Kajaria Ceramics Limited (500233) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Kajaria Ceramics Q1 FY '24 Earnings Conference Call hosted by Antique Stock Broking Ltd. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar from Antique Stockbroking. Thank you, and over to you, Mr. Mahawar.

Thank you, [ Nita ]. Warm welcome to all the participants on Kajaria Ceramics Q1 FY '24 conference call. From the management, we have Mr. Ashok Kajaria, Chairman and Managing Director; Mr. Chetan Kajaria, Joint Managing Director; Mr. Rishi Kajaria, Joint Managing Director; and Mr. Sanjeev Agarwal, CFO on the call. Without further ado, I would like to hand over the call to Mr. Ashok Kajaria for opening remarks, to which we may open the floor for Q&A. Thank you. Over to you, Mr. Kajaria.

Thank you, Manish. Very good evening to everyone. It gives me great pleasure to welcome you to the Quarter 1 F '24 Earnings Conference Call for Kajaria Ceramics Limited. Joining me on this conference call are my sons, Chetan and Rishi; my grandson Kartik Kajaria; our CFO, Sanjeev Agarwal; our [indiscernible], GM Investor Relations. We are in the midst of a growing demand environment on the back of a positive real estate cycle already kicking in and government's continued efforts on infrastructure development. As [indiscernible] typically lock us in the later stages of construction process, the momentum gained from new launches over the past one year is expected to translate into stable time demand from September onwards. Despite having a strong conviction in our ability to outperform the industry, this quarter has been a bit slow as compared to our expectations, mainly attributed to the subdued demand [ summary ] in the months of April and May. In this quarter, we sold 25 million square meters of tiles compared to 23 million square meters in quarter 1 F '23, achieving a growth rate of 7.25%. However, we are firm in capitalizing on increasing demand and surpassing industry performance. Our previous announced budgets are progressing as planned, will commission 2.6 million square meters of GVT capacity in Sikandrabad by early August '23, and the modernization of ceramic tile capacity and therefore, by end of August '23. These two new plants will enable us to manufacture larger tiles and save on fuel consumption as the new kilns are more energy efficient. At Kajaria Ceramics Limited, our success has been driven by an unwavering committed sales and marketing. First, firmly establishing a dominant position in the market. With a strong dealer network strategically spanning both urban and rural areas, we are continuously expanding our reach efforts. At the beginning of this year, we kicked off the exciting launch of GVT products, featuring an extensive collection of over 300 SKUs, that even witnessed the participation of more than 300 dealers from across India, making it a great success. During this launch, we proudly produced several exotic product categories including the innovative 4D concepts, where one design is presented in 4 distinct finishes. Initially, we showcased stunning marble-like slabs [indiscernible] 120 to 240 centimeters, adding a touch of luxury and elegance to our offerings. In PVT vertical, we introduced a vitrified slab measuring 1,200 x 1800 mm with the higher thickness, strategically positioned as a superior substitute for marble and granite. In ceramic vertical, we launched our latest signature collection, featuring an impressive addition of more than 300 SKUs. This extensive product range showcases 39 designs taking to various customer segments, allowing us to penetrate a wider market. Furthermore, we also made a successful launch of Kerovit products, offering new variants and captivating colors. The response to this launch was truly remarkable as numerous dealers expressed keen interest in either establishing new Kerovit showrooms or integrating Kerovit into their existing ones. And a considerable 30% or more of new orders coming from previously [indiscernible]. On the export front, Indian exports are thriving and reaching unprecedented heights in several territories. In the first quarter of F '24 alone, the country achieved exports worth INR 4,803 crores, marking a remarkable 23% growth compared to INR 3,897 crores in quarter 1 F '23. Presently, the United States, United Kingdom, Israel, Russia, Mexico, Kuwait and UAE stand as the primary export destination for Indian tiles manufacturers. Looking ahead at the [indiscernible], exports as such hence be around INR 21,000 crores in fiscal year '23, '24, surpassing last year's figure of INR 17,500 crores. This substantial increase reflects the rising global demand for Indian tiles and the industry's expanded presence in international markets. Now for this quarter's financial performance. In quarter F '24, the company achieved a 7.25% volume growth and a 6% year-to-year increase in consolidated revenue from operations, reaching INR 1,064 crores compared to INR 1,008 crores in F -- quarter [indiscernible]. Despite the challenging market conditions, the bathware segment performed well registering a notable 17% increase in revenue during quarter 1 F '24 reaching INR 84 crores compared to INR 71 crores in quarter 1 F '23. However, the Plywood segment faced a decline in revenue during quarter 1 of F '24 recovering INR 14 crores compared to INR 20 crores in quarter 1 F '23. The revenue from the Adhesives segment stood at about INR 10 crores in quarter 1 F '24. EBITDA margins for the quarter stood at 13.9%, expanded by 130 basis points quarter-to-quarter and a 67 basis points year-on-year. This margin improvement was largely influenced by reduction in fuel costs. As of 31st December 22, working capital days increased to 62 days from 59 days as of March 31, '23. Business, I take this offer to thanking you for joining us today. Over to you for Q&A [indiscernible].

Ladies and gentlemen, we will wait for a moment while the questions you assemble. Participants are requested to restrict to 2 questions per participant. If time permit, please come back in the question queue for a follow-up question. The first question is from the line of Rahul Agarwal from Incred Capital.

Good to see the gas cost normalizing for the industry. Sir, two questions. Firstly, on tile pricing. How is that behaved during the quarter and my understanding is the volumes are still not recovered. I mean your commentary also mentioned it will recover from September. Channel discounts in my view should be higher in 1Q also, but any price adjustments was done in 1Q and the outlook on the same, please?

See, as I said, we have already promised 30% to 15% volume growth just for the knowledge of everybody who's joining today, 14% to 16% revenue growth for the year and 14% to 16% EBITDA margin for the year. As I said, first quarter has been tough because of various reasons. We hope that from September, things will pick up. Things are better, much better from June onwards. And regarding your question of price adjustment, yes, some price per se will not come down, but some benefit will pass on to the dealers. And this I have already said in my investor meet also earlier. And the part benefit will be passed on to the dealers. But overall, then it will be a net gain for Kajaria in the year. As I said earlier, let me repeat that. For the year, we should save about INR 150 crores to INR 175 crores in the FY. And we should pass on roughly about INR 50 crores to INR 75 crores to the [ trade ] and INR 100 crores will remain in the company. And as far as JV is concerned, I also repeat. Because I repeated the same thing -- I said the same thing earlier, that last year, the JVs didn't do well. They have made a profit of about INR 2 crores. This year, it should be INR 40 crores to INR 50 crores plus.

Got it, sir. And one last question, then I'll come back in the queue. On the Nepal plant, should we expect like INR 10 crores, INR 15 crores of profits next year from Nepal?

Nepal will only be commissioned by March '24. So nothing will come up this financial year.

Yes, sir, I'm asking about fiscal '25. Assuming that you have 50% share, my sense is Nepal could be like a INR 30 crore annual profit business and INR 15 crores comes to Kajaria from next year. Is that assumption correct?

Definitely, yes.

Next question is from the line of Keshav Lahoti from HDFC Securities.

Q1 result, I can see there is a dip in depreciation.

Keshav, you are not audible. Can you please speak through the handset?

Is it better?

It's still the same. It's sounding very feeble.

Hello?

Go ahead.

Yes. So in Q1, the depreciation costs have decreased. What is the reason for that?

I believe the management is not able to hear...

It's okay. [indiscernible] in our plant.

In our subsidy -- in our relevant subsidies, in our earlier year, in this financial year, [ ours ] were there.

Okay. Understood. Last question from my side. How has been the fuel prices for Q1 region-wise? And how is it currently?

The fuel prices of this year? Average fuel prices for Q1 has been about INR 39, and it is on the same lines in quarter 2.

What about region mix for Q1?

Our Q1 mix is INR 39 for north, 44 for south, west 37, average is 39.

Next question is from the line of Achalkumar Lohade from JM Financial.

I had a question about, in terms of the demand situation, like you said, April, May has been weak, June onwards is improving and you're maintaining 13% to 15%. But is it possible to give some more color in terms of industry? Have you seen -- I mean, in your estimate, has the industry seen a decline in volume in 1Q? Or was it kind of flattish? Any color on that?

See, industry should have been flattish. Kajaria has grown at about 7%. I would say industry has been flattish more or less. Exports have picked up definitely. And going forward, as we all are aware, things are moving in the right direction in the country with a lot of real estate growth, you are more aware than me. And at our earlier discussions, we also said that once the real estate growth has come after 7 years, now it's one year plus. September onwards, that demand should come, infrastructure demand should come. And as you know, elections are coming, general elections are coming, that demand should also come from some time from October. So things are much better. Things should be much better.

Understood.

We see positivity on the ground.

Correct. Sir, if you could talk about the CapEx for FY '24 and FY '25, what kind of CapEx can be built in the estimate?

FY '24, the estimated CapEx is about INR 370 crores.

And could you elaborate where -- which all plants and what CapEx. Is it possible?

Detail-wise, if you want to make a rough note, Gailpur modernization is about INR 50 crores. Sikandrabad new plant is INR 70 crores. Nepal is INR 90 crores. Bathware is INR 80 crores, Maintenance CapEx is about INR 30 crore plus. And we are -- [indiscernible] should be another INR 50 crores. That has already some CapEx has incurred last year and some CapEx would be this year.

Sorry, last part, I couldn't follow, sir. INR 50 crores for towards what?

INR 50 crores for the corporate office Kajaria's building.

Corporate office. Okay. Understood. I'll fall back in the queue. So thank you so much.

Next question is from the line of [ Ravin Sai ] from [ BL ] India.

Yes. So my question is related to the gas pricing. How much of the biofuel contribution right now to your north plants?

To the north plant, it's about 33%. And total is about 20% overall.

And how is the pricing there?

Pricing is about INR 22.

Okay. And you also use propane in the south plants, how is the pricing there?

We are not using propane anymore, which all -- south plants are all gas based, now -- LNG by [indiscernible].

Okay, sir. And the next question is related to subsidiary realization, which has gone down somewhere around 11%. So is there any specific reason for that? Or is it just on a market behavior?

So there is no realization, which has gone down on subsidies. One minute please. See, in JVs, since there is a massive reduction in the gas prices there, we passed on that benefit to the [indiscernible] because of the competition out there. But basically, JVs, we are making PBT, polished vitrified tiles, which Kajaria is buying and we are reducing the price.

So that will be maintained over the year at this gas price?

If the gas prices continue like this, yes.

Next question is from the line of [ Neha Reja ] from Edelweiss. Neha, may I request you unmute your line from your side and go with your question, please? Due to no response, we move on to the next participant. Next question is from the line of Nikhil Agrawal from Vt Capital Markets. Nikhil, can you hear us?

Sir, can you please guide us on the pricing strategy like really pegging in price hikes in the first 3 days of July. What is our trend going forward?

Nikhil, your voice is echoing. Can you please speak through the handset?

Yes. Am I audible?

Yes. I think you are [indiscernible].

Now it's audible, sir?

Yes. You're audible. Please repeat your question.

Yes, sure. So in this guidance, like what kind of pricing strategies we are looking for. What's going ahead. Like are you taking the price hiking from [indiscernible] of July, like we are seeing some significant -- like price drop has happened?

As we said that we already got good saving on the gas. So there's no reason of taking a price hike. In fact, we are maintaining the prices and giving a little bit more benefit to the dealer so that we increase our sales. As we said that our target is to grow 13% to 15% of volume growth, and that is what we are looking for. So we can't increase prices, but the savings in gas will pass on similar trade to achieve our volume. Volume is the main criteria which you're looking at. And you've seen the margins have already improved in the first quarter.

Got it. Sir, second question is like we have seen some significant spike in our raw material consumption. Can you throw some light on that? Like what kind of things are causing that sudden spike in these raw material cost?

There is no spike in the raw material. In fact, the material costs have stabilized and even...

Gone down.

There's no spike anywhere.

The next question is from the line of Abhishek Ghosh from DSP Mutual Fund.

Sir, just looking through your volume on a more like a 4-year CAGR, we still are looking at about a 6% 4-year CAGR volume that you have grown for 1Q FY '24. And if you look at broadly some of the other building material category, we see much sharper growth happening on a 3-year, 4-year CAGR basis. So is it that with the lag effect, one should expect a much stronger H2? How are you looking at the demand? Is there a point of inflection, Sir, just some thoughts there will be helpful.

See, the quarter 2 after September, things should be better. No doubt about it. But right now, let us stick to 13% to 15% volume growth. First quarter, we have done at 7%. We have to make it up also to make sure that we achieve that numbers, right? So there is no inflection and let us focus on what we are trying to do.

Okay. Great. The other thing is...

Just to add to that, we are also increasing our advertisement spend and all, as we said, which will also help us achieving on -- achieving our growth numbers.

Okay. And what would be the spend for the quarter and the year look like?

So last year, we spent INR 108 crores in advertising spend. This year, the target is roughly INR 135 crores. Last quarter, we spent INR 19 crores, and this quarter, first quarter, we spent around INR 26 crores on that.

Great. And from the current capacity of about 81 MSM, how should one look at it by end of FY '25, what would the capacity be like?

So with our Sikandrabad expansion, we will add about [ 2.6 ]. And then [ 6.1 ] in Nepal, so that will make it about 89%. And these are the ones that are planned as of now. The other than that, the outsourcing will also increase. Other than that, we will go along, we'll plan. No other expansion planned right now.

Okay. Okay. And sir, just one last question in terms of the Bathware segment. How should one look at the growth prospects from there? Because there, I think the opportunity for market share gains are much better. So anything that we should look at the growth prospects as far as the bathware is concerned?

Yes. So we are very positive on the bathware. I think in quarter 1, we did a 20% growth roughly, which is a tough quarter overall. We still did a 20% growth, and we are looking at a 30% plus growth in the entire year. We had a very good launch in the bathware where the dealers were very, very happy with our products that it has a good area for displays and all that. So we are definitely going to achieve 30% plus volume growth in bathware -- volume growth.

Okay. And sir, just one thing on the large slab part of it. How has been the market feedback progress? Any color there would be helpful.

See, large slab market is still very small in India. It's still a growing segment, still a lot of work has to be done. But with our south plant, we are the only company which are Continua Plus line in the South -- in South, and we just started our Continua Plus line in North. So with both these lines, we're definitely going to increase our slab scale in [ tangent ]. These are high margins. The volumes are very less, but the margins are good. So as we go along, as the market develops, things are going to get better.

Okay. Great. And sir, just one last question. Any color on the competitive intensity as far as the end market is concerned? Any color there would be helpful. How has that been shaping up?

See, everybody is trying to do the job better. Everybody is trying to do the job better. I think Somany and Johnson should do well with the -- [ GST ], as I have always said, GST helps us in taking our market share from the so-called regional players and we are all trying to do our best efforts. And I think we are all for a positive gain in the coming time.

[Operator Instructions] Next question is from the line of Ritesh Shah from Investec.

A couple of questions. Sir, first one, you indicated a 23% revenue growth for exports for Q1. Sir, how much is the volume growth over here and the price growth?

Price look for export should be more or less same. Whatever number you are seeing is the volume growth.

It is the volume growth. Okay.

Not much in -- whatever you are seeing is the volume growth -- value growth, I'm sorry.

So 23% is value. So the volume growth, there's no value, that's what you're saying?

No. Volume growth. [Foreign Language].

Correct. Sir, my second question is on...

One minute.

The exports is a 23% value growth over last quarter. So this quarter, the more we did -- we did almost INR 4,800 crores of exports versus [indiscernible]. There is no price change.

There is no price change.

Perfect. Perfect. Sir, second is, how much is it the fuel costing for the Morbi guys. Specifically the reason I ask is, I think propane import duty has got increased during the quarter, but the underlying prices would have reduced. So I just wanted to understand on a parity basis, so there would Morbi be operating at number that you stated for us is around INR 39. So can you please throw some color here?

Morbi, the current prices of gas is about INR 41, including taxes, number one. And propane is also the same price. Propane is INR 1 higher, about -- INR 41-point-something. So their landed cost of gas today is INR 41 per scf. And the propane is also INR 41 per scf.

And this is after the import duty, right? [ Bounce ] in import duty.

Yes. When we talk about landed means, landed to the plant. Import duty is we trade by the manufacturer, whoever is the [indiscernible].

This is helpful. And sir, if possible, would it be possible for you to give some color on how we arrived at INR 39. Earlier, you had indicated about when we have biogas. Some color over here, that would be useful.

That details you can pick up later. But right now, as I said earlier, the North prices are 39%, South is 44%, and West is 37%. Landed is 41%. [Foreign Language] So the average is 39%.

Sorry to interrupt you, I'll request you to join the queue again for a follow-up question. The next question is from the line of Jenish Karia from Antique Stock Broking.

My first question is that there is a contraction in the gross margin during the quarter. So is there any specific reason that you can highlight for that?

The marginal impact. Very marginal. So these are marginal improvement in the gross margin, if you take a purchase of traded good, power and fuel and raw material together. And if you cannot take in purchase of traded good, then remove the outsourcing volume from the total volume.

Okay. So I'm not taking in the consideration the power and fuel costs. So is it a purchase of trading goods and stock in trade that I'm taking in consideration. So considering that, 63% gross margin has gone down to 56%.

Yes. If you're comparing Y-o-Y, then same [indiscernible]. Obviously, in Q1 FY '23, the raw material costs were cheaper as compared to today's raw material. But quarter-on-quarter, it has come down. So all inflationary impact has come down. But Y-o-Y basis, there is still some impact.

Okay, understood. And would it be possible to quantify the benefit that we have passed on to the dealers in terms of reduced gas cost during the quarter essentially?

[Foreign Language].

It is not the question of [indiscernible]. It's a question of some discounts depending on the product is given so that it pushes more to the market. That will be very difficult to tell you exactly on what, but something like 3% decline overall in the revenue.

That helps kind of. I'll come back on the queue for some more questions.

Next question is from the line of Hasmuk from [indiscernible] Life Insurance.

My question is on margins. So you guided for with the 14% to 16% margin for this year with Q1 at 15.9%. And as gas prices are also, let's say, favorable, so any specific reason to be conservative here?

So going forward you will see better margin. See as we know, quarter 2 and quarter 3 were the toughest last year. Gas was cut, gas prices went up high. Spot prices were at double the prices of the normal pricing. Things have become normal. I'm sure with the market improving, you will see better results, that's all we can say today. We keep our guidance unchanged. But if the number goes up, you will see it first [indiscernible].

Okay. On that line only, employee cost this quarter has declined on a Y-o-Y basis. This is slightly unusual in Q1. So any specific reason here?

See, as far as the employee costs are concerned, as we said earlier 2 years back, no manpower is adding every year. Manpower addition is almost zero. Somebody go, somebody comes in is one issue. Secondly, with this growth of volume, whatever is happening. Manpower costs will proportionately come down. Absolute numbers are same.

Okay. So basically, going forward in, let's say, the next couple of quarters, whether this more or less a trend remain as volume growth will start picking up from September onwards. So yes.

Yes. Volume growth will start definitely from September onwards.

Next question is from the line of Sonali Salgaonkar from Jefferies India.

I hope all of you are doing well. Sir, my first question is regarding biofuel. You mentioned in your earlier commentary that the average usage of biofuel across is about somewhere 20%. And I think, correct me if I'm wrong, the maximum that it can goes about 35% of your overall current fuel cost. So does that mean that there is a further leeway of margin expansion as you increase your biofuel mix in your overall power and fuel?

First, the biofuel in North is 33%. Overall, biofuel is 20%. That's number one. That's the maximum we can go right now, number one. But as some participant asked earlier, right now, if you see the numbers, we have done -- as far as EBITDA is concerned, it's 15.9%. But -- and the 2 quarters ahead, were the most difficult quarters. Once the sale picks up things, numbers will improve, definitely. EBITDA margin has to improve, I'm not giving any guidance write-down, as I said. But definitely, you will see for more positivity as we go forward.

I understand, sir. Sir, my second question is, you mentioned that April, May was tough in terms of demand. I understand because of unseasonal rains as well. June seems to be picking up. In July, also a case where we are seeing demand pick up on the ground? And where do you see the demand coming on from rural or rather urban versus Tier 2, Tier 3, Tier 4 cities.

See, July would have been better. But unfortunately, excessive rainfalls everywhere in the country has made transportation and everything very, very difficult. If the transportation doesn't reach, the dealer doesn't know whether I can -- I will have a customer tomorrow or not so that's the reason. July has been overall [indiscernible] months, because of the excessive rains all over the country and especially in Northern India, as you are aware, things have been very, very tough. And even in Gujarat and Mumbai things have been tough. So looking at that, July has been a tough month. But July, August are 2 months where heavy rainfall takes place in India. And as I said earlier, September onwards, you will see very positive scenario in the country. And I'm sure this will also apply to us.

Next question is from the line of Udit from Yes Securities.

Yes. Sir, just one question pending, you have highlighted a lot of things. But can you throw light on your Plywood business. Earlier, we were aiming for more than INR 100 crores in '24, but Q1 has just been INR 10 crores. So how do we see the whole year planning for the business?

So last year, we had INR 77 crores of revenue. This year, we're targeting INR 100 crores, which are 30% revenue growth. The main reason is we've got a very strong sales team now, which is a very senior gentlemen from the plywood industry for heading the plywood vertical and is getting in a very strong sales team in the next month or two so we're looking at positively crossing INR 100 crores turnover in this financial year.

Okay. Yes, that's helpful. All the best.

Next question is from the line of Neha [indiscernible] from Edelweiss Mutual Fund. Neha, we are unable to hear you, may I request you to speak through the handset. Neha, if you can hear us, can you unmute your line, please? Next question is from the line of Rajesh Ravi from HDFC Securities.

My question pertains to your volume assumption. As you mentioned, second half, the volume number should pick up. So are we factoring in 20% sort of volume growth for second half?

Let's not go into the details. Let us focus on our job and we are saying that we are looking at 13% to 15% volume growth for the whole year. And I'm sure that the market improving, we'll to do it.

Okay. And this margin guidance, 14% to 16% also, we could deliver this Q1 sort of margins in subsequent quarters even as the volume numbers pick up?

Slightly look better.

Sorry to interrupt you, we missed out on the beginning of the answer. Can you repeat that, please?

As far as the margins are concerned, the quarter 2, quarter 3 last year were the toughest because of the gas prices, because of gas cut and the spot prices were double than the normal prices. Things have normalized on that full front. And going ahead, the moment the volumes come, you'll see a better EBITDA margins that much I can assure you. But I'm keeping up -- but I can assure you that the margins will look better.

Great, sir. I'll come back in queue. Thank you. All the best.

Next question is from Utkarsh from Haitong Securities.

Sir, first question is like what is the reason that our manufacturing tiles production was down 5% on a Y-o-Y basis, whereas our outsourced sales volume was up 13% in the same quarter.

So our manufacturing was down because we were upgrading our Sikandrabad plant. So that entire quarter that plant was shut down. And it just -- we commissioned the line on 15th of July and the production will come on 29th or 30th of July, early August, and then it will match up. The entire quarter was shut because of the upgradation of the plant.

And even going forward, you see as Kajaria is saying that 13% to 15% volume growth, we just shared a few minutes back the capacity part. So outsourcing will increase more and more depending on where we are marketing, the outsourcing will depend on that.

Also, what we're also trying to do is we are launching a good master ad campaign very soon, early August and are increasing our ad spend. So all these factors will help us to do in our numbers.

Okay. Sir, second question is on the export side. So on the global tile trade space, if you can give some idea where India is placed in comparison to China in terms of quality and cost.

India quality and cost, both are excellent. Both are excellent.

We are more competitive than China or they are more competitive than us?

No, I think it's -- we are almost equal to China. We are now #2 just after China. And lot of countries are now preferring India over China. So that is the reason that you've seen exports -- surge in exports.

And secondly, if you recall two years back, last two years, the freight rates had gone up sky high. That has come down to almost 15% of what it was. A container to U.S.A. was costing $12,000 to $15,000, it has come down to $2,000. So that has also made the worthwhile to export to all these countries. The freight rates have come down to 10% to 15% of what it was 2 years back.

And so what kind of a margin and return is earned on tiles export, those who are exporting from India?

That Morbi people will tell you better.

Sir, first, you might be having an idea. So I just wanted to get a sense from you.

Somehow, you get this idea from them.

We hardly export. So we'll let them -- let this...

Get it from them. That will be better.

Next question is from the line of Sneha from [ Investor ].

Sneha here from Nuvama. Two questions from mine. One is on the adhesives part of it. I think in the opening remarks, you mentioned this particular quarter, you have done INR 10-odd crores. Just wanted to understand what are we doing here? And what's the vision in this particular segment? And what are we aiming for FY '24 and even going ahead.

So last year, we had turned around INR 38 crores in the adhesives division with a PBT of roughly INR 7 crores, and this has targeted a turnout of INR 65 crores, with a PBT of roughly INR 12 crores to INR 13 crores. We've already tied up with 10 manufacturing facilities across the country for faster delivery and timely and in a cost competitive manner to all the dealers and the channel partners we have because of freight-intensive products. So that's the vision plan for this financial year. And next year, we plan to cross INR 100 crores turnover in this segment.

Okay. So this segment is actually growing much faster than even the wood panel division that you have at this point of time?

Correct.

And on the wood panel side, although you've given clarity in terms of what you're looking at, what's the rough breakup, I think we were also doing laminates here. What's the rough breakup right now between the plywood and the laminate side that you are working on?

Roughly 45 [ CR ] walls, plywood and 32 was laminates. That was the breakup of our last year's turnover.

And what is the ambition going forward, like you said INR 100 crores you have to reach. So roughly is it a similar kind of growth in both the segments?

Yes. Similarly -- similar growth is there in both the segments.

Sure. Got that. And one last one, if it all right, I can just comment again, is on the distribution front. You mentioned your agenda for the ad spend, you want to increase it to INR 135-odd crore. What are you looking at in terms of distribution addition this particular year? And what have you already achieved in quarter 1? Any addition numbers that you can throw here.

So roughly, we have 1,840 dealers across the country. And we're looking to surpass 2,000 dealers in this financial year, out of which 500 will be exclusive Kajaria dealers, whom will only sell Kajaria tiles.

Next question is from the line of Pulkit Patni from Goldman Sachs.

Sir, you spoke about export and how strong export growth has been. Typically, we've seen whenever Morbi's focused on export, the competition in the domestic market is a lot lesser. Are you seeing that play out? Can you talk about how this export growth impacts realization in the domestic market? I mean any color on that would be helpful.

A good question, Pulkit, that whenever there is more exports, as you rightly said, the lesser pressure will be from Morbi on domestic market, yes. Secondly, two things have happened. Gas prices are considerably reduced in the last 12 months. So prices per se will not go up at least in the next 6 -- 8 months, but our margins will improve for a simple reason that whatever benefits like last year, I said, we are selling close to INR 150 crores to INR 175 crores this year on the gas front only. And that -- partly that we will pass on to the trade and at least INR 100 crores will remain with the company. Secondly, JVs, which we are not working well, are also working very well now. That should add very positive as for the bottom line is concerned to the extent of INR 40 crores to INR 50 crores. So that will be the net addition. But exports, whenever it goes up, you take it there will be less pressure on the domestic market [indiscernible].

Sure, sir. So that's helpful, sir, maybe one more question. Can you talk about broadly for the industry, is there significant capacity addition that is planned for the industry? I mean I'm just trying to visualize how the demand-supply dynamics could look in the next few years?

See if I take you 3 years back, in the year '19, almost every year in the month of Janmashtami -- whenever Janmashtami was there, they were adding 30, 40, 50 plants in a year. 2021, '22, '23, there's hardly a [indiscernible] of 14 to 20 new plants. So that is a scenario in Morbi. And the biggest change is what, GST. Before GST, there was a lot of tax play, after GST, tax play has reduced to a great, great extent. I think that is one reason why the organized sector for sale like Kajaria, Somany and Johnson is taking the market share from -- away from them.

Next question is from the line of Onkar from Shree Investments. Onkar, may I request you unmute your line and go ahead with your question, please?

Yes. My question was on ROE. What kind of ROE and ROC targets we are looking for this current year?

There are no targets. Kajaria doesn't set its targets. It is...

If market goes up and ROE and ROC will go up also.

And as I said earlier, I think Sanjeev will say more about it. With the more outsourcing, you've seen that Kajaria has to grow 13% to 15% in volume terms every year. Part of it will be -- a lot of it will be outsourcing also. So automatically, your margins will. ROC will go up.

Maybe Sanjeev can give -- throw more light on this?

See, in this quarter also, there is a 300 bps improvement in ROE from 15.5% to 18%. And this quarter, we have done only 600% volume. When we grow more, when we achieve 13% to 15% volume, coupled with better -- margin, the ROE, ROC both will go up. And as [ Chetan ] had said, because of the more outsourcing, the percentage of more outsourcing, the ROC will go up further.

You talked about 13% to 15% annualized growth. So in order to achieve that, you have to grow significantly in the next 3 quarters. So what's making you so optimistic about this?

Can you come again with your question? Because your line is not so clear.

Can you hear me now?

Yes, yes.

Yes, my question was in order to grow 13% to 15% on an annualized basis, you need to grow substantially higher in the remaining 3 quarters as you have grown just 6%. So what is making you so bullish.

I think I have answered this to everybody. You are not hearing, I think what is happening in the con call.

No, I joined the call a little bit late, so that's why.

As I said earlier, markets are tough, have been tough in April and May, June was better, July is again tough because of the excessive rains all over India. August will be okay, and September onwards, things will be very, very positive in the country as well as for us. So we are very confident of reaching 13% to 15% volume terms, number one. Secondly, as Rishi said that we are -- as Chetan said, that we are going to spend about INR 135 crores plus in advertising. From first week of August, we are going very strong on advertising, and that will also help generate more sets to our dealers. Because basically, what is the purpose of advertisement. Advertisement purpose is to bring the customers to the door of the dealer.

Just wanted to know any longer-term plans on the revenue front and margin trend you want to share? Not immediate short term or maybe 3, 5 years kind of.

And then you were asking the same question, which I've said so many times. The target for this year is 13% to 15% volume growth, 14% to 16% revenue growth and 14% to 16% EBITDA growth. That is what we are looking at, that is what we are focusing on.

That's for the current year, right? Any medium-term plan.

There is no medium term plan. There is no long term plan. This is what we are talking for this year. We will talk about it after 6 months.

Next question is from the line of Lavanya From UBS Group.

Just one thing I wanted to understand, because you have been highlighting that pricing would be largely stable or slightly lower for Kajaria. How has been the pricing scenario of the overall industry, how it has come down? And what's the pricing difference between Kajaria products and Morbi products? Any sense there?

Pricing for Kajaria has been stable. Prices per se have not been touched. But as we said earlier, some discount will be passed on, some trade benefits will be passed on to the dealers to sell more. That's what. As far as the difference between the pricing is concerned, I can often tell you that between the nearest competitor, that is #2, I think the pricing difference is between 6% to 10% depending on the product. As far as Morbi is concerned, it should be close to 20%, 25% between Kajaria and Morbi.

Got it. And this is slightly stable over the last year and now, right?

This is stable for the year end now. But before GST, the difference was -- between Morbi and Kajaria was 40% to 45%. GST has minimized the difference from 40% to 45% to 20% to 25% because we are also paying GST, they are also paying GST.

Got it. That's my question. And anything on exports that we are planning? I know that it's a very small business for us, but do you see any opportunity there going ahead?

So our main focus is not on exports. We'll still export a little bit here and there, but our -- and our main focus is domestic. And Dubai's showroom is helping us a little bit to expand our export horizon. We're getting some inquiries from Africa and all -- a lot of people -- that is the whole purpose of opening a showroom in Dubai to get our international presence. So that's helping, but that's a very slow and steady process. Overall, all the buyers come to Morbi.

[Operator Instructions] Next question is from the line of Nikhil Agarwal from Vt Capital Markets.

Yes, sir. Thank you for the opportunity, sir. Can you please guide us with the...

Nikhil, you're not audible.

Am I audible now?

So initially, when you were speaking, it was fine. Can you go back to the same old setting? Due to no response, we move to the next participant. Next question is from the line of Rahul Agarwal from Incred Capital.

Ashok, just one question on the business mix. I can see when we discuss about outsourcing and own manufacturing. Obviously, outsourcing will increase as we've discussed earlier. But if I look at the average selling pricing, it looks like the outsourcing tiles are at least 10% expensive than what we're making in-house. I just wanted to get my thought process very clear on this. As a strategy, shouldn't we be doing the more value addition in-house and lesser outsourcing?

No. First your [indiscernible] is not correct. As far as outsourcing is concerned, like we said earlier, we have to do -- we are looking at 13% to 15% volume growth for the next 3 years. That's number one. Now next year, we are getting lesser capacity through outsourcing increase. Depending on which market you sell, suppose we want to sell to North and East, then we will put up a plant in North. If we have to sell to South more, the South plant will expand. If you have to sell West, then it will come from Morbi. So that's a basic strategy. As far as the outsourcing is concerned, only polished vitrified tiles, which is being outsourced from Morbi, the bigger slabs are more value addition than the normal production. In ceramic and GVT, nothing is like that. The manufacturing in-house will always be more expensive than the [indiscernible]. Realizations will always be better than the outsourcing.

Got it. And while referring to that was, when I look at your reported numbers, your outsourcing realizations is INR 440 versus manufactured is INR 390.

That is only for all polished vitrified tiles.

That volume is very less, no. We are -- only that selected some items we are -- what we are outsourcing. They are little value-added products.

Next question is from the line Saurabh Jain from HSBC.

Yes, thanks for the opportunity. Most of the questions have been answered. I wanted to understand that in addition to the sales team that we have on our payroll, correct me if I'm wrong, that people like the architects or the masons also are actually a strong component in this whole value chain and also act as a sales ambassador for our brand. Is that the right understanding?

So masons really don't play a role. Architects, yes, in some places, they do play a role. And we already have people in our organization who are meeting architects and interior designers. Mason is very smaller terms. So that is decision maker is a consumer as well.

Got it. So what initiatives are we putting in on ground today to kind of strengthen our relationships with people like the architects or the other influencers.

We already have people in place. We do not have to do anything today. We're already been doing it for years. We already have people in place who are very aggressively meeting architects and interior designers and promoting our products. See that in the industry, we already have to be in touch with them.

Yes. That's great. What I understand is that, correct me again if I'm wrong that things like large-sized slabs, there is a lot of training that needs to be put on ground as far as the masons are concerned because they are facing somewhat hard time to kind of handle or deal such large slabs, which they haven't kind of dealt before. Is that the right understanding? If yes, then do you see a need for kind of training also to be an important part, along with your sales strategy when you want to scale up the contribution from these larger sized slabs?

See, large slabs, Kajaria has come after two years. Morbi has come before 2 years ago. So the mason's already trained. They're already trained. And there are 15 plants operating in Morbi. Kajaria put the first plant for itself in South. Now it is putting up in North, which are the individual plants. But Morbi's already there. And they have been being trained for the last...

Not an issue -- Laying of these tiles for masons is not an issue.

Okay, understood. That is helpful. And another question that I had, what could be -- can you talk about your medium to long-term aspirations in the Plywood segment. I thought that you highlighted that you had kind of also churning up the sales team and we look -- you look to be getting aggressive in the space. Can you highlight in the mid- to long term, what are the aspirations in this business.

So right now, let's -- we are focusing on this quarter and the next quarter. We can update more after the next 2 quarters. Once we are close to this INR 100 crore number, which I talked about in the earlier call.

I now hand the conference over to the management for closing comments.

Thank you. Thank you very much. I think it was a good set of questions and answers, which came from the various share of people. And we hope, as Kajaria team, we have answered it to the best of our -- this thing. So thank you very much for organizing this, Manish. Thank you.

Thank you very much. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you. [Audio Gap].

Masons laying up these tiles of masons are main not an issue.

Okay. Understood. That is helpful. And another question that I had, what could be -- can you talk about your medium to long-term aspirations in the plywood segment. Now that you highlighted that you are kind of also churning up the sales team and you look to be getting aggressive in the space. Can you highlight in the mid to long term, what is your aspirations within this business?

Right now, let's -- we are focusing on this quarter and the next quarter. We can update more after the next 2 quarters, once we are close to this INR 100 crore number which I talked about in the earlier call.

I now hand the conference over to the management for closing comments.

Thank you. Thank you very much. I think it was a good set of questions and answers, which came from various people. And we hope, as Kajaria team, we have answered it to the best of our [indiscernible]. So thank you very much for organizing this, Manish. Thank you.

Thank you very much. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.