Bigbloc Construction Limited (BIGBLOC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Bigbloc Construction Limited Q1 FY 2027 Earnings Conference Call hosted by Valorem Advisors. [Operator Instructions]. Please note this conference is being recorded. I now hand the conference over to Mr. Wage Chan from Value Advisors. Thank you, and over to you, ma'am.

Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Paravani Jan, the Balsam Advisor. We represent the Investor Relations of Bigbloc Construction Limited. On behalf of the company, I would like to thank you as for participating in the company's earnings call for the first quarter of the financial year -- before cautionary statement. Some of the statements made in today's earnings conference call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties and which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's conference call is broadly to educate and bring awareness about the company's fundamental business and financial performance. for the period under review. Now I would like to introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us Mr. Mohit Saboo, Director and Chief Financial Officer; and Mr. Manish Saboo from [ Mota. ] Without any delay, I request Mr. Mohit Saboo to give his opening remarks. Thank you, and over to you, sir.

Thank you, Pavan. Good afternoon, everyone, and thank you for joining us today for the Big Block Construction Limited Earnings Conference Call for the First Quarter of Financial Year 2027. We are pleased to begin FY '27 on a strong and encouraging note. The first quarter marked an important inflection point for block as the investment and capacity expansion undertaken over the past 2 years are now beginning to translate into higher utilization, stronger operating leverage and a meaningful improvement in operating performance. Over the last several years, we have transformed ourselves from a regional ASC block manufacturer into a diversified green building materials company. During this period, we have significantly expanded our manufacturing footprint, diversified our product portfolio and build a stronger platform to serve the evolving needs of the construction industry. Our revenue has nearly tripled over the last 7 years, reflecting both the scale we have created and the growing acceptance of our products across our key markets. The last 2 years, in particular, were an important investment phase for the company. We undertook significant capital expenditure to expand our manufacturing capabilities, upgrade our manufacturing capabilities, strengthen our market presence and create the capacity required to support our next phase of growth. While this investment phase temporarily impacted reported profitability through higher depreciation and finance costs, these investments have significantly strengthened our business platform and position us to participate in the next phase of industry growth. Importantly, a major capacity expansion cycle is now largely behind us, and our focus has, therefore, shifted from capacity creation cateutilization, operational efficiency, cost optimization capital generation and profitable growth. We are already beginning to see the results for the same. During the quarter, we achieved sales volume of 1,545 cubic meters representing a healthy 32% year-on-year growth in spite of industry-wide labor availability challenges, our plants operated at an average capacity utilization of around 69 percentage reflecting resilient execution and healthy demand across our key markets. More importantly, we are now approaching rational breakeven. As utilization improves was 75% and beyond, -- we expect operating leverage to strengthen further, resulting in better absorption of fixed costs and a meaningful improvement in our profitability. We believe this marks the beginning of the return stays on the investments made over the past 2 years. An outside improving utilization. We are also implementing several initiatives focused on energy efficiency, cost optimization and operational productivity, which we believe can support marginal improvements going forward. During the quarter, approximately 52% of our power requirement was met through solar energy. This represents an important step in reducing our dependence on conventional power sources while improving our overall energy efficiency. As the contribution from renewable energy increases, we expect it to support our cost optimization and sustainability objectives over the coming periods. We are also progressively introducing elective focus across our operations. This initiative is aimed at improving material handling efficiency while reducing fuel maintenance and operating costs. Over time, the increased adoption of electric material handing equipment is expected to contribute positively to our operating efficiencies and margins. Our Motor plant is now operational further expanding our product portfolio and enabling us to participate in the growing opportunity in the construction chemicals and allied building material solutions. As we scale up the business, we expect it to increasingly contribute to our product mix, revenues and profitability. As a future-driven company, we are continuously adapting our processes and operations to align with the evolving needs of the industry and the environment. As part of this approach, we are implementing measures that will help reduce our overall carbon footprint and improved resource and energy efficiency. Importantly, these initiatives will also have the potential to enable the generation of carbon credit creation -- creating an additional value opportunity for the company while supporting our long-term decarbonization goals and sustainability goals. These initiatives together will improve capacity utilization, better product mix, automation and continue management [Technical Difficulty]

Ladies and gentlemen, the line for the management has been reconnected.

sorry for the disconnection. The growth agency of the industry remains highly strong and encouraging. The demand continues to be supported by healthy activity in the real estate and infrastructure sectors, along with the increasing adoption of lighter, faster, more efficient and sustainable construction materials. ASC and other green building materials are well positioned to benefit from these structural trends. increasing awareness around energy efficiency, faster construction time lines, reduce structural lower resource efficiency and sustainability is supporting the long-term production of these products. We believe these are not nearly short-term trends, but represents a structural shift in the way buildings are designed and constructed creating a significant long-term opportunity for the green building materials industry. Going forward, our focus remains on 4 key priorities: first, improving utilization and plant efficiencies across our manufacturing network. We have already created significant capacity and our priority now is to increase throughput and improve asset productivity; second, increasing the contribution from higher-value products such as ASC wall panels, all bans provided attractive opportunity to participate in the growing demand for faster lighter and more efficient construction solutions while also supporting an improvement in our overall product portfolio mix. Third, expanding into existing green building material categories recent entry into construction chemicals, including the operationalization of our Mota plant represents an important step in this direction. We see this as an opportunity to broaden our addressable market and gradually will be block into a more comprehensive screen building materials platform; and fourth, strengthening cash flow generation and improving return on invested capital. With a major capacity expansion phase substantially completed, we are increasingly focused on ensuring that the capacity we have created translates into higher utilization, stronger profitability, healthier cash flows and better returns on Captisol. Now let me take you through our financial performance for the quarter. For the first quarter of financial year 2027, the revenue from operations stood at approximately INR 79 crores, registering a strong growth of approximately 40% year-on-year. primarily driven by higher sales volume. EBITDA improved significantly to approximately INR 6 crores compared with INR 1 crore in the corresponding quarter of the previous year. This presents a substantial improvement in operating performance with EBITDA margins expanding to 8 percentage approximately. Our bottom line also improved materially -- the net loss net to approximately INR 1,700,000 compared with a loss of INR 6 crores in the corresponding quarter last year. Therefore, within a year, we have moved significantly closer to profitability by Simon A limiting strong volume and revenue growth. We see this as an encouraging indication of the operating leverage embedded in our business model. Looking ahead, we believe we are entering a new phase of our growth journey. The company has invested in capacity tender is manufacturing platform, expanded its product portfolio and build a broader market presence. Our focus now is on unlocking the value of these investments with improving utilization levels, a supportive demand environment strong volume momentum and increasing operating leverage, we remain confident of delivering stronger profitability, healthier cash flows and improved returns on invested capital over the coming years. Our objective is clear to grow volumes, improve utilization, expand margins stand and cash flows. We believe the foundation we have built over the past several years provide us with a strong platform for the next phase of growth. Q1 is an extremely encouraging start to FY '27, and we look forward to building on this momentum through the year. With that, I conclude my opening remarks and would now like to open the floor for questions and answers.

[Operator Instructions] The first question comes from the line of Manish Kela with Swastik Investments.

Yes. So sir, your PPT sales at your current capacity utilization of 69%, is that correct?

Yes, that's right. approximately 69% for Q1 of FY '27. SP-8 Yes. Is this across all the 3 segments that you operate in?

So this is majorly for AAC blocks because that is the biggest segment that we have, which contributes majority of the turnover right now -- and so 69% is the utilization, capacity utilization across the AC blocks.

That's right.

Okay. And how about the other 2 segments, what is the current capacity utilization?

So AAC panels and AC blocks with the fungible capacity and the 69% is across the AC block installed capacity that we have -- the construction chemicals plant is recently began in May. And for that, for this quarter, the capital utilization is in the range of almost 20, 25 percentage will be gra

Dually scaled up over the next couple of quarters. Okay. And when you say that the capacity is fungible, right? Is it across all your plants? Or is it a particular plant

So there are 4 plants that we have currently installed, 3 are exclusively for AAC block. And 1 plant has the fungible capacity for AC blockchain panels. -- for that plant, the capital utilization is approximately around 40 percentage since the AST panel is a new product, and we are doing a category creation for the same in the market. It's not a product that was available in our country earlier, but it's a product that we have recently introduced. And we are the only company in the country currently who is providing a single panel, which is a height of up to 6 meters -- and it is still reinforced and it is being used in lots of industries, data center. We are also executing the upcoming bulletin stations on the Mumbai ad and are in the process of executing work orders for electric stations and are in talks for a few more. with the a balance.

So sir, across the other plants where your capacity is not fungible. Is there something which can be done to make it fungible because as in if you would have noticed there is obviously that increase in finance cost appreciation that is rating into profits and although your sales are growing well. but the profitability is definitely missing, at least the last 7 or 8 quarters. And that was also reflected in the depressed stock price performance. So your thoughts on that.

So as I mentioned in my opening speech that over the last 2 years, we have done a lot of capacity build up. We have increased our capacity from around 550,000 cubic meters to around 1.3 million cubic meters. And now that we are improving our subsidy utilizations over the last 1 year in our investor calls, we have been continuously telling that we'll keep first focusing on improving our subset utilization to reach 70% plus utilization levels. Once we reach that, we will begin the monetization phase to further improve our margins.

And so what's the target in terms of improving your margins? So what is that they're going to take margin improvement?

So if you would have seen our results over the last 6 to 8 quarters, I think when we did the capital buildup, the capi utilizations were quite on the lower side from around 40%, 45%, reaching up to 70% now now that we have raised 70% capital utilization and build up the necessary market or the target profile customers for the same we'll be looking at improving our margins on a quarter-on-quarter basis, we further see margin improvement and as well as capitutilization going ahead.

So the margin improvement, I understand that is going to come from benefits of operating leverage. Is that correct?

So from a combination of both from operating leverage as well as improvement in realization.

Okay. And will that be in the form of price hikes?

Yes, that's what we are targeting going ahead.

Okay. And when are we targeting what do you say, the go live of the new capacity, the new facility in Central India.

So we have -- we had acquired a land in NPE about 15 months back. And since the industry was going through a little slow phase, and we also had not peptide utilization, sort of just meaning the installation for the NP plant. Now that we are on the work of reading 70%, 75% plus cash utilization, mean by looking at the -- setting up the capacity for MP and expanding to that reason.

So I guess the construction would have not started as a elite land which has been acquired.

So the land is acquired and we have taken all the necessary government approvals like a construction permission plantation control got permissions, et cetera. And Hopefully, post monsoon, we'll be looking at beginning construction at that site.

Understood. And sir, again, coming back to my previous question, can't we do anything to make the capacity fungible across the other 2 or 3 plants where you currently do not have that option. What is it -- which can be done to kind of do something on that front as doable. So does the

Basic math. So currently, we do not have the option to modify existing facilities to make them fungible for AC panels because to involve a shutdown period of almost 2 to 3 months, maybe up to 4, 5 months. to make it operational for AC blocks as well as panels. And in today's demand scenario where we have already reached 70% of utilization, we feel that's not the right -- and if we see a further improvement in volumes from the AC Boldin segment, we have the option of expanding that capacity from the current 150,000 cubic meters per annum to 5,000 segments per annum by putting up some messy autoplay and additional machineries.

Got it. So final question around the Central India plant. So the construction will start now, right? Given that you are already at 69 percentage capacity utilization. So you expect this consumption to complete what in the next 1.5, 2 years. So how much time would that take

So I think

[Technical Difficulty] -- you are not audible to us. Could you please repeat the answer?

So over the next couple of quarters, we will be deciding to begin construction at that plant. And we begin to -- we target to start commercial production at that plant in FY '28.

The next question comes from the line of Hasan Macalena Investor.

I am participating for the first time in this conference call. Can you please help me with the total market size for AC Block and AC panel separately.

So to answer the question for AC panels, there's no particular market size that we have right now, since this is the category creation that we have started doing for -- it's a new product that we have introduced in the country.

Okay. Okay. And sir, for AAC Block Hello? Hello and audible? [Technical Difficulty]

Yes. Sorry to interrupt Mr. Hassan the Madsen has been disconnected. Please collect

Okay.

Ladies and gentlemen, the line for the management has been reconnected.

Yes, sir, -- so sorry for the disconnection again. So regarding the market size for AC blocks if you block the total installed capture in India would be about INR 20 crores to INR 2.5 crores cubic meters per annum. Out of that, we have an installed capacity of about 1.3 million cubic meters per annum. But since AC blocks is a bulky bacterial within Red transportation radius of almost 300 kilometers to 350 kilometers. We are currently concentrated on the Western India space. And in Western India, the total installed capacity would be around 9 million to 10 million cubic meters per annum. So we considered about 8% to 10% of the total market size for the Mernda block space.

Okay. So out of this 90%, you said that we have 10%, remaining 90%, who must be the major competitors?

So in terms of the other competitors, 1 of them is Magic and another would be Hendra Industries Limited, which is Belani. And apart from there are lots of small regional players with or multiple partners or small players.

Okay. Okay. Understood, sir. So that is what I'm coming from. If you look at the material expenses with respect to our sales, it has been increasing year-on-year. So for FY '24, our material expenses in relation to sales was around in FY '25, it becomes 40%. In FY '26, it become 45% to 46%. So our margin on material is compressing year-on-year. What is the challenge? I mean, we are not able to dictate the price or we are not able to pass on the input cost escalation here?

So over the last couple of years, as you said, we have done a lot of capacity expansion. We have increased our capacities by almost 2.5x. And in order to increase the city utilization No, there was a pricing pressure in the market and because of which the margins were contracted. As a result, the raw material cost as a percentage of sales are showing on the higher side. Now that we have reached almost 70% plus cap site utilization, we are now targeting price increases in the market.

So we'll get acceptance in the market or still will have some challenges in increasing the price hike?

So I think over the last 4 quarters, continuously, they have improved our cap utilization by maintaining almost the same pricing. Now that we have reached the volume growth that we are targeting to reach -- we'll be now able to pass the price increase to the market. And across some markets and some segments, over the last 1 or 2 quarters, we have already done some price hikes. -- and pass on to the customers. And across other markets, we'll be now looking -- continuously increasing the prices. And in some markets, we have already gotten the necessary conversion. Also to come down to your point. So as of today, Ablo has a share of just around 9% to 10% in the volume materials segment, whereas rate rate still has almost 80 to 85 percentage -- so the convergence from metric to AC blocks will keep on happening. And eventually, over the next few years, it should reach almost 40% to 50% of the volume material market share, which is there in the developed economies, the likes of Turkey, China, et cetera.

Okay. Okay. Okay, sir. So this -- once we increase the price, I'm not talking about the next quarter or next 2, 3 quarters. But eventually, when we are through with the capacity utilization, we reach our ideal capacity utilization, this material expenses in relation to sales still back to the 2 years back, I mean, 30%, 35% or so.

So we just do not see the montage expenses as a percentage of sales. Generally, what we do is the target on the EBITDA margins there are also times that we are able to save on the transportation costs or some other oversteer -- and on the lower side, the EBITDA margin has gone quite low, but over the last couple of quarters, we have been able to improve EBITDA margins with Q1 FY '27 at around 8 percentage. We are further targeting to improve EBITDA over the next 2 to 3 quarters?

Okay. Okay. And second, coming on this AC panel, how much sales volume we achieved in this quarter?

So AAC panels had a sales contribution of approximately 5 percentage in the tort avenues of the company for Q1 FY '27.

Okay. Okay. So it is still a very initial page of product life cycle there?

Yes. So as of today, the total capital that we have about 1.3 million cubic meters. Out of that, around 1.05 million cubic meters as for AAC block. And 1 150,000 cubic meters is a fungible capity between AC blocks and panels. But in spite of that, this is a category creation that we are doing. And it's a great product, which is being accepted by a lot of large corporates. So we have done a project for IDC. We are executing the bulletin station for LNG. And we are in talks of a few other large corporates for data centers like STT and also, we are in talks for metro setons.

Okay. And sir, in terms of margin, how much incremental margin we get in AAC panel compared to 83 blocks?

So panels will have almost 30%, 35% EBITDA margin possibility as the mutualization levels keep on improving.

Okay. Okay. Okay. And Okay. Sir, 1 last question. Sir, as we speak earlier, that current capacity utilization is around 69% for the quarter, and we'll be starting with the MP facility creation post-monsoon. But sir, my small request is that we should first monetize on what capacity already has been built on rather than expanding further capacity. So if this capacity utilization for coming next 2 quarters keep on the same, maybe 70%, 75%, then we should go ahead with the capacity expansion at MP rather than looking at the quarter 1 number only should look at some more further improvement in the utilized

So honestly, I think we bought the Mt land about 15, 16 months back to out up a new plant there. And the reason we put on hold the capacity expansion was the capital utilization were on lower level. Secondly, now that we've reached almost 69%, 70%, I said we'll be taking up that expansion over the next couple of quarters. And hopefully, by then, we'll reach 75% plus utilization levels. Early coming down to the point in this industry, the maximum utilization level possible of almost 50% to 85% since our raw materials are flyers, which is base on the thermal power plants. There are some other issues or challenges while operating a plan. So the optimum capital rate, which we have achieved in any particular quarter is around 80 to 83 percentage. And fourthly, NPE is a separate market altogether, which we are looking to target. And we already have a little bit of presence there and we have tested the market by selling materials in that market from our existing unit near inter

Okay, okay. Okay. That's great, sir. Because what is happening now currently, it looks like we are funding the losses from bank borrowings because our bank borrowing is continuously increasing, whereas our -- and no doubt losses are getting narrowed quarter-on-quarter, but some of the other way, it looks like you're funding losses through Bangor. Nevertheless, thank you so much, sir. I appreciate your responses.

Our next question comes from the line of Tushar Skandi and Individual Investor.

Sir, my first question is on the revenue bifurcation side. I want to understand, sir, which customer segments amounts residential, commercial and ultra have contributed most to our volume growth -- and what is your future expectation on this brand?

So we have a mixture of various customers and our customer profile. We are in almost 50% to 60% of our material through a dealer network. -- almost 20%, 25% material is being sold to a builder and 15%, 20% is sold to large corporates like -- so Adani and ENT, Tuna, Fantech, PST projects, et cetera. So this is how the customer profile looks like in terms of sales volume. In terms of contribution, so the industrial segment or the infrastructure segment, something which we do not easily bucket because when you are bidding to L&T, we are not very sure whether it's for the L&T infrastructure segment or the building industrial segment. So to the infrastructure and the Industrial segment, the sales are almost 20% to 40%, whereas to a residential or a commercial segment, the sales are almost 0, 7.

Okay, sir. And the bacon you had provided through the sales channel wise. So is it going to remain same? Or is there something -- some change do we expect in near term?

So I think we'll continue with the same bifurcation of sales channels over the coming quarters because if we have built up over the last 2 to 3 years, -- and we have been able to scale up our volumes in this profile and channels. But we are keeping on exploring to add more and more corporates to our corporate profile. -- customer profile? And just that might have a little increase going ahead.

Okay. Understood, sir. And my last question is on the finance cost side, sir, the finance costs increased sequentially during the quarter. So is this -- since we have completed a major portion of our CapEx, so is this likely to remain at current levels? Or do you expect debt reduction and better cash generation going forward, sir?

Sequentially, the finance cost has not increased, it has gone down, I think. So maybe there's an arranger. And as I mentioned, we have done a lot of CapEx and are in the process of continues to be reducing our banners as well. So I think the finance cost should keep on going down over the next few quarters.