Pyramid Technoplast Limited (PYRAMID) Earnings Call Transcript & Summary

Hello, everyone, and welcome to Pyramid Technoplast Limited Earnings Con Call for Q4 and FY '24. We have with us on the call today Mr. Bijaykumar Agarwal, Managing Director and Chairman of the company; and we have Mr. Jaiprakash Agarwal, Whole-Time Director and Chief Financial Officer of the company. I must remind you that the discussion on today's call may include certain forward-looking statements and must be, therefore, viewed in conjunction with the risks that the company may face. I would now request the management to take us through the company's business and strategic updates, post which we will open the floor for questions. Thank you, and over to you, sir.

Hi, good morning, everybody, and good morning, all my friends. So thank you for joining us on Q4 FY '24 earnings con call. Hope you had a time to go through our investor presentation, which we have already uploaded on the exchange. So now this year, we, with all your support, we have achieved a significant milestone with our IPO and listing on both NSE and BSE. Our journey began with a small plant in Silvassa, at Dadra Nagar and Haveli. And through our hard work and dedication, we expanded our operations to Bharuch, Gujarat and beyond. Today, we proudly operate 7 manufacturing units with 8 on the way in Maharashtra. And going forward, more locations to be added in near future. Our goal has always been clear, to maintain best quality products, provide timely service to our clients and offer competitive pricing. Over the years, we have expanded our offerings from MS drum, polymer drums and to intermediate bulk containers, IBC, meeting the bulk industrial packaging needs of our clients across various industries. We continue to scale our business across all three verticals to better serve our clients. Now coming to the strategic updates and planned CapEx this year. We have increased our metal drum capacity from 30,000 to 50,000 units per month using automation at our Unit 6 Gujarat plant. And as highlighted in our earlier communications, we have already purchased adjacent land to our existing Unit 6. And in the near term, we are targeting to reach around 70,000 units per month capacity by September 2024, with potential to reach 90,000 units by further more automation. At Unit 7, we have already commissioned Line 1 for IBC in July '23, which is at 50% capacity. We plan to order Line 2 IBC very soon as soon as we cross 70%, 75% of the capacity. Our strategy is to expand in a phased manner to ensure steady growth and efficiency. Also, the land initially proposed for Unit 8, adjacent to Unit 7, will now be merged into Unit 7 for better... [Technical Difficulty]

Jai sir, we lost your voice.

Friends, unfortunately, we got disconnected. So let me start it again. So this year, we have achieved a significant milestone with our IPO. Thanks for all your support. Our journey began with the plant in Silvassa. And with our hard work and dedication, we expanded our operations in Gujarat, Bharuch. Now we probably have 7 units running and 8 is on the way in Maharashtra. And going forward, more locations to be added in near future. [Technical Difficulty]

I think we lost the voice again. I'll just check with them.

Yes, Jai, please go ahead now.

So this year, we have added -- we have increased our metal drum capacity from 30,000 to 50,000 units per month with automation at Unit 6. And as highlighted in our earlier communications, we have purchased adjacent land to the Unit 6. In the near term, we are targeting to reach 70,000 units by September 2024 and with a potential to reach 90,000 units per month. At Unit 7, we have already commissioned Line 1 of IBC in July '23, which is currently operating at 50% capacity, and we plan to order Line 2 for IBC. Our strategy is to expand in phased manner to ensure steady growth and efficiency. Also the land initially proposed for Unit 8 will now be merged into Unit 7 for better efficiency and will allow us to expand IBC and HDPE polymer drum production there with civil work already underway and is expected to be completed by end of quarter 3. Our recently announced acquisition of land at Wada in Maharashtra. We have commenced civil work there. Phase 1 CapEx, including the purchase of land and civil work is estimated to be around INR 40 crores to INR 45 crores, and is expected to be completed by quarter 4 2025. Now we plan to gradually ramp up the capacity over 2026 and financial year 2027, aiming to achieve approx INR 150 crores in revenue. The entire planned capacity will be developed in 3 phases in 4 to 5 years with a total CapEx of INR 100 crores and revenue potential of around INR 400 crores from the Wada plant. Our overall -- so for this financial year, our overall volume during the year increased by 19% year-on-year, driven by growth across all three verticals. In financial year 2024, our volume for IBC grew by 27.2% year-on-year basis, metal drums by 21.1% and HDPE drums by 16.4%. We ended the year with a total income of INR 537 crores, achieving a growth of 11.5% year-on-year basis. And EBITDA margin during the year 2024 stood at 9.1%. As per the pricing norm in the industry, typically, raw material prices changes are reflected in the selling price as monthly prices are announced. However, we maintain an inventory of around 45 days, and we see a lag in cost reduction when raw material prices are falling. This lag affected our EBITDA margins during the year. We do benefit from this lag when raw material prices are rising. We have seen recovery from lows in January and hope we benefit by this in the financial year 2025. And this can be seen on our quarter 4 earnings also. Balance sheet remains healthy as we have a net cash balance sheet, to expect to continue to maintain a healthy balance sheet and CapEx is expected to be funded from internal accruals and cash balance to maintain net debt balance -- debt 0 balance. We remain optimistic about the future and are committed to deliver value to our stakeholders. And once again, I thank all my stakeholders, all my investors. Now our floor is open to question and answers. Thank you very much.

[Operator Instructions] The first question from Ms. Amishi Gupta.

I'm speaking from Niveza Investments. And my question is the capacity utilization for the financial year '24 has fallen by 2.2%, even though volumes have been increasing. Is this because Unit 8 is under construction or are there other reasons as well?

Because Unit 7, we have -- we are running at 50% capacity. So once it will be utilized more than 75%, then you can see the capacity utilization will be higher.

Okay. And what is the optimal capacity utilization across all your units, especially Unit 7?

So it is around 65% to 70%.

We have the next question from Mr. Divyesh Vora.

I have seen your presentation, and from that, I understand that because of the raw material cost, this year you had the profit degrown by INR 46 crores. Am I right in making that statement? If everything would have been normal as per the '23 figures, it would have been INR 46 crores, which you have lost because of the raw material movement, which is against your selling price. So is it safely to understand that everything would have been normal, your profits would have been INR 76 crores?

[Foreign Language].

INR 29 crores is your existing profit. If I add INR 46 crores, it is roughly around INR 75 crores.

Divesh sir, that number that you're referring to is the revenue bridge number. So had prices stayed where they were last year, revenue would have been higher by INR 46 crores. But we don't make 100% margin. Our EBITDA margin is around 9% to 10%. So INR 4 crores to INR 5 crores of EBITDA loss is there because of this.

Okay. So fair enough. I understood. I was misunderstanding it as a raw material cost only. Revenue -- it's a revenue which has been -- my second question would be that since you are doing expansion in IBC second line and this, so how fairly do you think you will have a projection for 2025 in terms of your top line growth and your -- because we see a lot of expansions happening, but we couldn't -- we are not able to decipher into the growth pattern, which will happen in your capacities and your top line for '25 and then '26?

[Foreign Language]

So if you can tangibly put it in numbers or in percentage terms the growth of topline?

[Foreign Language]

And you are planning a CapEx of INR 45 crores. But if I see your cash accrual, which is around INR 35 crores or INR 40 crores. So are you planning to raise some debt or you...

[Foreign Language]

So you are planning to keep the company as debt free?

[Foreign Language]

Utilizing all the Phase 3 of Wada, we will utilize it from our internal accruals.

We have the next question from Mr. Majid Ahamed.

From Smart Sync Investment Advisory Services. So my first question, sir, is that FY '24 has been slightly weaker what we expected. How is FY '25 is going to look in terms of raw material pricing? Any sort of disruption that you're looking, sir? How do you see FY '24 going forward? Because as you said last time that it has bottomed out, but how do you see any sort of improvements?

[Foreign Language]

At the same time, the chemical companies are also growth is there. We have seen this year. This year, we see an opportunity in the chemical sector also. And in HDPE sector also -- this year, all the entire industry is hoping to be good because the chemical sector is also recovering. At the same time, the HDPE, the demand is coming from them. So as the demand will grow, the prices will start increasing. This is how it is.

[Foreign Language]

And my last question is, what's your upcoming plans on breakup -- the breakup between the polymer drums, IBC and how are we going to look? So what is the breakup currently? And how are you going to look forward in the upcoming years between those products, IBC, polymer drums and others?

Break-up volume-wise [Foreign Language]?

Yes, sir.

[Foreign Language]

We have the next question from Mr. Parth Kotak.

It is heartwarming [Foreign Language] despite a lower raw material price and finish good price, we managed to grow margins [Foreign Language] our nameplate -- we have just mentioned MS drums [Foreign Language] but last time I think you mentioned MS drums [Foreign Language] MTPA capacity [Foreign Language], is that the correct understanding as of...

[Foreign Language]

And same would be the case with IBC and polymer drums, right? I think [Foreign Language] current capacity, and I think our guidance was [Foreign Language] IBC 6 lakh units [Foreign Language] and polymer drums 48,000 units -- 48,000 metric ton [Foreign Language]. Is that the correct understanding?

[Foreign Language]

In Wada, we're coming with all the three products, polymer drums, IBC and metal drum.

[Foreign Language]

Fair enough. Secondly, on the margins front sir, I think we've had a conversation [Foreign Language] that is why our..

[Foreign Language]

Correct, sir. But if [Foreign Language]?

[Foreign Language]

Right, right. [Foreign Language] last question, [Foreign Language] other income, that has jumped sharply from INR 33 crores to INR 55 crores. [Foreign Language] nature of other income?

[Foreign Language]

We have the next question from Mr. Priyank Parekh.

[Foreign Language] in terms of revenue number, can you guide us [Foreign Language] FY '25 and FY '26 [Foreign Language]?

[Foreign Language]

So in FY '24, we did INR 533 crores, and on that 20% would be INR 640 crores. So we are seeing if FY '25 around INR 640 crores?

[Foreign Language]

Okay. And revenue level [Foreign Language] polymer, MS, and IBC, so would that...

[Foreign Language]

By the end of 2025.

IBC [Foreign Language] 36% to 37% [Foreign Language], and 43% [Foreign Language] polymer drum [Foreign Language].

10% others [Foreign Language].

[Foreign Language]

Okay. Sir, what I am saying, we would be requiring 27,000 metric tons of polymers drums capacity if we expect 75% utilization, right? MS drums [Foreign Language], we would require 10,650 metric tons and IBC [Foreign Language] we would require 366,000 around, if I expect capacity utilization to be around 75%. So for FY '25, are we on a track to achieve this much capacity expansion?

[Foreign Language]?

[Foreign Language] 20% growth.

[Foreign Language]

Maharashtra [Foreign Language].

[Foreign Language]

We're hoping we can receive [Foreign Language].

Quarter 4 of FY '26?

'26, [Foreign Language]

This is quarter 4 of FY '25, not '26.

Okay. Got it. Next four quarters, we won't have Maharashtra and from the fifth quarter we will have Maharashtra Phase 1 ready.

Majorly Maharashtra you can consider in 2026 only.

Okay. Got it. Yeah so and sir we had initial target of INR 1,000 crores for FY '26 as a whole. [Foreign Language]?

[Foreign Language]

'27 you mean?

'27, yes.

We have the next question from Mr. Madhur Rathi.

[Foreign Language] inventory loss [Foreign Language]?

[Foreign Language]

[Foreign Language] quarter 4 [Foreign Language]?

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

We are expecting it to be [Foreign Language].

[Operator Instructions] We have a question in the chat box from Mr. Rohan Patel. He's asking if -- so considering all the CapEx and expansion we are doing, what would be our top line in FY '28? And what would be the normalized margins?

[Foreign Language]

So we have the next question from Mr. Saptarshee Chatterjee.

[Foreign Language] 5 times asset turn [Foreign Language] every INR 100 crore incremental revenue, [Foreign Language] maybe I have to do INR 20 crores of CapEx and I have another 80 days of working capital, meaning that [Foreign Language] another working capital [Foreign Language]. So the free cash flow [Foreign Language] negligible. [Foreign Language]?

[Foreign Language]

[Foreign Language]

[Foreign Language]

Understood. And second is, sir, when I see in your business that you are expanding in states like Maharashtra, can you give some indicative market share that we have in each of these like polymer drums, IBC, [Foreign Language], in which part we win the deals?

[Foreign Language]

Understood. [Foreign Language]?

[Foreign Language]

Understood. [Foreign Language]?

Time Technoplast.

[Foreign Language]?

[Foreign Language].

We have a follow-up question from Amishi Gupta.

[Foreign Language] FY '25, FY '26 and FY '27 EBITDA and PAT projections [Foreign Language]? [Foreign Language] raw material cost [Foreign Language]?

[Foreign Language]

[Foreign Language] projection [Foreign Language] for raw material for FY '25 and FY '26 [Foreign Language]?

[Foreign Language]

[Foreign Language]

[Foreign Language]

We'll take a follow-up question from Mr. Priyank Parekh.

I just wanted to understand [Foreign Language] other expense last year compare [Foreign Language], what is the reason behind that? And how we are seeing it going forward for next 3 years?

[Foreign Language]

Okay, sir. [Foreign Language]

[Foreign Language]

Once we start getting business from them, from that sources, so then -- you will not see the kind of difference between the other expense.

[Foreign Language]

Almost completion stage [Foreign Language]. So in next -- third quarter, we will...

[Foreign Language]

Only the Maharashtra unit will be starting...

[Foreign Language]

Then we will keep on adding machines, that's it.

[Foreign Language] CapEx projection [Foreign Language], what would be that, FY '25?

[Foreign Language]?

CapEx?

[Foreign Language]

[Foreign Language]

[Foreign Language]

Last year we have proposed to do around INR 40 crores, INR 45 crore CapEx for financial year.

[Foreign Language]

If FY '24 end [Foreign Language] capital work in progress, [Foreign Language].

[Foreign Language].

And beyond that INR 45 crores, [Foreign Language] for FY '25.

Yes.

Okay. And we feel that [Foreign Language] internal accrual [Foreign Language] we don't have to rely on external borrowing.

[Foreign Language]

[Operator Instructions] We'll take a follow-up question from Mr. Madhur Rathi.

[Foreign Language]

[Foreign Language]

Plus we have done a lot of automation also. So that will...

[Foreign Language]?

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] product-wise margin differentiation [Foreign Language]?

[Foreign Language]

[Foreign Language] MS drums, HDPE and IBC?

[Foreign Language]

[Foreign Language] IBC and MS drums?

[Foreign Language]

We have the next question from Mr. Arpit Tapadia.

Can you just throw some light over the pricing trend during the year? What was the prices at the starting of the year and how it has closed?

105 [Foreign Language] 95 [Foreign Language].

Starting of the year [Foreign Language], now it is INR 95 per kg.

Correct.

It is about the polymer price. Same trend is there into the IBC grade polymer as well?

Yes, when Polymer goes up, it goes up for all grades.

Okay. And what is our capacity utilization for the year and this quarter?

[Foreign Language]

Unit 7 we are utilizing at 50%. Going forward in next quarter, we are hopeful that we will increase by 10%, 15%.

I'm not able to reconcile then. You're guiding about 20% volume growth. So in case MS drums [Foreign Language] 100% utilization [Foreign Language] achieving that 20% from the entire level from IBC only?

[Foreign Language]

Historically, [Foreign Language] polymer prices, then historically low [Foreign Language]?

[Foreign Language]

[Foreign Language]

Yes.

[Foreign Language]

[Foreign Language]

[Operator Instructions] We have a next question from Mr. Shivam Jhunjhunwala.

Shivam from Lucky Investments. [Foreign Language] When we last spoke, [Foreign Language] IBC plant utilization was somewhere around 30% and because [Foreign Language] ramp up stage, [Foreign Language] break even. At around 50% utilization [Foreign Language] 60% [Foreign Language]?

[Foreign Language]

[Foreign Language] 40% around [Foreign Language]?

[Foreign Language]

[Foreign Language] from the current 50% to 70%, 75%, incrementally [Foreign Language]?

[Foreign Language]

[Operator Instructions] We have the next question from Mr. Anant Mundra.

[Foreign Language] something of that sort?

[Foreign Language]

[Foreign Language]

[Foreign Language]

Anything related to plastic we are doing in-house. Only few components which we are buying from outside which doesn't make sense to make in-house. Certain thing we are already doing in IBC. We have recently installed, right now it is under testing. So next quarter you will see that we will not procure that product from outside, we will start manufacturing. As soon as we will start manufacturing, it will start showing on the profit side. So this is how it is.

We have a follow up question from Mr. Rohan Patel.

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Operator Instructions] Sir, I think we don't have any further questions. I will hand over the call to you.

Dear friends, thanks for joining us. And as you see in the last quarter, we have improved. Going forward, quarter-on-quarter, we are going to improve further. This year, we see a very good scope for and good demand coming up in chemical industry, in other segments, which will drive our demand also. And as soon as we will complete Wada project, we will definitely -- we are exploring our opportunities in other markets. And soon, we will going to use that. Thanks for joining us. Looking forward to meet you again next call.

[Foreign Language] Thank you.