Duroply Industries Limited ($516003)

Thank you, Navin, and good morning, everyone, and thank you for attending our earnings webinar for the fourth quarter FY '26. Duroply was founded in 1957 and over the years has built a strong and robust brand in the industry recognized across the country for its high standard of quality, which we have maintained over the years. On the business front, Duroply closed its fourth quarter revenue at INR 111.6 crores, a 5% growth over the same period last year and up by 20% from the previous quarter. The business reported a profit before tax of INR 1.03 crores, which includes an exceptional onetime loss of INR 27.5 lakh approximately on account of the changes in the wages code. For the quarter, revenue from in-house manufactured goods stood at INR 61.9 crores, a 4% growth over the same period last year and up 2% on a quarter-on-quarter basis. Revenue from contract manufacturing stood at INR 49.7 crores, up close to 6.7% on a year-on-year basis and up by nearly 50% on a quarter-on-quarter basis. Gross margin this quarter stood at 34.3%, down from 37% in Q3 FY '26. And last year, same period, the gross margin was at a similar level of 34.9%. Our EBITDA margin for the quarter stood at INR 5.18 crores, down from INR 5.4 crores in Q3 FY '26 and down from INR 5.4 crores in Q4 FY '25. On the annual performance, the annual revenue stood at INR 402.6 crores, up by 8.3% in the same period. The business reported a profit before tax of INR 6.95 crores as compared to INR 6.85 crores after including exceptional items. Earnings before exceptional items for this year stood at INR 7.23 crores as against INR 5.8 crores last year. Revenue from in-house manufactured goods stood at INR 224.9 crores, up by 2.3% from the same period last year and contract manufacturing revenue stood at INR 177.7 crores, marking a 17% growth over the same period. Gross margin on a 12-month basis stood at 35% as compared to 34.7% in the same period last year. And the company reported an EBITDA of INR 22.4 crores this year as against INR 17.9 crores, an increase of 25.3%. The company this year showed significant improvement in its working capital management. Days debtor stood at 42 days as against 47 days last year. Days inventory reduced to 146 days as against 169 days last year. The days payable also substantially reduced to 72 days as against 117 days last year. Our marketing spend stood moderated at 3.2% of sales. Our employee expenses were inflated at 12.2% of sales this year. Second half of the year was very challenging for us and our growth rate saw a slowdown. We are taking necessary actions to correct this. I would now be happy to answer any questions that you may have.

Thank you, Akhilesh. Friends, we now open the floor for the Q&A session. [Operator Instructions] Friends, the floor is now open for the Q&A session. [Operator Instructions] Since there are no questions, I'll hand over the webinar back to Akhilesh. Akhilesh, for your closing remarks, please.

Thank you, Navin, and thank you for those...

We have a question, Akhilesh, if I may interrupt you. Tarun Rathi got a question. Tarun, please unmute yourself and go ahead. Tarun, the setting is for you is to unmute yourself, so you'll need to unmute yourself and go ahead. In case you're facing any problem, please share your question on the chat or Q and A board and I'll take it up.

I think he's typing.

Yes. Tarun wants to know the initiatives. I'll just read it out. Please share initiatives being taken for growth. This is Tarun Rathi's question.

I can't go into too many details for obvious reasons, but a couple of things that we are doing. We have expanded the sales force, the frontline sales force to reach more and more customers across India. We are also reviewing our loyalty programs with various stakeholders. Those are under review as well and changes are in the process on those parts. So those are the 2 major initiatives we've taken. We are also now looking at B2B customers, project sales, which was not a focus area of the organization. Those will be the focus area in this coming financial year. I think these are the 2, 3 initiatives that we are taking. We also believe that there will be a significant shift from the unorganized to organized this year because of the various supply chain breakages or disruptions happening because of the ongoing war, and that inherently will have a positive impact on the organization.

I had a similar question: impact of geopolitical tensions.

The impact on geopolitical tension within the industry remains high. chemicals used for making resin for gluing the plywood together are all petrochemical in nature. So melamine, urea, phenol, -- these are all derivatives of the petroleum industry. A large part of this was being imported from the Gulf countries. I think 40% of India's requirement was coming from the Gulf countries for these chemicals. So the cost of these chemicals are elevated. A large part of our raw material requirement and for all plants that are based on the western part of the country are dependent on imported raw material. The dollar has depreciated very aggressively in the last few months. So both of those have put a lot of inflationary pressure. Freight, trucking costs are going to go up. So irrespective of wherever you are in the country, goods getting to consumers are going to get more expensive. Cost of labor in the country, as a result is going to go up because if LPG and fuel cost goes up, I think it's the lower rung of the economy of the society that gets impacted the most. And then labor costs are going to go up, which then in turn makes production more expensive, which then has to get passed on to the consumer. And then labor cost goes up, also the cost of construction on site goes up. So I think we're staring at a phase of very high inflation in the coming few months. Because we are a branded player, we believe that a large part of that cost can be passed on to the consumers, but there's only a limit to how much that can actually get passed on.

Thanks, Akhilesh. Dia, I hope that answers your question. We'll take the next question from Vansh Sachdev. Why this problem of them not being able to unmute yourself? Vansh, my apologies. Can you please share your question on the Q&A board or chat? I'm just trying to fix this. Vansh, may I request you to please share your question on Q&A board? Vansh, you need to unmute yourself because the setting is for participants to be -- Okay. Dia had another question, which I missed. Have you been able to pass on your costs in April and May?

For the cost increase incurred over March and April actually have been passed on to the consumers, partially for May. But we are now seeing a resistance in the market on the -- for further increase in price. So we will keep an eye on that. And whenever we see an opportunity of passing on, we will. But for most parts, we have been able to. Any cost increase going further is going to now be a challenge.

Vansh, can you please try to unmute yourself.

I just wanted to ask that I have been tracking the stock very recently. So I just wanted if you can give a sector overview and how do you expect the sector to perform going forward?

All right. So Vansh, just on a sector overview, 70% of the industry is unorganized, 30% is the organized players. On average, the plywood industry grows at about 6% to 7% per year. The organized sector is seeing a growth of 10% to 11%. The demand for construction in general remains very strong. And as with per capita income increasing, the demand for good quality plywood and branded plywood is increasing in India at a faster rate than the unorganized sector demand. However, our industry is dependent on wood and plantation timber, coming, large part getting imported. Also, the chemicals required to manufacture plywood and allied products have a very large bearing on what's happening with the fuel costs because all the chemicals are petrochemical in nature. And so with the dollar rates going up as well as import costs in general going up, there is a significant inflationary pressure. So that's a very short brief of where the industry stands today. Over a long term, if you took a long-term view of the next 7 to 10 years, I don't think this is a minor blip in that story. But overall, the industry is very -- is doing quite okay. And I think the long-term 8- to 10-year view of this industry is very strong.

[Operator Instructions] Tarun, in case if you still have a question now you can unmute yourself and go ahead. And Dia, if you have a question, you can go ahead. [Operator Instructions] Tarun shared another question. I'll just take it up.

I think overall for the company, we are looking to returning back to double-digit growth in the coming -- in this FY '26 year -- in the year FY '26. I think Tower and Duro, there was a hyper-growth sales of tower. I think that has normalized now. And so the growth across both segments, the premium segment and the mid-segment is now going to be in that range of low to mid-double-digit growth. And to be specific on this, I don't want to disclose this on a public platform.

Okay. Dia shared another question on the Q&A board. Margins -- will the margins be affected in FY '27?

I hope not. But -- so we are taking some steps to get our cost of goods sold under control. We have sufficient liquidity. So we believe we would be in a good place to procure better. Having said that, our aim is to grow in the low to mid-double-digit growth rate and keep a very strong control on our costs. And for the company, I see the margin expansion should happen at the EBITDA level, but it's very difficult to predict how much the raw material costs would get impacted and how much we would be able to pass on to the consumers without demand getting impacted. So it's very difficult to say. I don't think anyone expected the Iran-U.S. -- tension or the war in West Asia to continue for as long as it has. And it would be very difficult to really look too much into the future and give an impact on that. But I do feel for this company, we have seen continuously the EBITDA margin increasing from mid-3.5% to now about 5.5% to 5.6%. And for this company, I think the margin should continuously keep improving.

[Operator Instructions] As there are no further -- one second, Q&A board there is another one, I'll take it up. Dia asks, any quantitative guidance for the next 2 to 3 years?

Yes. I think, again, barring price, I think a 10% to 12% volumetric growth and whatever comes on the price side would be on top. So maybe a 9% to 12% quantitative growth is what we would be looking at for the next 2 years. We are been very, very conservative on this, keeping in mind that there would be more geopolitical tensions coming our way, which could affect the demand situation within the country.

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

Thank you, everyone, for attending today's earnings call. And I look forward to seeing you -- seeing everyone at the next earnings call. Thank you.

Thank you very much. On behalf of SKP Securities, thank you very much, Mr. Chitlangia, for your time to interact with the investors. And we look forward to hosting you again in the next quarterly call. Thank you, and have a wonderful day, ladies and gentlemen.

Thank you.