Carysil Limited (524091) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Carysil Limited Q1 FY '27 Earnings Conference Call hosted by Go India Advisors. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Chirag Parekh. Thank you. And over to you, sir.

Good evening, ladies and gentlemen. I would like to extend my wishes to all of you and your families on the occasion of India's 79th Independence Day. I hope you have the opportunity to review our Quarter 1 FY '27 financial results and investor presentation, which was shared earlier and are also available on the company's website and stock exchanges. Our journey at Carysil is closely aligned with the spirit of Make in India today of building world-class manufacturing capabilities in India, creating products to global standards, and bringing India manufacturing excellence to customers across the world. Joining me this call is Anand Sharma, Executive Director and Group CFO along with our GI Investor Relation Advisor. Before I start with the details of my SWEEP, I would like to offer some key messages. The first one is we are pleased with our Quality of Order 1 performance. Most importantly, we believe that the underlying trends gives us a lot of confidence in the full year trajectory. We also would like to mention that we are maintaining our existing FY '27 margin guidance. However, based on quarter one performance and trends we are seeing, we are we currently see ourselves tracking towards the upper end of that guidance. The improvement in the profitability is not given by a single factor or a one off benefit. We are seeing benefits from operating leverage, product mix efficiency and scale and we expect this factor to continue to support our margins. We think we have reached our scale where our focus is now no longer simply on growing our existing businesses. Our Focus is now how we going to build the next INR 1000 crore of Carysil. India is becoming an increasingly important growth engine for Carysil. We are expanding our distribution, increasing our presence across categories and improving cross selling across things pockets and appliance. As far as export international, we have major breakthrough with large international customer chains. We have been able to build strong customer relationship market position. We significantly we see a significant opportunity to grow exports by maintaining healthy markets. We are also continuing to invest in R&D product development technology and the brand Investments are designed to create the next phase of growth rather than simply optimize the current business. Our objective is not to maximize one quarter earnings. Our objective is to build Carysil into a global kitchen solution company with sustainable double digit growth and industry leading margins. We remain confident that a combination of growth and operating leverage new categories gives us a strong runway now for the next several years. Quartz Sink business, the Quartz Sink business continues to bring a strong momentum in FY '26 supported by resilient export demand and improving domestic traction. Our capacity stood at 80% during the first quarter. Demand visibility remains healthy. Company continues to invest in new models, machinery, automation and product innovation. The expansion of 260,000 units are on track and we expect the change to be completed by end of FY '27. We have also like to announce that we have extended our partnership with Home Depot, U.S. And Canada. We have also entered into a collaborative agreement with [ airplay ] Australia and New Zealand for one of the biggest chain retail in Australia. We also would like to share that we just cracked our first orders into Amazon, USA. Industrial things continues to emerge as a very important growth engine with volumes growing at 16.3% worldwide strong OEM demand exports and increasing operating in domestic market. The company commenced the additional 70,000 units annual capacity taking now the capacity to 250,000 units approximate capacity of 94%. The company acquired an existing land and we have already started the expansion for our new B2C B2B OEM customers like Cola, Huxley, Gloe et cetera. With increasing the acceptance of premium assets in global market resulting capacity increase. The company expects steel to be one of the great growth drivers coming forward. Profits continue to remain a strong traction where volume growing at 43.4% making one of the Carysil's fastest growing categories. The company expanding its portfolio into stainless steel and the brass. Profit will various 3D finishes. Initial traction in Europe and launch of our RO enabled drinking water projects and in the company long term long term potential. Every Indian should bring water from Carysil faucet which is our dream India story green migration driving with India is increasingly becoming a 3 growth engine with domestic sales at around INR 56 crores up to almost 40% Y-o-Y driven by 25% volume growth and 12% average price realization growth reflecting premiumization and favorable crowd mix. All the broad four categories quartz sink, steel sink, appliance and faucets in India have grown 31%, 60%, 28%, 45% respectively. We continue to see this momentum moving forward. Our focus always remains on premium products, high design, technology and consumer engagement, strengthening our ecosystem with expansion of our dealers, brand stores, experience centers, our B2B channels and on online. We are increasing our reach by opening 40 to 50 galleries, 11 brand stores, 34 are committed in quarter 2. 180 stores coming in the next 2 years' time we are because of the new B2B vertical for India, we are now penetrated into large builders in the B2B segment, particularly Tier 2 and Tier 3 markets through complete kitchen combo [ sell ]. Digital emerging as one of the most important growth channels in India where our breakthrough with Amazon Alpha, Flipkart, Quartz Sink, Pocket appliances. We expect e-commerce sales to grow by 3x this year. Global Growth. Building a global premium franchise. Carysil's global business continue to gain traction with the stronger order pipeline supported by Broad based across the international markets. The company is pursuing the Europe strategy by strengthening momentum across the world with specific relationships with IKEA, Royal Roads, Housing UK, Amazon. We continue to deepen through adding new models and colors. Carysil's is also expanding its presence into new emerging markets like Qatar and in Qatar and in the Gulf countries. Our objective is to build Carysil's not as Indian exporter but as a global premium kitchen solution with a strong local presence key markets. UK Market Outlook. Turning to the UK our business continues momentum across retail, merchant contract and OEM channels. Our new initiatives a new Carysil showroom coming in Manchester showcasing sink stats and the appliances and the launch of the new premium services ready to be matching across with the built in appliances in the UK by quarter 3 FY '27 we have also added new customers like Bodel, [indiscernible] UK and Ireland for sinks and the [ DAP ] range. We are also progressing discussions along , [indiscernible] Landmark Properties. The market UK market expects to remain modest. We remain cautiously optimistic and see strong opportunities to gain market share through distribution channels. Going ahead on FY '27 guidance as we said, we continue to maintain our revenue guidance of 15% to 10% and the upper side of the 18 to 20% EBITDA margin. Our domestic momentum is supported by from the 90 Day Festive Plan from September to November and then we did an 8 city Celebrity Chef Roadshow. We remain committed to disciplined capital allocations Invest ahead of growth across capacity, technology, innovation, products and brands. To conclude, FY '27 has a strong start for Carysil. With that I will hand over to our group CFO, Director. Mr. Anand Sharma for the financial performance. Thank you.

Thank you sir. Good evening everyone. Let me take you through the company's consolidated financial performance for quarter 1 FY '27, we have achieved consolidated total income of INR 264.8 crore in Q1 FY '27 as compared to INR 227.3 crore in Q1 FY '26 grew by 16.5%. EBITDA for Q1 FY'27 stood at INR 56 crore as compared to INR 44.1 crore in last year. Corresponding quarter growth of 27% with EBITDA margin expanding by 175 basis point to 21.2% from last year 19.4%. EBIT stood at INR 46.8 crore up by 31.2% year on year basis with EBITDA margin improving by 198 basis point to 78.7%. Profit after tax and annotate interest stood at INR 31.4 crore compared to INR 22.8 crore in Q1FY '26 registering growth of 37.7% Y-o-Y basis type margin improved by 183 basis point to 11.9%. Our EPS stood at 11.05 as compared to 8.03 in Q1FY26. Growth of 37.6% on sequential basis revenue grew by 12.2%. EBITDA increased by 16.8%. EBITDA margin expanded by 89 basis points from 20.3% in Q4 FY'26 to 21.2% in Q1 FY '27. Quartz sink volume in Q1 FY '27 increased by 6% Y-o-Y basis to 2.01 lakh unit compared to 1.89 lakh unit in Q1 FY'26. Stainless steel sink volume increased by 16% to 49.4 thousand unit compared to 42.5 thousand unit in last year. Volume across retail appliances and other category increased by 12% Y-o-Y to 9.8 thousand units compared to 8.8 thousand unit in Q1 FY '26. Out of the total sale of kitchen appliances, 53% of the kitchen appliances produced in-house. Volume across faucet increased by 43% Y-o-Y 12.5 thousand units compared to 8.7 thousand units in Q1 FY '26. Again 67% of the faucet is manufactured by in-house. Export from India operations grew by 10.6% Q1 FY'26 as compared to Q1 FY'26 while domestic sales grow by 39.8%. Our domestic sales outpaced our exports. Overall Q1 FY'27 reflect healthy volume growth, strong rate price realization, improving product mix and operating leverage resulting in meaningful improvement in profitability. With this I open the floor for question and answer.

[Operator Instructions] The first question is from the line of Pritesh Chheda from Lucky Investments.

Any reason for the quartz growth being single-digit in the quarter and the international subsidiaries of yours where you have a lot of these on site fabrication work as well there? There, those 3 subsidiaries look really, you know, look different in growth and the Carysil products revenue in UK also looks slightly lower. So some comments on these areas.

Yes, there is a lot of disruption happening in the logistics side. So while we had a very strong order booking and I think we did well, we could not dispatch a lot of things because of the delayed container. So I think that's one, two is yes, UK is I think going through a bit of, bit of a tight phase. But we have, as I said in my commentary, we've been able to break through a lot of new customers. So you will be able to see this momentum coming back in the coming quarters.

Okay. Any other challenges on the material side by any chance?

No, there is no challenges as far as supply is concerned. I think everything remains smooth. A bit of delay here and there due to logistics but by and far we are equipped with stock just the nomination containers which has been nominated by our customers has been delays by 1 week or 2 week and sometimes like we could not dispatch kind of huge amount of containers end of quarter 1 which got postponed to quarter 2.

Okay, my last question is in the last, you know, 4 quarters to 6 quarters we have announced a lot of these OE relationships on sourcing. So when do we see start seeing the specification of those relationships, those volume commitments flowing through your P&L?

Yes, you are talking OEM, right?

Yes, yes. So some of the -- yes.

No so we are already in the quarter 1 average we had 80% for example, in the. Just for the month of June, I think we did almost 90% for the quarter. But in June we have done almost 90%. So we are right now heavily booked. We probably have the strongest order booking position as of, as of now we've been able to break through with adding a lot of SKUs with Lowe's, Home Depot, with Amazon. So I think we are probably sitting on the highest ever export order booking right now. So the momentum of the order has already started coming in. Now our challenge is how fast will we do expand ourselves, which we are targeting by March FY '27 year at the factory levels. We are trying to see how do we improve our productivity. You know, it may happen that we may have to produce more than our production capacity. Also looking at the current order booking position. So the flows are started coming in. The flows start coming in.

[Operator Instructions] The next question is from the line of Avijit Sheet from SBI Capital Securities.

So I have the two questions. So first question is any price hike that you have taken across categories during the quarter?

What is that? Sorry, I didn't get it. Any…

Any price hike you have taken?

For the price. We have taken like in terms of like you're talking about we increasing the price of the customers.

Yes, yes, yes. Any particular category, like in steel, you're realizing it almost in double digits up by. So is it because of any mixed change or price you have taken?

See, one thing is very clear that we have definitely got a big operating leverage. That. That's one, two is clear. Second is that the rollback of the discounts in the United States has also come back. And third is that we have launched a full line of premium products in stainless steel and in the glass. So that's a big product. There's a big product next stage. And that has led to the higher margins.

All right.

Or I would say has increased. Our ASP has increased [indiscernible].

And just to confirm in the presentation, you have given that 94% of capacity utilization you have achieved for stainless steel.

Correct.

So is it already included the 70,000 units of subscription you have added in the 1, 2. So I just want to understand.

No, no, I'll tell you this. Capacity came in the middle of the quarter. So it is on weighted average basis. Number of days available.

Okay. Okay. And just a follow-up on this. So stainless steel things volumes are above 16%. So I just want to understand any particular reason for that. Is it because of new designs or higher OEM ones or any new geographies you have targeted for stainless steel?

First of all, our demand in India has gone up because of the way we are marketing the products and the new range has gone a tremendous success. Two is we got breakthrough with large OEM customers like Kohler. And so Kohler, for example, has almost doubled their volumes with us. So there is a large OEM opportunity which is coming and I think that's why we need to speed up with the granite sink, also our stainless steel expansion.

The next question is from the line of Resha Mehta from GreenEdge Wealth.

My first question is basically on the UK market. So appreciate the challenges there. But I think in the Expo it was mentioned that, you know, some 1.5 million homes are, you know, to be kind of built in that market. So here should we also explore the projects or the builder segment in UK? Do we do that already or do we plan to do it?

Yes, good question. And I would like to answer you. I just want to kind of go back to my notes and I was saying, you see when I mentioned in my new customers like this Bodel, [indiscernible], these are the guys who deals with projects in UK. So till now we think. But these are the customers who will give us some breakthrough in these projects. So that's why I said that we see that UK improving in the coming quarters.

So until now this builder market was essentially not tapped in the UK. Would that understanding be right?

Yes.

Got it. The other one is on the faucet. So we, you know, whatever revenues we, you know, report from the faucet side of the business, would it largely be from the domestic market or. I think we'd also acquire some tap company in the UK. So it's a combination of domestic as well as UK?

Yes, ma'am, I think it's 90% more than 95%, 97% Indian market. We have still not started or we have used inquiry for export market. Like everything needs a tap. I had seen this in my last quarter also. But we need to build up our capabilities to start manufacturing world class product. For example, I don't want to take any of the risks till we are streamlining my faucet operations. So as we are speaking, the company is investing in new technology machines to bring the faucet to the quality worlds. And we are also in touch. I just came back from Europe, we are in touch with some major companies to do a technical collaboration to help us to give off, to give us an edge in terms of, I think once it is done then we will spike our exports. Till then. Right now I think mostly is India. To answer your question on the UK, we acquired this company primarily to get the technology of the RO Water system and that RO water system is launched. India has been tremendous, been successful. So the first consignments which we made or we imported completely fold, sold out. Right. We honestly have like a 60 day back backlog if you want to get a Carysil's RO water system. So yes, so we have acquired this company to get the technology to India and we want to slowly now start building on that.

That's encouraging. And so lastly, you know, on the India business, a couple of questions here.

Yes.

I think we did around 176 crore revenues in the last financial year. Can you give the split of B2B and B2C years?

B2. I can tell you it's approximately 20%. Yes.

And this also includes the builders or the project segment.

Yes, yes, yes.

Typically in India, you know, even these grade A builders have generally shied away from putting, you know, premium things in the past also. Right. So are we basically, you know, then going to sell a different, different kind of a thing especially for this segment because they are not going to, you know, pay us as much as, you know, what a retail segment pay. So any thoughts there?

So I think it's quite relative, honest to your question. There are different builders asking for different quality of the things. Right. We are, for example, we work, we got a breakthrough in DLF Delhi in M3M and they ask for very high end sinks. So some of the builders may not ask for high end sinks. So some of the builders ask for high end sinks. So we are typically into the category where we do not promote cheap things. We do not sell it. We would probably ask our competition to go and sell it. We would like to focus on people and on the builders who believe in good quality. That's one thing. Now two is as you would have seen that there's lot of bare shell apartments coming because of the real estate, because the cost of the apartment and all. And now that has now given the flexibility to the owner to build their own kitchen, choose their own sink and all. And that's why you have seen you will be will be able to probably give you in the quarter 2 that how much of the B2B project sales have increased? You know because of this there is a significant increase.

Got it. And the surfaces business in India I think we were to set up the fabrication unit. So any problem there, only Carysil Blue D2C brand for bathroom suite. What's the progress there?

We are already on track. I think the fabrication should be ready by FY '27. The March. March 27 Carysil blue is. We started with our first store and it's doing it's. And it's doing really, really well. There are some hiccups. We would just want to like to test it for example some quality. We are now we don't. We don't have enough particular colors. We don't have particular SKUs. We don't have. This is expected to be finished within the next 60 days-60 days' time. I think we'll be doing at least about by end of the calendar year or by latest March at least our first 10 brand Carysil Blue brand stores in India.

Okay. And lastly on the you know, United Granite business. So what's driving, you know this 20% plus kind of revenue growth there?

See there's one big fundamental strategy. When I was in the US few months back, what we had done, I think that one fundamental strategy was that cut less, make, make more. So we invested in high exotic stones in my marbles. And those are the. Because the cost of the manufacturing is same. And so we increase our inventory by a million pounds to get a very high-end exotic Italian stones. And I think that has turned around the corner where the margins have significantly improved. For example, I think it has gone from 35% to 50% gross margins.

The next question is from the line of Achal Mehta from Bastion Research.

So my first question is regarding your types with OEM. So as the company grows and starts selling more products under its own brand name in both domestic and international markets, possibly, possibly more competitive prices than the other white labels, could that create a conflict with your OEM partners? So do you do your current agreements permit that and are the OEM partner aligned with your direction? How do you see this dynamic playing out in the future?

First of all, our OEM partners are completely align aligned with us. Otherwise we would have not got a success. Two. Two is. Two is. You are. It's a very different category you are addressing in the, in the market. While it is your brand, the, you know, the channels are different and the models are different. So then we don't see any conflict.

Okay, my next question is in your previous thought you were spoken about in entering the services segment in India?

Sorry, can you speak a bit slow please? I'm not able to hear you properly.

Yes, Okay. Yes. So in your previous calls you have spoken about entering the services segment in India. Could you give us an update on it and how do you see this segment contributing in the overall domestic business moving forward?

Yes, I've been always very confident about it. And hence we'll be the first company in India to come with the whole CNC automated fabrication process. Because your sinks look excellent when they are installed to it. This is, this technology exists across the world like US is about $50 billion. Market UK is about 10 billion, world is about 100 billion. But in India we do not have this technology. So in a modular kitchen per se, if you want to install a good high quality stainless steel or worktop in your kitchen you still have this Kadias and all to doing your… Whether you have a 5,000 square feet marble or you have a 100 square feet marble. And I think this is going to significantly change. It's going to add so much of a value to us, just what we did in UK that everything is then code with a worktop in a modular kitchen. So this could be a big transformation for us and it could be a transformation in India that when you are trying to use the fabrication CNC process to get a very good looking countertop in your kitchen or in your bathroom, it is going to be the next 5 years a very significant amount of business to our Indian contribution, to our Indian business.

[Operator Instructions] The next question is from the line of [ Balakrishna ] from Oman Investment Advisors.

Earlier so the our quartz sinks is running at each capacity. Earlier we had a plan to add a 1 lakh quartz sink capacity but we deferred it by adding 2.25000. So what is the reason for that? Is there any thought process you want to have a bulk capacity at a time or at the time? Is there any demand? Demand issue?

No 100% issue on the demand. Because the kind of the deal for the company has signed and with the export momentum and India momentum, what we have, we cannot expand 100,000 in isolation. We have to do it together. So the infrastructure is made for half a million things while we'll be doing the 450,000 sinks capacity. You know I've been saying this and I'm saying it again. That Carysil is now becoming, as far as the cost is concerned, so very competent in the global sync space. And that's why we are seeing these huge opportunities in the market. You see our new tie ups with some large companies across the world. And that momentum is, is on a continuous basis. So it's very imperative that when your company reaches at almost 90% capacity utilization, you need to build another 20%, 25% of excess capacity utilization.

Understood. So do we have any plans to have some higher ASP product like built-in refrigerator built in or anything like that?

So we have already launched the refrigerators under the CX lease in our sales in UAE and in Oman. I think you are from Oman, maybe your company is Oman, maybe you are from Oman. I don't know. But 80% of the sales are built in appliance. Out of that 80% sales of built in appliances, more than 40% is built in refrigerators. And the same concept. We are very, very surprised to see that how can we sell refrigerators, right? And now we have seen many companies launching even the washing machines like wash and cement. So I mean things are getting transformed. So we launched our refrigerators consignment for instance got sold out now. So that, so gives us more confidence. That Carysil does have an opportunity to sell high end appliances in India. So our new range of the CX appliances are with high end ovens and refrigerators.

Okay, how do you see that market like…

… to the question queue for a follow-up question.

Yes, small follow-up on same question. A similar kind of traction demands are in India like for built-in refrigerators. How do you see the market maybe in the 3 years, 4 years?

You see I think it's. I think we are in a very early stage of this. Probably in the probably the next few quarters I'll be able to answer this more precisely.

The next question is from the line of Pragyam Laddha from Omnee Management LLP.

Sir, first question is on U.S. tariffs. Like are we seeing any reversal of discounts that we earlier gave when tariffs were implemented?

Sorry, what do you say?

Is there any reversal of discounts or any payback?

Yes, yes, we have the other. So the, so the rollback, the role -- 90% of the rollback is already done.