Duroply Industries Limited (516003) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'm pleased to welcome you on behalf of Duroply Industries Limited and SKP Securities to Duroply Industries' Q3 FY '25 Result Webinar. We have with us Mr. Akhilesh Chitlangia, MD and CEO. This webinar is being recorded for compliance reasons. And during the course of the conversation, there may be certain forward-looking statements. These must be viewed in conjunction with the risk that the company faces. We will have the opening remarks from Mr. Chitlangia followed by a Q&A session. Thank you, and over to you, Akhilesh.

Thank you, Navin. Good morning to everyone, and thank you for attending our earnings webinar for third quarter and 9 months ended FY '25. Duroply was founded in 1957. And over the years, we have built a strong brand in the industry. We're recognized across the country for our high standard of quality products, which we have maintained over the years. This is our 68th year of operation, and we feel proud to have played a small, but meaningful part in India's growth story for over the last 6 decades. On the business front, the third quarter is always a tough quarter due to festive seasons across India. And this year, we also saw some economic headwinds. Despite these challenges, during Q3 FY '25, Duroply reported a revenue of INR 89.82 crores, which is an increase of 12.5% from the same period last year, though we are down 1.1% from Q2 FY '25. The business reported a profit before tax of INR 1.2 crores, a 127% increase on a year-on-year basis and a 5% increase on a quarter-on-quarter basis. For the quarter, revenue from our in-house manufacturing plant in Rajkot stood at INR 54.4 crores, up by 16% year-on-year; however, down by 3% quarter-on-quarter basis. Revenue from our contract manufacturing stood at INR 35.5 crores, a growth of 7.5% for the year and up by 2.5% quarter-on-quarter. Our gross margin saw a drop from the second quarter. We ended at 34.2% for Q3 FY '25 as compared to 35.6% in Q2 FY '25. Gross margin in Q3 last year stood at 33.9%. This was largely due to increased timber costs and some product mix shift that we saw in our product portfolio. Despite the lower gross profit margins, we saw an improvement in our EBITDA margins for Q3 FY '25. EBITDA stood at INR 4.37 crores, up by 32% year-on-year and 6.3% quarter-on-quarter basis. EBITDA as a percentage stood at 4.9% of sales as compared to 4.1% in the same period last financial year, up from 4.5% in Q2 FY '25. The company employee expense stood at 11.3% for the quarter as we continue to hire aggressively to build our sales and operations team. Our marketing spend for the quarter stood at a moderated 3.7%. For the 9-month revenue, we closed the 9-month period at INR 265.5 crores, up by 11.1% from the same period last year. Profit before tax stood at INR 3.61 crores for the period ended, up by 10.4% on a year-on-year basis. Revenue from in-house manufacturing stood at INR 160.3 crores, a growth of 11.5% and revenue from our contract manufacturing stood at INR 105.2 crores, growth of 10.4%. Our gross margin saw an improvement for the year, ending at 34.7% as compared to 33.9% in the 9 months FY '24. EBITDA stood at INR 12.5 crores, up by 9.4%. However, EBITDA margin as a percentage of sales is at 4.7% of sales, down from 4.8% for the same period last year. The Duro segment for Q3 FY '25 saw a growth of only 5% on a year-on-year basis, but a decline of 7% on a quarter-on-quarter basis. Our economical offering segment under the brand name Tower showed a robust growth of 50% on a year-on-year basis for this quarter and a 30% growth on a quarter-on-quarter basis. For the 9-month period, the Duro brand segment grew by 9% and Tower by 22%. The reduced growth of Duro segment in third quarter in addition to the higher timber costs had an impact on the margins at the gross level. The slowdown in the premium segment is largely consistent with the challenges that we normally face in the third quarter, which is driven by work disruptions related to festivities and also the construction ban across NCR area due to the high pollution levels post Diwali. This quarter, we also witnessed some macroeconomic headwinds. But despite that, we posted a robust growth of 12.5% for the quarter and maintained our profitability. We are rapidly increasing our sales team and investing in our infrastructure across the countries, and we expect stronger growth numbers in the coming future. With that, Navin, I think it's -- let's ask for the floor to be opened for any questions that they may have.

[Operator Instructions] We take the first question from Sagnik Sarkar.

Congrats on a great set of numbers. So I just wanted to know about the raw material cost for the Plywood segment. So any guidance that you could give on the timber costs for this segment going ahead?

Thank you, Mr. Sarkar, for your question. The timber cost, this year, we have seen a significant jump of about 8% to 10% on the raw material side in the last 8 to 9 months. We've been able to pass on some of it to our customers, but not the entire part of it. Going forward, I do not see a slowdown in the inflationary pressure of the raw material coming anytime soon. The capacity in India has increased substantially for production and the plantations have not kept in pace with the required demand for raw material in our country. So I think this -- for the next 2 more years or at least another year at the very minimum, there will be a lot of challenges on the raw material price perspective. I hope that answers your question.

[Operator Instructions]

There is a question in the question box.

Congratulations for a good set of numbers compared with top 2 players. Please, can you share each product segment data and growth projections? This is from Tarun Rathi.

So thank you for that, Mr. Rathi. As I've given the growth percentage that we're doing from these segments. But I would like to keep the revenues that we're doing from both the segments a little confidential for the simple reason that we are growing very aggressively in the Tower segment and the competition, we would not like this data to get a hand on that. So we'd like to not disclose that at this point of time.

[Operator Instructions] We have a question from Vijay Suryavanshi.

Congratulations on your behalf. But I just wanted to ask that I missed the financials that you explained earlier. I joined a bit late. Can you please provide me the financials?

Largely, Vijay, I'll just keep it quick. We had a 12.5% top line growth for the quarter as compared to same period last year. And profit before tax stood at about INR 1.2 crores, significantly up from Q3 last year and marginally improved from the second quarter this year. EBITDA margin stood at 4.9% for the quarter, which is slightly improved from -- significantly improved from 4.1% same period last year. And, yes, and it's up -- and it was at about 4.5% or 4.4% for Q2 in the same financial year. So I hope that helps you.

[Operator Instructions] We have a follow-up question from Sagnik Sarkar.

Yes, sir. Just a follow-up question on the demand side. Like do you see any pickup on the real estate side like following the rate cuts? And I mean, on a real estate demand front, how do you see demand shaping up in the next quarter or maybe next financial year?

Sagnik, I'll give my understanding of this. See, if you see the last 3, 4 years, the sizes of cities in India have substantially increased. So there's a lot of construction activity that is going on. The muted demand has been because of challenges, not so much on the demand side, but I think there's been a restriction on the liquidity in the market, which has muted the demand. I think with the measures that the government is putting in place, as soon as the liquidity improves, the demand should pick up. But our industry, especially the plywood and the wood panel industry, is a laggard industry in the sense that any initiative that happens, it percolates down to our industry much later. So I think another -- at least another 5 to 6 months, and I think the demand should start moving in the right direction again. That would be my estimation, I think, for the next couple of quarters, it's is going to be a little challenging, but that's my take on this.

[Operator Instructions] Since there are no further questions, I'd like to hand over the webinar back to Akhilesh for his closing remarks.

Thank you, everyone. Thank you, ladies and gentlemen, for joining us for the Q3 FY '25 earnings call. There's a long way to go for us, and we've just started on this journey, and I look forward to seeing you again at the next earnings call. Thank you.

Thank you very much, Mr. Chitlangia, for your time to interact with the investors. Thank you, ladies and gentlemen, and we look forward to hosting you again for the next quarterly results. Thank you, and have a wonderful day.