Hi-Tech Pipes Limited (HITECH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Hi-Tech Pipes Limited Q2 and FY '26 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded. I now hand the conference over to Mr. Anish Bansal, Whole-Time Director from Hi-Tech Pipes Limited. Thank you, and over to you, Mr. Bansal.

Good afternoon, everyone. On behalf of Hi-Tech Pipes Limited, I extend a very warm welcome to all our valued investors, analysts and participants on this Q2 FY '26 investor conference call. I'm joined today by Mr. Arvind Bansal, our Executive Director and Group CFO; and Mr. Arun Kumar, our Company Secretary and Compliance Officer. At the outset, I would like to thank each one of you for your continued trust, engagement and support in our growth journey. Financial and operational highlights. Let me now share an overview of our financial and operational performance for Q2 FY '26. Sales volume grew by 1.78% Y-o-Y to 1.25 lakh tonnes, reflecting stable demand from our infrastructure, construction and dealer segments despite seasonal softness. Revenue from operations rose by a strong 21.66% to INR 858.77 crores, driven by a better product mix, improved realizations and higher contribution from value-added products. EBITDA stood at INR 44.33 crores, up 5% Y-o-Y, while EBITDA per tonne improved by 3.24% to INR 3,540, supported by efficiency gains and cost optimization measures. PAT increased by 11.86% to INR 20.26 crores, reflecting consistent operational performance and disciplined financial management. Capacity utilization for the quarter remained healthy at around 66% and is expected to improve with the commissioning of new capacities. This performance has been achieved in a very challenging external environment, which was dominated by extended monsoon and declining steel prices. This proves the company's resilience of strength to deliver consistent performance despite adverse market conditions. Now discussing the half yearly numbers. The sales volume increased by 1.66% to 2.5 lakh tonnes, supported by steady demand across key sectors. Revenue from operations grew by 4.91% to INR 1,650 crores, demonstrating resilience despite moderate steel price trends. EBITDA stood at INR 85.36 crores, broadly in line with last year with EBITDA per tonne at INR 3,425 versus INR 3,462 in H1 FY '25. PAT for the first half stood at INR 37.56 crores, up from INR 35.2 crores in the same period last year. On the balance sheet side, debt-to-equity ratio remains healthy at 0.21 versus 0.15 last year. Current ratio stood at 2.09x, demonstrating sound liquidity. Overall, we continue to remain -- maintain steady volume growth, margin stability and financial discipline despite a dynamic operating environment. Now coming to strategic and growth initiatives. Firstly, the ongoing capacity expansion. Our 3 lakh tonne capacity addition at the existing facilities is now in the advanced stage of commissioning. Trial runs have already commenced, and we expect commercial production in Q3 FY '26. This will meaningfully augment volumes and strengthen operating leverage in the quarters ahead. The greenfield manufacturing project at Hindupur, Andhra Pradesh, nearly Bengaluru, a landmark milestone is the foundation stone laying of a greenfield manufacturing project at Hindupur, Andhra Pradesh, a crucial step towards our long-term vision of achieving 2 million tonne capacity. The project with a planned 1.5 lakh tonne capacity will focus on value-added coated products catering to infrastructure and industrial sectors. We sincerely thank Shri Nara Chandrababu Naidu Garu, Honorable Chief Minister of Andhra Pradesh for foundation stone laying ceremony and for the positive industrial ecosystem that enables such long-term investments. This project is expected to be completed by Q1 FY '28 and will expand our footprint in Southern India, enhance product diversity and drive future growth. Talking about the branding and marketing initiatives, the company launched its new nationwide television commercial and various marketing campaigns during this quarter, which enhanced brand visibility and generating strong responses from our dealers and distribution network. We have added several new SKUs in this quarter, mainly jumbo steel sections up to 300 series, enabling us to serve larger infrastructure projects. Our pipes and tubes are being supplied to several prestigious government and industrial projects, reflecting the growing trust in our quality and reliability. On the export front, Hi-Tech is now supplying to a wider set of international markets, strengthening our global presence. On the solar front, company continues to get repeated orders from its clients and has established itself as a trusted and reliable supply chain partner in the renewable energy space. Coming to financial discipline and sustainability. Even as we pursue aggressive capacity expansion, we continue to uphold financial prudence. All our ongoing and upcoming projects, including Hindupur, are being funded entirely through internal accruals. We remain committed to responsible growth through energy-efficient operations, process digitization and sustainability-oriented approach that supports long-term stakeholder value. Looking ahead, we see strong underlying demand from infrastructure, construction and renewable energy space. Our near-term focus areas are improving capacity utilization to 70%, enhancing the value-added product mix, strengthening certain and export markets, seamlessly progressing toward our 2 million tonne capacity milestone. With the commissioning of our new capacities and sustained brand momentum, we expect improved operating leverage, enhanced margins, stable stability and stronger return ratios in the coming periods. Thank you. We now open the floor for questions.

[Operator Instructions] The first question is from the line of Pallav Agarwal from Antique Stockbroking.

So just had a question on our volume guidance. So are we sticking with about 6 lakh tonnes for FY '26? And broadly, what would be our EBITDA guidance, EBITDA per tonne?

So this -- for the first quarter, we have done approximately 2.5 lakh tonnes. And in the H2, given a better market scenario and the festive and the monsoon period already over and a strong order book in hand so 3 lakh to 3.5 lakh tonnes is what we are aiming to achieve in H2. So overall, our total volumes between 5.5 lakh to 6 lakh tonnes is intact. Regarding the EBITDA guidance, so this quarter, we have achieved INR 3,550 per tonne and with steel prices now stabilized -- and I don't think there will be further steel price decline in H2. With that, there will be a significant improvement in the EBITDA per tonne. Also, the new facilities which are getting on stream in this quarter, they are mainly focused on the value-added products like galvanized and special SKUs. So that will also help in increasing the blended EBITDA per tonne.

Sure, sir. Okay. And how have the patra prices moved? So what would be, say, the differential between HRC and patra waste pipes at current levels?

So right now, I think the differential is around INR 5,000 to INR 6,000 per tonne between the primary and the secondary. And the secondary is also under a lot of pressure because of the monsoon and all that. And the gap has narrowed in this quarter. And I see once the demand for the PMT and secondary steel when it comes back, so this -- the gap should further bridge down between the primary and the secondary players. So the demand should be significantly better in H2 for the primary steel producers.

Okay. And sir, I think our debt has gone up this quarter. So is it -- what is like our CapEx guidance for '26 and '27?

So yes, our 3 plants are coming on stream in this quarter. So that is mainly why this has gone up. But I think the generation will start happening from this quarter, and we hope -- as we get cash flows from this, so this will get stabilized in the short term.

Sure, sir. And in the CapEx guidance, sir, can you help with '26, '27, what is the CapEx guidance?

So FY '27, approximately INR 120 crores to INR 130 crores. This is what we are -- this is the CapEx what we've been doing for the last 2 to 3 years. So the similar kind of CapEx.

Okay. And '26, I think we have built in about INR 200 crores. I just wanted to check whether...

Yes, yes. That is it.

[Operator Instructions] The next question is from the line of Vartika, an investor.

My question to the company -- sir, first of all, congratulations for the growing results for this quarter. Sir, I want to understand that how and in which phases we will be adding this 1 million tonne capacity in coming years?

So thank you, Vartika. So by FY '28 and mid of FY '29, so we'll be commissioning this additional 1 million tonnes. This will be partly brownfield and partly greenfield. And we have the land already in place. And at several sites, the approvals are already there. And we have just started construction in one of the sites. And in coming quarters, we'll be starting the other sites as well. So 2 million tonnes journey is fully planned and the execution has begun in this -- regarding this.

The next question is from the line of Pratik from Smith.

I just wanted to ask a question on the realization per metric tonne. So on a Y-o-Y basis, it almost grown at 20%. And on a quarter-on-quarter almost basis, almost it grown 8%. So what has led this? Is it entirely because of the value-added mix improvement or any other reason for that?

So this is due to several factors. One is there is -- we have started export vertical. So the value there is much higher. And the new products that we have launched in the value-added stream, the coated products, the special SKUs, that has also helped us in achieving higher realization per tonne. Along with that, there is a trading volume which you may not have considered. So that will even it out.

Okay. So what was the export volume? Can you throw some color on that in percentage terms or in absolute terms?

Currently, it is in the range of 6,000 to 7,000 tonnes per quarter, and it is growing steadily.

Okay. Okay. And does that realization per metric tonne is sustainable going forward or might get moderate going ahead, sir?

No, we are striving for better. Now the new capacities, again, they are mostly in the value-added segment, where the realizations are more than INR 10,000 to INR 15,000 per tonne compared to the normal uncoated products. So going forward, this should be intact.

[Operator Instructions] The next question is from the line of Pratik from Smith.

Sir, I just wanted to ask a question that how much you are targeting the value-added mix going ahead?

Yes, Pratik, as of last quarter, our total VAP share was around 37%. And we'll close this year at 41% to 42%. And next year, there will be a substantial jump because these new capacities and the value-added. So 45%, 47% is for FY '27.

Okay. And again, you are maintaining your EBITDA per tonne guidance of almost INR 3,500 to INR 4,000 in FY '26, right?

Absolutely. Absolutely. Absolutely. This is given the steel prices have really played a very detrimental role. And now I think prices globally and in India, they have stabilized. And if we don't see any further reduction, the EBITDA per tonne should be even better.

Okay. And sir, just on steel prices. So basically, the government has implemented the safeguard duty on the steel imports. So that has benefited the steel industry and you as well?