Pyramid Technoplast Limited (PYRAMID) Earnings Call Transcript & Summary

Hello, everyone, and very good afternoon. I welcome you all to Pyramid Technoplast Limited Q3 and 9-Month Earnings Call. Please note 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 faces. We have on the call today Mr. Bijaykumar Agarwal, who is the Managing Director; and Mr. Jaiprakash Agarwal, CFO and Whole-Time Director. So I'd now like to hand over the call to Jai sir to proceed with the opening remarks. Post which, we'll open the floor for questions. Thank you and over to you, sir.

Hello, everybody. A very good afternoon and a very warm welcome, everyone. So as the result is already open so let me just summarize few things. So it is our pleasure to share the progress report of Q3 financial year 2025 as we continue to execute our growth strategy. So this quarter we saw robust performance across our key segments; IBC, metal drums and polymer drums. Despite a dynamic market environment, we have maintained strong growth momentum. Our commitment to increase operational efficiencies, enhancing product mix and scaling capacities has positioned us well for long-term sustainable growth. So let's start with MS Drum. So this segment recorded an impressive growth of 46% year-on-year volume growth and a 40% year-on-year revenue growth. So in Q3 FY '25 benefited from the expansion of our production capacity from 30,000 to 50,000 units, which you can see and further, we are scaling it up to 90,000 units per month by March 2025. So for HDPE Drums, volume growth stood at 6% year-on-year with revenues remaining flat as same due to capacity constraints. However, as we said, with the expansion of Unit 7 now completed, we expect a pickup in production in quarter 4 financial year 2025. For IBC segment, the segment posted 17% year-on-year volume growth and 8% year-on-year revenue growth, maintaining market share despite pricing pressures. Capacity utilization on Line 1 has already crossed 60% and second line is scheduled for commissioning in early financial year 2026. So as far as these are what has happened to us. Now we would like to share some strategic expansions. So to go forward, as per our long-term commitment expansion. So Unit 6 capacity, we are increasing from 50,000 to 90,000, which is scheduled for March 2025 with civil work and machine installation progressing as planned. For Unit 7, production ahead -- for Unit 7, that is IBC and HDPE Drums, our production commenced ahead of schedule for 1 line of 200 liters polymer drums and 50-liter polymer drums is already commissioned for Unit 8 Maharashtra where we are installing HDPE Drums, IBC and MS Drums. Phase 1 construction is expected to be completed this financial year with trial scheduled for March 2025 and commercial production beginning in quarter 1 of financial year 2026. I request everybody to be on mute, please. For Unit 9, as we informed, we are coming up with a recycling plant. The construction is underway for our first recycling plant with expected completion by May 2025 with an estimated investment of INR 8 crores to INR 10 crores, which will allow us to recycle around 10,000 metric tons of plastic annually reducing dependence on virgin raw materials and enhancing our cost efficiencies. On sustainability part so as a part of our commitment to sustainability and cost optimization, our 15.25 megawatt captive solar power project is progressing well with commissioning scheduled in phases starting May 2025. This initiative is expected to reduce annual power cost by around INR 10 crores, improving our EBITDA margin. We have laid out a CapEx budget of around INR 40 crores to INR 50 crores for financial year 2025, of which INR 38 crores has already been spent. For financial year '26, the budget is projected to be INR 50 crores to INR 60 crores and will be utilized for the mentioned initiatives. Revenue for Q3 stood at INR 154 crores, up by 15% quarter-on-quarter and 19% year-on-year reflecting continued growth despite the market dynamics. EBITDA stood at INR 11.8 crores with a margin of 7.6%. We believe that benefits of economies of scale and cost optimization will start reflecting in the coming quarters. Net profit for Q3 stood at INR 6.8 crores. Our balance sheet remains healthy with net debt to equity at 0.13x. With ongoing expansions and strategies investments, we are well positioned for the future. The completion of new capacities, sustainability initiatives and backward integration will drive efficiency and profitability. As we scale operation, we remain committed to deliver consistent growth and value for all stakeholders. And one more thing I would like to add that few of our projects has been completed and few of them are on the last leg. So from next quarter onwards, we will start getting better results. Thank you very much. Now I start the floor for the question and answers.

[Operator Instructions] We have the first question from [ Mr. Dinesh ].

My first question is regarding the other operating part of our business. So broadly wanted to understand the kind of margins that we would have in this segment and going forward, do you think this will continue to remain a sizable part of the business or should that taper off or how are you broadly thinking about this?

So with our initiative, the margins will going to improve because right now we are adding up a lot of volumes, lot of CapEx is happening. So once the utilization will start happening, our margins will start increasing. And plus we have already taken initiative like we are coming up with recycling plant, we are coming with solar installation, which will add on to the margins definitely.

My question was regarding the other operating part of the business in which we were kind of selling raw materials?

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[Foreign Language] on the IBC container business, we had said that competitive intensity there is increasing a bit. So is this kind of larger players increasing competitive intensity or are other kind of smaller players coming up or how is that shaping?

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We have healthy relationship with our customers so we give them solutions. So that is why customers are with us and we are increasing our -- we are adding new customers every month-on-month basis.

Got it. One last question [Foreign Language] we have EPR costs which have risen to a hit on margins. So is that a major thing? How is that?

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Once we complete all the CapEx, margins will come back to normal plus we will add -- we have taken certain initiative which will definitely add on to the...

We have the next question from [ Mr. Saraj Gupta ].

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As per our last survey, we achieved 40% so we are assuming that we are at 40% as of now.

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Next year it would be around 700 odd plus.

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So we have the next question from [ Mr. Saket Kapoor ].

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So we will have a quarter-on-quarter growth going forward from next quarter -- from actually this quarter 4 onwards.

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[Operator Instructions] We have the next question from [ Mr. Deepesh Sancheti ].

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Quarter 1 of FY '26, we will be able to achieve full capacity.

Not full capacity. Commercial production will start, then we will start adding machines slowly and gradually.

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We will start getting volumes, but it will be a gradual process.

But we must be already in talks with customers, right?

Yes, yes we are already in discussion. But we need to do sampling. We need to do everything. We need to start with because it's a new facility.

Okay. And you mentioned that we will achieve INR 590 crores in this year FY '25 and FY '26 you mentioned INR 700 crores. [Foreign Language]

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And sir, margins will start improving especially I think in MS Drums you mentioned. [Foreign Language]

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Q1 I would say because we are installing a fully automatic plant.

Where are you installing this?

In Bharuch only that we are ramping our capacity to 90,000 tons per month. So it will definitely add on the margins there.

Great. And you expect the same ROE to be maintained there?

Yes, yes, absolutely.

Great. And I think one more question would be -- and your solar plant has already commercialized or it will take time?

It is under process. It is under installation right now. So from May onwards, we will start getting connections from -- slowly and gradually installation will start.

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Because we need to go certain government approvals so we are doing that.

So by May, we should be able to start saving proportionate INR 10 crore per year [Foreign Language]?

Correct.

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It is under testing. So we will be the first company to start recycling plant for our own consumption. So the idea behind this is to collect material from our existing customer and convert them into drums and supply them back. So this idea is working. We have been discussing with many customers now. Hopefully from May onwards we will start doing this.

Okay. And how much would be the CapEx on this?

Around INR 8 crores to INR 10 crores we have identified as on date.

Okay. Already INR 8 crores to INR 10 crores. So the kind of material which we are getting from outside, there are some companies which are doing only this recycle. I mean they're doing for their own consumption also, but I think they're selling in the market also. So we are not going for that kind of companies. Just to give you an example of Agro. Agro is also doing that, Agro India.

This is the first initiative for us. So for now, we will do it for ourselves. So as and when we have an expertise, we'll start doing it for the outside market. So that will be a challenge then.

So then with this new plant, how much will we be able to do -- I mean achieve. I'm sure not 30%, but how much percentage we will be able to achieve?

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It will definitely depend upon the input material, whatever material we are getting.

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But definitely it will save certain amount, but as of now we cannot comment on that because again if things will not work out, you will going to say next quarter.

But sir, since we are getting the same material as ours, we are getting our products also back, right?

Exactly. So we need to see -- we need to maintain the same quality because packaging is very dynamic. So basically it moves from one place to another. So we need to maintain the same quality. We will do certain trial and errors and accordingly, we'll come to a conclusion. Right now we are targeting 30% for sure. This is our target. We are starting with 30%, then we'll go how best we can go ahead in that.

[Operator Instructions] We have the next question from [ Mr. Pratik Dedia ].

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Correct, correct. We already have inventory in plant and certain material in transit office...

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[Foreign Language] Maybe we'll start. This quarter will be definitely better than previous quarter.

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We see demand coming from all the polymer drum also, IBCs, metal drum also. [Foreign Language]

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But we want to keep ourself ready to as soon as the infrastructure comes, the demand comes, we'll definitely catch up that one.

Okay. And one more thing, your existing capacity [Foreign Language]

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[Operator Instructions] We have a follow-up question from Mr. Saket Kapoor.

Sir, if you could just explain to me the volume growth part. I just jumbled it up just for the sake of repetition. For the 9 months, which category we have seen this volume and for the next year, how are we seeing this gaining traction once our new capacity gets commissioned?

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Sir, we are -- our competitors' customers and we are adding the numbers month on month basis.

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[Foreign Language] We are serving everybody.

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Sector have started improving. you can see the numbers of other chemical companies. They have also given a good result.

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We'll take a follow-up question from [ Mr. Shanthanam ].

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Our focus is operational efficiency. We will increase the margins from there and we are definitely always at good scope for improvement. So this is what we believe in and we are working on that.

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We have the next question from [ Mr. Rahul ].

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[Foreign Language] So we'll take a follow-up question from Mr. Deepesh.

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Because Maharashtra will be fairly significantly plant. So Maharashtra generally [Foreign Language]

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[Operator Instructions] We have another follow-up question from Mr. Pratik Dedia.

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So we have another follow-up question from Mr. Pratik.

[Foreign Language] What is our current long-term debt and working capital requirement?

[Foreign Language] INR 60 crores

INR 60 crores. So INR 60 crores, we have drawn that amount or how much is pending?

INR 20 crores is used balance is under sanction. But as and when we will need to pay a certain amount for solar, we'll submit that.

Okay. So as on 31st December, our closing long-term debt balance is INR 20 crores. What is the cost of fund there?

8.5%.

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And we will reach peak debt of INR 60 crore when?

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Solar is the next initiative which was not planned earlier.

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[Operator Instructions] Sir, I think we don't have any further questions. So I'd like to hand over the call to you for closing comments.

I thank you all the investors, all the participants and the patience you have all shown on us is remarkable. And we -- as I said, few of our projects has completed, few are on the last leg. So now it's time for the good show and quarter-on-quarter, you will see the improvements and the numbers will start growing. And I would hope and tell you that keep trusting us and keep update on us. Thank you very much.

Thank you, Bijay sir, Jai sir, for taking the time out and thank you to all the participants.