Ddev Plastiks Industries Limited (543547) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Ddev Plastiks Industries Limited Q1 FY '26 Earnings Conference Call hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference to Ms. Saloni [indiscernible] from Go India Advisors. Thank you, and over to you, ma'am.

On behalf of Ddev Plastiks Limited, I would like to welcome you to our earnings call to discuss the operational and financial performance for the first quarter of FY '26. This session is hosted by Go India Advisors. Joining us from the management team of Ddev Plastiks is Mr. Narrindra Surana, Chairman and MD; Mr. Rajesh Kothari, Whole-Time Director; Mr. Arihant Bothra, CFO; and Tani Panday, Company Secretary. Please note that today's discussion may include forward-looking statements, which are subject to various risks and uncertainties. I encourage participants to consider these factors when interpreting company developments. With that, I now invite Mr. Rajesh Kothari to provide an overview of the quarter and business outlook and performance. Over to you, Kothari.

Yes. Good morning. And welcome to the Ddev Plastiks Quarter 1 FY '26 Earnings Call. We appreciate your time and continued interest in our journey. Yesterday, our Board of Directors approved the financial results for the first quarter of FY '26. And today, we are pleased to share with you our performance highlights, key developments and outlook for the future. During this call, we will walk you through our financial and operational performance, provide insight into our strategic direction and articulate our growth road map. We'll also shed light on the key initiatives undertaken during the quarter and reaffirm our long-term vision for the sustainable and inclusive growth in FY '26 and beyond. Before we begin, I would like to remind you that certain statements made on this call may be forward-looking in nature and are subject to risks and uncertainties. FY '25 was an exciting year for us, marked by significant milestones and robust growth in line with our management vision and guidance. We remain confident that FY '26 will follow a similar trajectory, driven by our unwavering commitment to excellence. Thank you, Saloni. Here is a well-structured professional speech-ready version of our entire draft policy for clarity, flow and tone. I have preserved all the key messages while ensuring it reached smoothly as part of our formal address. The quarter gone by has undeniably been one of the most eventful and turbulent period in recent history. Escalating global tensions, both geopolitical and economic, have resulted in a mix of conventional military actions and nonkinetic confrontations such as cyber and trade wars. These developments have fueled significant market volatility across geographies and sectors. The resulting ambiguity has weighed heavily on corporate confidence and international business. Despite such a challenging backdrop, India has demonstrated remarkable resilience. Amid the prevailing geopolitical uncertainties, the Indian economy has emerged as a relative bright spot, underpinned by macroeconomic stability and encouraging trends across key indicators. The previous quarter witnessed an uptick in GST collections, rural base growth and government-linked capital expenditure at both central and state levels. Inflationary pressures, including on the commodity front, remained soft. Looking ahead, we see multiple macro tailwinds supporting the growth recovery. These include a sharp cut in interest rates, middle-class income tax relief, forecast on an above-average monsoon, healthy showing patterns, easing commodity prices and surplus banking system liquidity. One the most notable feature of first half of calendar year '25 have been the swift and decisive policy response by the government and the Reserve Bank of India in addressing emerging economic concerns. The RBI adopted a highly accommodative stance, surprising the corporates with a 100 basis point repo rate cut year-to-date, alongside a cumulative 150 basis point reduction in case reserve ratio. This was further supported by liquidity infusion by multiple rounds of open market operations and ForEx. Regulatory relief measures such as the rollback of restriction on certain lenders further reinforced financial stability. On the fiscal side, the government's FY '26 union budget stood out for its growth orientation, including the INR 1 trillion income tax relief for individuals aimed at boosting consumption and sentiments. In a significant boost to fiscal headroom, the government also received a record INR 2.7 trillion dividend from RBI, which is expected to support growth supportive expenditure through the remainder of the year. After an extended phase of muted capital spending in first 9 months of FY '25, the government has decisively ramped up its investments. March '25 alone showed a record outlay of INR 2.4 trillion and the 5 month period from January to May 2025 recorded a strong 41% year-on-year growth in capital expenditure. The cable and wire segment remains central to India's industrial expansion. Now I'll explain you what are the demand drivers in the domestic markets and export markets. The major demand drivers are power generation in renewable through solar and wind energy. And also, we are seeing a substantial new investment coming in coal-based thermal power projects and related infrastructure in transmission and power distribution by transmission and distribution companies of central government and state governments. Simultaneously, we are witnessing a resurgence in coal-based thermal power investments, which along with large-scale initiative in transmission and distribution infrastructure by central state utilities is further accelerating sector demand. We assure that we will continue to grow with the projected percentage what we have stated, and we will try to improve upon it during the current financial year and subsequently. This will be our endeavor to keep the growth momentum in the company on a continuous basis. The Indian wire and cable market is projected to grow at the rate of CAGR of 12%, in line with this growth. Leading manufacturers are expected to undertake capital expenditure of approximately INR 13,200 crores. This year of investment presents a significant growth opportunity for polymer compound suppliers like us who form a critical -- form a very critical link in value chain. Over the past 5 years, FY ’20 to FY '25, our company has delivered consistent and profitable performance. Our EBITDA has grown at a CAGR of 28% with margins expanding from 5% to 11%. Similarly, our profit after tax has increased at a CAGR of 46%, rising from INR 27 crores in FY '20 to INR 185 crores in FY '26. We remain confident in our ability to sustain this growth trajectory. In fact, it is our continued endeavor to outperform our stated target and strengthen our market position in current financial year and beyond. Due to critical quality requirements and stringent approval process mandated by end users, polymer compound manufacturing is not amenable to outsourcing. This calls for robust quality control mechanism, advanced in-house R&D infrastructure and continuous capital investments, making it a high entry barrier industry. With evolving regulatory standards and heightened emphasis on safety and product quality, compliance costs in the wire and cable sector are expected to rise. In this context, legacy players like Ddev Plastiks are well positioned to benefit as large, more organized players. Now the big players such as Adani and Ultratech enter the wires and cable space, Ddev Plastiks naturally emerges as the preferred compound supplier, owing to its proven track record and deep industry expertise. As India's largest listed polymer compound manufacturer, Ddev Plastiks has effectively leveraged the evolving industry dynamics. We are planning to increase our focus on cable segment by adding more capacities in PVC, Halogen Free Flame Retardant and XLPE compounds. Our efforts are commomerated towards adding capacities to meet the global rising demand for cables and allied sector. The company has demonstrated consistent cash flow generation, sustained margins expansion and holds industry-leading market share, approximately 50% in Sioplas and around 33% in XLPE, underpinned by a strong balance sheet. In FY '26, we aim to build on this momentum by expanding our compounding capacities in XLPE, PVC and Halogen Free Frame retardants to meet the rising demand for high-voltage cables. Currently, our XLPE offering cater up to 72 kV with the planned capacity expansion, we will be entering the 220 kV segments also. Apart from the capacity, we would endeavor on getting certification for 132 kV for making it ready for commercial use by end of FY '26, early FY '27. Whilst SFR is expected to get more industry impetus, this upgrade aligns with market trends and positions us to serve the growing requirement for medium and high-voltage cable applications. During the quarter, our export orientation encountered challenges due to geopolitical conflicts. However, we successfully mitigated these impacts by promptly redirecting product to the domestic market, where strong demand enabled swift absorption. Despite the prevailing conflicts, our export revenue grew at a rate of 3% year-on-year basis to INR 154 crores. We remain firmly committed to our long-term objective, targeting volume growth of approximately 10% to 15% and revenue growth of 12% to 13%. On a conservative basis, we aim to achieve a revenue of about INR 4,500 crores to INR 5,000 crores by FY '30. We also expect to maintain a robust EBITDA margin in the range of 10% to 12%. Our strategic focus will remain on enhancing our operational efficiencies, expanding our product portfolio and delivering sustainable value to all our stakeholders. I now invite our CFO, Mr. Arihant Bothra, to take things forward.

Thank you. Thank you,. We at Ddev Plastiks are pleased to announce a robust start to financial year '26. For the first quarter, revenue from operations reached approximately INR 769 crores, representing a 23% year-on-year growth. This performance was primarily driven by sustained strong demand in the wire and cable industry, coupled with a 50 basis point increase in our average selling price. EBITDA stood at INR 79 crores with a margin of 10%, while PAT was approximately INR 52 crores, delivering a margin of 7% for the quarter. During the quarter, we continued our capital expenditure programs, adding capacity for compounds of 5,000 metric tons in the Eastern part of the country, while bringing our installed capacity to 38,400 metric ton per annum Production volumes saw a healthy growth of 11% year-on-year basis, reaching close to 52,000 tonnes. Capacity utilization improved both sequentially and year-on-year basis, standing at 87%. Our CapEx plans remain on track with an expected investment of INR 110-odd crores in this financial year. Now we request -- rather we open the floor for question and answers.

[Operator Instructions] The first question is from Archana Gude from IDBI capital.

Hi, good morning and heartliest congratulations to the team for strong set of numbers. Si I have few questions. First, can [indiscernible].

So this 23% growth has been contributed by 2 things. One, as we have already informed with regards to volume, volume has grown by almost 13-odd percent as compared to the Y-o-Y quarter 1 FY '25. the average selling price, the first quarter average selling price was around INR 136 this quarter, we have achieved average selling price of INR 148 though as compared to the previous quarter, it is a marginal increase of 50 basis points. But when we compare with the year-on-year quarter basis, it is close to 9%. So that is what contributing close to 23% of the growth...

Okay. So you said this INR 13 per kg for Q1 FY '25 and INR 148 for this quarter, right?

Yes.

So that is roughly 9% growth?

Yes.

And the remaining 13% growth in the second on what kind of revenue should we expect once we receive this 132Kv FY ’27?

So here, the important factor, 132 kV, the revenue generation we can expect somewhere in FY '27. And as we go higher in the voltage rating, the time which is taken for ramping up the volumes is quite long because you have to get the first the cables made, then cables need to get approved. And then the customers will start lifting the product in a small quantum because it is a measure of trust building. Despite having the certification, the volume growth takes time. So significant volume growth from 132 kV segment alone can be seen beyond 2027, not before that. But the real advantage of being able to deliver 132 kV successfully to the customer and get the approval would be seen in our volume growth for the voltage rating up to 72 kV because when people accept you as a good supplier and reliable supplier, capable supplier for 132 kV, then all the doubts for any voltage rating below that are eliminated and there you are able to grow your business in a bigger way.

Correct. Sir, can you help me with the market size for this segment and what kind of margins are there?

132 kV market, I will put the market within the of 132 kV to 440 kV, the market size is just 10% to 12% of the total market size for XLPE insulation for this category. And realizations are generally 10% to 12% higher compared to 72 kV product. If we talk about 132 kV pricing, it is bound to be higher by 8% to 12% compared to a product which is offered for 66 kV.

Sir, any update on this capacity addition what we planned last year, FY '26? And when should we expect it to start contributing to the [indiscernible].

So this is already in fragment which is already happening. As we explained, 5,000 tonnes is already added in the Eastern Coast. And now PVC and HFFR already in process, probably by third quarter, PVC and HFFR will be completely installed and those capacities also will be running. 5,000 tonnes of PVC is already installed in the Eastern part of the country in this quarter, and that will be running by next week with their commercial operations. So as far as this PVC, HFFR and FP initial plant capacities are all in line. We are also planning to increase further FP capacity, which will be in the second half of the year, probably in the fourth quarter. So that operational capacity will be practically from the next financial year.

There has been [indiscernible] healthy on Y-o-Y this quarter. So should we anticipate a similar kind of number for rest of the year in terms of utilization 87%, 88% for full year?

So if you see the average growth, which we have already projected or estimated whatever you say, we are targeting a growth of 12% to 13% on a minimum side as compared to the previous 3, 4 years. So if you compare the same, definitely, we are in line. The quarter-wise volumes may be up and down depending on the environment because second quarter is generally the monsoon season impacts and marginally, the volumes become the lowest as compared to any other quarters. So we should not see it is on a quarter-on-quarter basis broadly. But when we see the growth, definitely, we are on a better trajectory. The demand is very strong. And we see that this 12% to 13% minimum growth is there.

On the volume front?

Yes, on the volume.

Maybe lastly I'll just see one more question on the margins. here we are shy of 10%, excluding the other income, which is good. But is that this volatile raw material prices is really keeping us away from touching that 11% plus kind of mark? Or is there something I'm really missing out on reading the numbers.

So we see the numbers on the basis of EBITDA per tonne and that too on the gross basis, including the other income because most of the other incomes are part of our business. They are not separate. So if you see that the last year's average was close to INR 15,100 and this first quarter has been at close to INR 15,300. So on EBITDA per tonne basis, definitely, we are improving. Even if you compare with the Q1 of last year, we were at INR 14 and now we are at INR 15.3. So definitely, the improvement is there. The base effect of increasing the base prices from average of INR 137 last year to almost INR 148 in this first quarter had led to the percentage drop. But if you see the absolute numbers, it is improving on a quarter-on-quarter basis.

Right, sir. Maybe my question was more should really look to get back to that 11% mark for full year? How confident we are that in H2 FY '26 when we have this increasing capacity and higher share of value-added products. And for the full year, we should expect those kind of numbers at operating level?

Yes. So again, I'll just add a clarification. We always look at EBITDA margins as per ton basis. And our focus is to improve the margin on per tonne basis basically. So if realization per tonne goes up, then percentage-wise, it might appear that there is no improvement. That is why my request would be that please look at our forecast and projection with regard to our commitment to our confidence to see the improvement of EBITDA on per tonne basis. And that we have delivered better EBITDA per tonne basis compared to last year's first quarter, and we continue -- we hold this view for this entire year as well. I hope similar kind of numbers for the upcoming quarters.

The next question is from the line of Bhargav from [indiscernible] Asset Management.

Good morning team and congratulations on good performance. A fairly detailed presentation. Sir, my first question is on this certification of 132 kV. -- earlier what I understand is that we were looking to go live by FY '28. But is there a positive development here now that we are saying that by FY '27?

Yes. So Bhargav, the point is that product is ready with us, but the next step is driven by the fact that it has to be tried by a cable customer. And we are having a tie-up arrangement with a couple of customers, but unfortunate part is that the trial has not taken place yet. So when we are saying that we will be able to go live in FY '27, it is based on the assurance we are getting from our customers that most likely they will be able to take up our product for trial in the last quarter of, say, third or last quarter of FY '26. It means another 6 months, they will be able to conduct the test and come back with the report approving the product. Then in 2027, FY '27, you may have some volume to start with. So this is based on the latest interaction we have with the customer. But here, always you can see a possibility of improvement by a couple of quarters in the time line and a delay of a couple of quarters in the time line, depending upon the -- how this tie-up delivers.

Secondly, sir, with the PVC, which currently has about 4% to 5% EBITDA margins, are we looking at some value-added products which can sort of lift our margins maybe to 7% to 8%.

Yes. See, as we see that people like UltraTech and Adani are planning to enter the wire and cable segment and our inputs from the market and interaction with those investors indicate that the entry will start from the building wires. -- initially. And that is where the PVC's role is very important. And our margins because PVC, what we are selling is a basket of multiple products. The product which goes for building wires, the product which goes for the general purpose jacketing application also. So building wire per se delivers better margin. So we are getting ready for that opportunity, which will be offered to us the moment UltraTech and Adani start their building wire activity because we are very strong, and we have a very strong brand equity as far as this product is concerned because every big wire and cable player, you name anybody starting from Finolex to RR Cable to V-Guard, everybody has started their journey for building wire with our PVC compound to create a brand for themselves. So we see no difference in case of UltraTech and Adani. That is why we are adding capacity. And those products are definitely delivering margin of 7% to 8%. So PVC blended margin might improve as our share for the building wire goes up once these 2 giants are there in the market.

Sir, in terms of XLPE, is it fair to say that post this FA with UAE, the competition would have intensified because the import duty on imports done by the UAE-based compounders, they have now become 0. So how are we tackling that competition given that we are also increasing the XLPE capacity?

Yes. So here, the duties have not gone to 0 yet because they are going down with a fraction of percentage every year basis. That is one part. And secondly, the people who are supplying from Burj UAE, they are big giants and then their pricing is not driven by this duty advantage. Most of the time, they will try to pocket this duty advantage for themselves rather than passing it on to the customer. So they keep on improving their prices wherever there is a duty advantage. So we have not seen that significant impact. The impact or intensity of the competition is mostly driven by the capacity addition by them. So whenever in say, 3, 4 years, whenever they come up with the additional capacity, then we face a challenge for, say, a couple of quarters or maybe 3, 4 quarters till the capacity gets absorbed in the market. So we do not see any challenge at this point of time.

And lastly, sir, in your PPT, you mentioned America as your focus area. So given the recent development on tariffs increasing to 50%, do we still continue to remain this as a focus area? If you can share your thoughts on that, and that would be my last.

Yes. So definitely, U.S.A. market is a big market, and it will remain our focus because today, the challenge is that the cables which are being exported from India to U.S. market, yes, those will face a challenge and that also for a limited period of time because people will find ways to retain that market because they have created this for themselves with a lot of effort. So people are working as we are talking to all our cable customers. But for us, the opportunity is in a different manner. Not only we are supplying to the people who are exporting cables to U.S.A. from India, but we are having U.S. certification. Today, we are having U.S. certification for 1 product and 2 products certification is there in the pipeline. Maybe another 5, 6 months, that certificate also will come. So that will result into an opportunity globally for us. So we can supply to our product to a customer who is based in, say, for example, UAE. UAE has got a lower rate of duty while exporting to the cables to U.S. market. So anybody who is exporting cables to U.S. market will become our customer. Only 2 challenges will be there with us. A, our direct export to U.S. will not grow until this issue is resolved. Second is that our proxy export via our customers in India, yes, that may see a bit of it for some time. But at the same time, the opportunity will emerge from the other markets because those customers will come and buy from us.

The next question is from the line of Jyoti from LIC Mutual Fund.

Congratulations on a good set of numbers. So I actually wanted to know first thing is on a total basis, if you can just guide me what sort of capacity addition do we see for the next 3 years first? And then what sort of ramp-up in your total volume can we expect for the next 3 years?

Can you repeat the question, please?

Is on the capacity addition -- and then how do you see the ramp-up of those volume for the next 3 years?

Sure. So I will address the first one. So as far as the capacity addition is concerned, we are adding when we talk about 3 years horizon close to 15,000-plus tonnes of HFFR. We have already added 25,000 tonnes of PVC as a plan for this financial year. And if required, we may add another 5,000 to 10,000 tonnes. On the XLPE front, on the cable, specifically the transmission and distribution part, we are planning to add close to 60,000 tonnes of capacity in this next 1.5 years' time. And that may also increase to another 24,000 tonnes by next 3 years of time. So on a consolidated basis, we are talking about close to 1 30,000-plus tonnes of capacity being added. When you talk about the ramp-up, there are 2 different aspects to it. PVC is, as sir explained, due to the increasing demand expected, it will ramp up with the demand coming in. So it will be a gradual increase. While XLPE, we already have a demand in place in India and in the global market. So that will see a faster ramp-up as compared to PVC and HFFR. So on a consolidated level, we see that average utilization would remain above 75% to 80% on a consolidated level.

Got it. Secondly, on the margin front, so when we talk about the different kVs first, if you can guide like any idea on what sort of basically 6 kV will have what sort of contribution towards the revenue? And so how do you determine the margin based on this kV? So can we expect it to expand beyond 11 also after a given point of time, for example, when your 32 kV comes in. So can we expect that the margin in the range of 9 to 11 can go beyond 13, 14 or 15 at any given point?

Yes. Yes, please.

We are already doing our business up to 66 kV. So the new product line addition we are talking about is for 12 -- and definitely, margins improve as we go higher for the voltage rating. So 1.1 kV product will have the lowest possible margin. And then as you grow from 1.1 to 1 and 33 and then 66 kV, then your margins will continue to improve. And then over a period of time, product gets breed rather than individual voltage rating, but in a bigger range. So for example, today, there are 3 categories, I would say. One is low voltage, that is products which are up to 1.1 kV, then the products which are called medium voltage, they are product up to 36 kV and the high voltage, which are product for 66 and 72 kV. So every segment will have a couple of percentage better margin as we go up higher. Now the margins which we are earning today is a blend of margins we get from the lowest end of the product and the highest end of the product. And as the volumes will grow, so means our projection is not assuming that volume will grow only on a high-end segment. In fact, volumes are higher at the lower end of pyramid. So volume growth will come from all the segments. So even if we are selling more quantities of high value-added product at a higher end, at the same time, we'll be selling more product at the lower end of the pyramid also. So blended margins, you will not see much of a difference than where they are today. But at the same time, the introduction of high-end product more and more in our product range and achieving higher volume there would basically protect us from loss of our EBITDA margin because of the growth at the lower end of the pyramid in the volumes.

CapEx is there for this 132 KV?

No. We already have our equipment ready, which can 132 kV. So we are -- whatever the CapEx which we are planning, they are not specific to any voltage rating because equipment and the machines are such that they can produce anything starting from, say, 33 kV up to 132 kV in the same setup.

Okay. The guidance for the quarter 2, how do you see the -- can we see some sort of even better margins what we did in Q1 because Q1 was already good. So can we see improvement in Q2 or it will be at par?

So with the current situation, we see that it may remain at par because monsoon season, generally quarter 2 remains sluggish for us. So as of now, we are seeing it at par.

The next question is from the line of Arnab Sakuda from AMBIT.

So with regards to the crude prices, so the crude price movement had been a bit volatile this quarter, especially towards the end of Q1. So I just wanted to ask, has this impacted our performance in any way or not really?

Yes. So if you see the crude prices in India, it long ago got delinked as far as the crude prices and the demand and supply situation is concerned. So the polymer prices are mainly driven by demand supply. And if you see the last 10 years, there have been a lot of capacity addition by all the petrochemical players in terms of polymers. So in India, it is more driven by demand and supply. However, there are different processes of each different player and different raw material inputs. So when the global prices move as far as the polymer prices are concerned, marginally the prices move here as well. So when we talk about the base prices of selling price moving up by 50 basis points, we mean that there has been increase of raw material prices by that account, and that has been passed on. That is why the average EBITDA comes low, but the per tonne EBITDA seems to be better. So I just wanted to mix 2 things to make you understand how things look at our end as well.

Sure. And my next question is -- so I think someone had asked with regards -- the question with regards to the CapEx over the next 3 years, and you had mentioned that it will be 130,000 tonnes. So if you could just repeat the broad breakup of this, that would be useful.

Yes, yes. So HFFR, we have committed another 15,000 tonnes. PVC , we have already committed 25,000 tonnes, and there may be additional 5,000 to 10,000 tonnes as well. XLPE, we have committed for close to 60,000 tonnes and another 24,000 tonnes can also be possible.

The next question is from the line of Guru Darshan from [indiscernible] Capital.

Good set of numbers. Sir, our volume growth is around 12% to 13%, but overall EBITDA growth is around 22%, most likely due to lower base, which is around INR 14,000 per tonne in Q1 FY '25. Going forward, do you see the same kind of EBITDA growth or it will be in line with the volume growth, which is around 13%, 14%?

We see it in line with the volume growth because EBITDA, as we have continuously mentioned that we are targeting it to maintain our INR 15 and it will be in the range of -- a broad range of INR 15 to INR 16 to be very precise, I can say. So it will be more driven by the volume growth from here?

Understood. Understood. But when you say the realization growth by 50 basis points to 0.5%, are you saying that we are charging more for the same product or…

As we have explained earlier also, when the raw material prices goes up, we have to pass on the similar prices to our customers. We -- that is why if you see on a continuous basis, our EBITDA margins irrespective of the movement of raw material are on a continuous basis on stable levels. So from that perspective, when we talk about selling price going up, that means the raw material prices went up and that has been passed on to the customers.

Yes. So essentially, since you follow a cost-plus model, the EBITDA per tonne will remain around INR 15 to INR 15.5, right?

Yes.