is a difference between us and market leaders in terms of EBITDA. We've been able to visit a little bit this quarter and this year. But otherwise, there has not been any EBITDA increase across the board in any building material industry. What's happened is that, of course, the addition in capacity additional volume has come, but it's come at the cost of higher gas costs and also a larger pressure on pricing specifically due to the overcapacity in Morbi, which currently, I must state that the pricing in Morbi has more than bottomed out anything going forward now is getting compromised on the product and the dealer and the consumer is clearly being able to visualize the compromised product, which we're getting at a cheaper price.
And sir, can we expect the fourth quarter profit to sustain on a quarterly basis going forward?
Not for quarter 1 and quarter 2. Quarter 1 is extremely sluggish, specifically because of the election. You must appreciate that all the labor goes back for voting plus our business has certain other elements which restricts the purchase if you know what I'm saying, in these 2 months, the builders are extremely cautious. So from that point of view, these -- the election months are weak months normally, any which ways it's been added this time because it's early. The elections normally are in May and June. So April and May are going to be sluggish months of quarter 1, quarter 1, please don't expect any huge growth from that point of view. But yes, from H2 onwards, this will start becoming extremely robust. The both will start getting extremely robust, and I would be able to maintain these margins because the sales would start coming to the similar levels that what have come from Q3, Q4.
Just to add, Abhishek ji, please understand whatever guidance we gave, be it on top line or margins front, then we try to maintain our guidance on a annualized basis. it should not be extrapolated on a quarterly basis.
Sure, sir. And sir, I also wanted to understand that -- so the difference in the margin between the industry leader and us, sir, is it only due to higher operating leverage that they enjoy the industry leader enjoys -- or is it that our average selling price and the product mix is also inferior to the market leader?
Yes. Our product mix and the selling price is inferior to the market leader, number one. Number two, of course, operating leverages do come into play. Number three, a large part, a much larger part of manufacturing is in the north, which is approximately 50%. And there is a favorable gas pricing in the north compared to Gujarat and also compared to South mainly compared to the South, closer to the market, approximately to the market also makes a little bit of difference for industry leader for the urban market, which is a very strong market for both of us. These 3 attributes put together are the reason for the difference in the margins. .
Sir, and lastly, sir, since sir, we don't have any large CapEx plan for this financial year. And sir, so do you think that the company will become debt-free by the end of FY '25. And sir, if so, are there any plans for a further share buyback?
So if you see at the standalone level, we have anyway net debt plus for last 2 years. There are some days on consolidated level, and I think we have explained multiple times in past. So no point repeating it again, that if CVi, is forestalling in various multiple smaller CPs, SPVs for project financing. And we have been amortizing schedule of almost INR 40 and odd crores every year. And as of now, our long-term borrowing is INR 180 crores. It's around INR 185 crores long-term borrowing. So it would get amortized over the period of 3 to 4 years. So we have -- there is no fund mixing the cash lever that holding company a stand-alone level with the this is a fair policy which we have been maintaining.
And as far as capital allocation is concerned, we will see how and when the cash flows are, whether we need it for expansions. If not, then we will obviously have a more favorable dividend payout or I'm not too sure about the share buyback, if that happens or not at that level, but definitely would be more favorable dividend by us. .
And that is something which is demonstrated in the last 24 months also, we have done a CapEx of almost INR 400 crores plus and only a marginal rate of 25% were taken and that 2 in SPVs, otherwise, it's largely foments.
[Operator Instructions] The next question is from the line of Jenish Karia from Antique Stockbroking.
Sir, like we mentioned in the fourth quarter, there is a 400 basis point improvement in our mix towards the GVT side, which is great. But if I look at the gross margins, that is not being reflected in the gross margin, despite our gas cost reducing by 400 basis points on a Y-o-Y basis. Gross margin expansion is only 200 basis points. So could you help us with reasons or this?
I mentioned that GVT is something which is on one hand going but also under pressure in terms of pricing and everybody seems to be putting GVT in place. I think fourth quarter, there has also been an added sales incentive which has been given to expedite further sales. So coupled with that is the reason why the increase over here is 400 and the increase at the bottom line is only 200.
Sir, is it possible to quantify the discounts we gave?
Not really. I can't quantify the scheme and the discount because it's product-wise size-wise, regionalize, so it's quite a complex matrix.
Understood. And sir, just to understand the pressure in terms of GVT pricing, if you can just help us the premiums of GVT, which were say, 2 or 3 years ago? And what are the premiums to the ceramic or PVT tiles. So we'll understand what the kind of pressure the GVT and we can accordingly build in the numbers.
So I don't think you will be able to do that and build a number in there because GVT is also getting premiumized. So for example, the commodity which used to be of GVT, the biggest size is like 60, 120, which was supposed to be a premium size has become a commodity size. And the larger sizes has taken over which is 80, 160, 120, 180 and even the largest lab. So it's a question of how quickly we can now move towards the largest lab and at the ASP falling.
So just by giving you that number and you're doing a modeling you would completely go wrong with that. So maybe off-line, we can speak and I can give you a little more insight. My team can give you more insight as to what the number was of 60, 120 2 years ago, what the selling number is a 60, 120 in terms of volume and value. And similarly, there are 3, 4 items which were not existent 3, 4 years ago today has come up in a small way, but it's also growing very quickly. And when that happens, that's when it will arrest the ASP going down because of 60, 120 and 60, 60. So you won't be able to model it that way, it would be a wrong model.
Sir, second is on the working capital side...
Sorry to interrupt, Jenish, I request you to rejoin the queue.
That was only one question. It was a follow-up on the previous question only. Second is on the working capital side. So while our working capital has improved significantly on a Y-o-Y basis, a large part of the improvement is because of higher payable days and lower inventory days. So is this a normalized scenario? Or there was some one-off you would like to clarify?
I think this is a normalized scenario. Only thing which may happen notes a small reduction in debtor days, but otherwise, it's a normal scenario.
Yes. Only thing is the whatever shift you are seeing last year versus this year, that was something because of some arrangement and we have already clarified earlier. But going forward, whatever level today, it should be maintained. It would maintain. .
The next question is from the line of Shrinjana Mittal from RatnaTraya Capital.
But my questions are answered.
The next question is from the line of Sneha from Nuvama Wealth Management Limited. .
Congratulations on brief cash flows and balance sheet improvement. Just a couple of questions from my end. Firstly, you mentioned that you expect 5% to 6% growth on the domestic industry. Just 2 things here. Of course, you are looking at a higher growth, which is lower double-digit growth, which guides for market share improvement. So the point I'm trying to make here is that when you look at -- why do you look at only 5% to 6% given that we are expecting improvement in the real estate scenario and pickup in tile sales given that there is so much inventory being sold out? And we'll have better scenario coming ahead for tile or even other building material categories for that matter?
Yes. So just to clarify, Sneha, it's 5% to 6% domestic growth, which we're talking and not the entire industry. Export, I'm not too sure as to what that growth will be. But on the domestic front, there are 2 reasons why I say it's going to be 5% to 6% because if you see the Morbi industry, unlike the branded players, which are between 70% and 80% retail and most of our products go into retail and only 12% go into government for us 8%, 9% go into private projects, which are increasing, but if you see Morbi, other than export, if you see their sales, a good 50% to 75% of the sales between the medium-run brands to the small brands is in the project.
So they're already well entrenched in product in the project segment. So for them to grow on a very high base of project sales, therefore, I'm saying 5% to 6% would be the growth in the industry and not higher for them, because their concentration is more towards export. If I had to do the numbers with you, on the top 4, 5 players, 6 players growing at single, double digit at much base and all the rest of them growing at 5%, if you look at the absolute square meterage, which will come out, that math will tell you.
Understood. We'll try and work on that math, sir. Sir, secondly, on your margin guidance, while you said that 11% plus minus 1%. What I'm trying to understand, in the previous quarter though, in the past years, you have even seen our margins bringing upwards of 13, 15-odd percent. And now with your GVT portion increasing, why don't you expect a higher EBITDA margin? Is it that market is very competitive at this point of time? Or is there higher discounting taking place, some sense there would be helpful.
So 14% EBITDA was only 5, 6 years ago in 2017, it was a bad year since then, it's been sub-10%, in fact...
Not annualized level, sir. On the quarterly level. We have seen that happening in Q4. And this time, we are at about 10.8%. We've seen your Q4...
Past to last year Q4. That was a one-off. But otherwise, if you see on an annualized basis, it's been steadily going up, and we are talking of annualized basis only that 1%, 1.5%, we are looking at EBITDA increase. There is no turning back from a huge amount of pressure on a commoditized product like us in the market. That's been the scenario for the last 20 years. Every time there's been a good year, a good 2 years, there's been an influx of capacity, which comes in. Again, we brace for impact for those 1, 2 years of extended capacity.
So yes, there is discounting. There is additional capacity in the system, considering Morbi, if you see the number of units which are running today in Morbi, they're only at about 65% to 70% capacity utilization. So therefore, clearly, there is pressure. And I don't think we've ever seen a single year that there has been no pressure in the tile industry in terms of demand versus supply.
So we are being cautious in saying that this is something which we are sure we would be able to achieve. Having said that the volume would grow up -- grow in the single digit, high single digits or the low double digits, whatever it may be. Why I'm saying that, and why I mentioned that that this year, again, we had said something and the whole industry really could not perform. So I've been cautious because it's been so volatile the entire 2 years, but hopefully, this year, with everything else in our favor in terms of raw material prices and also in terms that the building materials industry, real estate industry, finally after 5 years is really looking up and generally, it's a 5-year cycle for the related industry because whatever launches they do Phase 1, Phase 2 takes between 2.5 to 5 years to deliver.
So therefore, we do believe that there will be good traction in the Indian real estate industry and also the IHB industry. So very confident of that. But on the EBITDA, we are sure we would be able to increase subject to, of course, gas pricing remaining stable by 1%, 1.5% or more.
Understood. Sir, last question from my end. Given that you mentioned your lower double-digit kind of guidance, and you also mentioned that you expect Q1 and Q2 to be slightly subdued. Do you have any breakup in terms of our understanding that how much high double digit can we expect in H2 and what sort of a single digit can we expect in H1 anything at this?
See, quarter 1, we would -- I don't think there would be any serious growth coming in at all because quarter 1, first 2 months are going to be super, super tougher. And I think everybody across industry is feeling that, so I'm not the only one. So yes, I wouldn't be able to give you a better break up maybe in the next call as to what it would be quarter-on-quarter.
The next question is from the line of Amit Purohit from Elara Capital.
Just one thing on the large tiles that you highlighted. Have we seen, I mean, pricing pressure in that category as well or that is slightly lower in terms of availability, not much of capacities are available relative to the normal GVT or what is the scenario there actually I didn't understand.
The scenario there is, yes, there is lesser competition. But the issue there is that with a lot of the Morbi industry going kind of unchecked because it's an expensive tile, there is more scope of the prior practices, which they adopt. So therefore, from that point of view, there is pressure. But otherwise, anybody buying a better product, generally would want to lean towards the better brands. But yes, there is that unfair competition, which we face there a little more than in the normal tiles..
Okay. Then effectively, that they pass it on in terms of pricing or you think...
Yes. Obviously, I mean if there is going to be untracked practice has taken place. The landed to the dealer becomes that much lesser. So it does put -- so from a consumer's point of view, when he's looking at a particular tile, there's a decent amount of difference because of that element coming into play.
And these tiles are finding application more in the projects, right, rather than residential?
Not really. Even in residential, the sizes are being put, but it is largely architect and influence led.
Okay. Okay. Okay. Okay. And sir, anything on the Morbi capacity addition? I mean any sense...
I don't think there is any capacity addition taking place right now. Whatever capacity is to come in, will come in, in the next 3, 4 months, which I believe is another 6, 7 plants, mostly export-oriented. The amount of plants which are coming that many plants are also going to shut down. The more -- the nonviable ones, the smaller plants, the very expensive plants in terms of gas pricing.
So I don't think any new capacity, any significant new capacities coming up in the next 12 months.
Okay. And when you say these plants which come in, they typically are at a significantly higher capacity than the earlier one, right? Is that a...
Correct. There will be more efficient plants.
The next question is from the line of Aashish from InvesQ Investment Advisors.
Sir, I mean, it's a bit complexing to understand why...
I'm sorry, I can't hear you, Aashish. .
Yes. Is it okay?
Much better, yes.
Yes. No. So it bit perplexing to understand why the building materials industry has been not been able to grow in the last year despite a month of manages we've seen the data and the trend that we are seeing a tail separate listing. So any data analysis that you would have gone through where the amount of experience to which tile be different between the fill growth of the total industry.
I'm really sorry, but I couldn't understand anything of the question. .
Just give me a second.
I can't hear you very well. It's a mumble.
Yes.
I'm sorry, I can't hear you really well.
Moderator, can you please check if it's good audio at your end, else, we can move to next participant .
Maybe we can move and come back in the queue. .
Yes. The next question is from the line of [indiscernible] from BOB Capital.
Sir, my first question is regarding your MAX plant. So if you can just give some sense what would be our current operating rate? And at what level do we expect to operate the plant by next March quarter?
Currently, it's running between 40% and 50% capacity utilization. And hopefully, by March, we should be in excess of 80% capacity utilization.
Okay. And sir, I need just a few data points, if you can tell me what would be the share of our ceramics and PBT volume mix for March quarter and also for FY '24?
Yes. Of course, ceramic FY '24 was 37%. PVT was 29%, and GVT was 34%. If you look at quarter 4 FY '24, ceramic was 35%. PVT was 29% and GVT was 36%.
Okay. And sir, what would be our ad spend in Q3 and Q4 of FY '24 and Q4 of FY '23?
The ad spend was 2.5% of revenue. And largely, the ad spend happens in Q3 and Q4.
Okay. And it has remained same versus on a Y-o-Y basis?
Yes. It remains the same. This year, we expect it to go up.
Okay. And what is the revenue growth for Sanitaryware and faucet for March quarter and for FY '24 as well?
7% for Q4 and the 9% for full year.
Alisha Mahawla8
I'm asking separately...
I don't have the number for Q4, no, we actually number Q4. Yes. It's 7% growth and 9%, but I don't have the exact absolute number. It is INR 80 crore of the Bathware business in Q4. And last year, Q4 was INR 74 crores.
Sir, because we have that data from the presentation, I'm asking separately for Sanitaryware and faucet?
Yes, yes, I'm giving you sanitaryware and faucet only.
Okay. I'll take this data offline, sir.
The next question is from the line of Yash Tedia from Maximal Capital.
Congratulations on the numbers, very good number. Just wanted to know a couple of things. So what would be the proportion of natural gas cost in our total proportion cost?
What is the -- what natural gas cost, I'm sorry?
What would be the proportion of natural gas cost in the total cost?
Approximately 30%.
30%. And so the EBITDA push which we are guiding about 1%, 1.5% in coming financial year, this financial year. So what are the levers which we are banking on for the same?
The 2 levers are increased GVT production, and the second ever is capacity utilization, increased capacity utilization.
The capacity utilization for this quarter is already pretty high. So operating leverage, the playout of operating leverage is not that great? .
It is. Because we will be -- we can outsource a lot more.
The next question is from the line of Miraj from Arihant Capital.
Congratulations on a great set of numbers, sir. Just a couple of things from my side and one clarification. Firstly, I want to understand on the ASP front, that how is this monitored? How does this fluctuate? Is it purely based on how much risk cons you give or what kind of demand struggles that happen are also factored in this? Because I want to understand if we are anticipating next year to have a very robust demand, our ASPs should increase from here on and this should be the bottom? That is my first question. And the second question is on the GVT side. If you could tell me what is our capacity in GVT and utilization for FY '24 in GVT?
Capacity for GVT. I don't have that number off line, but I'll give it to you. My team is just working on it. As far as the first question is concerned, the pressure is all to do with the demand in the market and also to do with the premiumization. So the ASP number going up or going down, depends on how quickly we can premiurize because at the commodity, there is more of a discounting pressure there is a lot more players at the commodity segment than in the premium segment. So it's a question of premiumization, which we are continuously with the effort to increase and rate ASP of every increase the ASP.
Your second question on what is our total capacity for GVT, out of the 78 million, we have a capacity of 25 million of GVT. 21 million of that is our own capacity, 4 is outsourced.
Perfect. And as you mentioned, sir, that premiumization is one of the reasons that will take care of the ASP. So currently, could you guide us somehow just give us some picture that from our sales right now, what percentage would be premium products? What percentage would be commodity products? If you could just throw some light on that?
That's a very complex matrix to give you because that is -- I mean, every product has a premium and non-premium products. So I'll have to take you side-wise that will take a long time. .
And lastly, sir, you mentioned the guidance for next year is single digit, right? So single-digit growth or double-digit growth, high single-digit?
Low double digit.
Low double-digit. Okay. Perfect.
The next question is from the line of Vineet Shanker from JM Financial.
I just wanted to ask on the -- if you can give us the absolute gas prices for RasGas, with RasGas and the Bharat Fuel and also the mix, if you can.
So south, it is INR 50 a spend. As we speak, this month -- last 2, 3 months average is the best guidance. So that's what I'm telling you. South it is INR 50 a standard cubic meter, in Morbi it is INR 47 a standard cubic meter. And in our North plant, it is INR 45 standard cubic meter. If you look at the entire year, South has been INR 52 a standard cubic meter. Morbi has been INR 45 a standard cubic meter, and in the North, it's been INR 43, INR 44 a standard cubic meter.
Sir, I just wanted to confirm again, Morbi currently, what's the price?
INR 47 currently and INR 45 for the year.
Okay. Got it. And sir, if you can also give us your retail and institutional sales mix?
Sorry?
Retail versus institutional sales mix or B2B versus B2C.
So thing is almost 80% of our sales mix and 20% is coming through industry, which comprises various segments, including the government contracts, the private builders, the corporates, all these institutions put together is around 20%. And 80% is coming through our retail network, which we call [indiscernible]
[indiscernible] team for the government segment. So are we doing anything...
Lost year voice. Can't understand. Lost your voice.
Sorry. One of our competitor has aggressively gone into the government project side and is increasing the team size in that particular segment. So are we also doing something in that area, if you can highlight?
I mean government projects are really doing well. So we already have a team in place for government. Obviously, as and when the sale goes up, we keep increasing the manpower across India. So obviously, we cannot ignore. Government is 12% of our revenue, and that will remain the same or maybe go up slowly because government projects are really moving up to value.
Got it, sir. And sir, just one last question on the gas again. Was there any contribution of spot gas during the quarter?
For the entire south is for gas. .
The next question is from the line of Abhishek Shah from Valcore Capital.
I actually wanted to understand in terms of pricing, our average realization or at company level or at industry level, how has the pricing moved in the last 10 years? What we heard was prices have not increased for the last 10 or even 14 years. Just wanted to check, is that correct? And maybe if you can help us understand that better? That's one.
Second question is, if I look at most real estate developers, the listed players, at least, their sales booking has actually gone up 2x or even 3x some even 4x over the last couple of years. So we are not talking about 10% or 20% growth. We are talking of multiples. So what I'm trying to understand is if there is a lag of 2, 2.5 years, could we see that level of growth coming in our industry as well? And are we prepared in terms of capacity if something like that comes, will we be able to take advantage of it?
So your first question, absolute figures has gone up because prices have become larger, better, thicker and also more in GVT and PVT than ceramics in the last 10 years. So if you look at the absolute number, yes, it has gone up. But otherwise, you're very right in saying that in 10 years, inflation at jerked prices have only gone down it's probably the only industry in the building material where prices have become smaller, much, much more under pressure.
Some of it is positive which is because of operating leverages, where the indigenization of machinery, indigenization of plant, the total capacity going up, efficiencies of plants, et cetera. But I think the absolute pricing obviously has gone up on to account premiumization of tiles and also gas prices going up, so that pushed up the prices.
Pressure is because all of this has come at a cost of an inflation-adjusted situation, which is not favorable for the industry. So I hope I'm able to answer the first question. The second question, Morbi is running at 65% to 70% capacity. So yes, in case there is a huge uptake in the building material, which is now going to come over 1 year, which is we're pretty sure if it comes over 5 years, we are very, very well poised to do that. Any new capacity in the industry in greenfield, it takes about 15 months, brownfield takes about 9 months. So yes, currently, considering that 65% of Morbi is under -- 35% of Morbi is underutilized. There's more than enough capacity for us to take that advantage.
Got it. Got it, sir. And sorry, just one more thing. If there are talks about U.S. imposing antidumping duty on exports from India, how will that impact our sector if I were to understand, apologies if this was...
Our interest doesn't -- we don't export to the U.S. at all. And what we're hearing is that the U.S. duty, which we were talking is not going to be as severe but I'm nobody to take that call as to how severe it will be. But I do believe that U.S. in the total campaign is approximately next year, if we are looking at a INR 22,000 crores is approximately about 8% to 10% is the value of the U.S. exports. It's about INR 140 crores a year. So it's about 7% to 8% of the total export of which the duty will be put in probably 3% to 4% of those materials. It's not going to be a blanket duty across the sizes.
So I don't think that's going to move the needle too much. But then if you remember last year, we were afraid of the European duty and people were talking about 50%, 80%, 90% duty, which Europe will improve on India. And finally, it came at 6%. I do believe the U.S. is also going to be in the single digits or maybe in the very low double digits as far as duty is concerned. So I do not feel that is going to be a major concern for the exports.
The next question is from the line of Akshay from Canara Robeco Mutual Fund.
Sir, just one question. I mean. If we consider that, I mean, you just said that retail is 80% and industry is 20%. And if you see with all these real estate launches, et cetera, they fall under the part and Morbi is already over indexed there, and they have spare capacity. So isn't it that Morbi will be much, much, much better way and capitalizing this demand versus -- I mean, how does it benefit us because we are more dependent on the retail side? Or is it that this you expect this 80-20 share to shift? I mean, so how does it benefit them?
No, the 80-20 share may not shift very much. I think it will be probably 75-25. We have added obviously, project is going to be a large kicker in the next couple of years. So we will increase our project share by 5%, 7% on the existing 20%, so that is one. And most of the projects beyond the point cannot be supplied only by Morbi. So there's enough capacity in Morbi, which is vacant. Some of it will be directly supplied to the project. Some of it will be contracted by us. So there's more than enough capacity available. That's something -- that's one thing which we're not really agreed on.
As there are no further questions from the participants, I now hand the conference over to Mr. Somany for closing comments. Over to you, sir.
Thank you for joining us for the earnings call. And I hope this year is a much better year than next year. We are hopeful backing on the real estate industry being extremely robust and strong. So minus the first quarter, which is going to be a very, very tough quarter due to elections. I think quarter 3, quarter 4 onwards, we do see a good run-up for the next 3 to 4 years.
Thank you so much, and we would wait for the same call in -- for the earnings call in quarter 2. Thank you so much.
On behalf of Asian Market Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.