Pyramid Technoplast Limited (PYRAMID) Earnings Call Transcript & Summary

Hello, everyone, and a very good afternoon. I welcome you all to Pyramid Technoplast Limited's Q4 and FY '25 Con 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 risk the company faces. We have on call today Mr. Bijaykumar Agarwal, who is the Managing Director; Mr. Jaiprakash Agarwal, CFO and the Whole Time Director. I would now like to hand over the call to Jai sir to proceed with the opening remarks, post which we'll open the floor for Q&A. Thank you, and over to you, sir.

Thank you. Very good afternoon, everyone, and thanks for joining for the con call today. So now it is our pleasure to share the progress we have made in Q4 FY '25. As we continue to execute our story -- growth story this quarter saw some robust performance across all segments. Despite a dynamic market environment, we have maintained strong growth momentum. Our commitment to increase operational efficiency, enhancing product mix and scaling capacities has positioned us well for long-term sustainable growth. We remain confident in the scalability of our business model. After establishing a strong foothold in Gujarat, now we are expanding our production capacity across all categories in Maharashtra, including polymer drum -- including polymer drums, IV [Technical Difficulty]. Can you hear me, guys?

Yes, yes, now continue, please.

Okay. So with our backward integration approach with in-house manufacturing of our products like caps, lids and many other items and which is going to increase in future also, not only keep our cost in check, but also ensures better quality and faster turnaround. And with our strategic location near key industrial hubs, supported by our in-house fleet by more than 80 vehicles, we are well positioned to ensure timely deliveries, cost efficiency and customer-centric approach. So now coming up with segment-wise performance. Now MS drums, our MS drums segment delivered a solid performance with 35% year-on-year volume growth and 27% revenue growth. Dry drums are currently underway for our expanded capacity of 90,000 units per month, and we are on track to begin commercial output by September 2025. With 90% of manual process already automated, we are expecting this segment to benefit much improved margins going on. And [ SDP ] drums. We saw a healthy uptick in the SDP drums segment this quarter, with 11% year-on-year volume growth and 6% year-on-year revenue growth. This was driven by the ramp-up across 4 SDP lines, 3 dedicated to 200-liter drums and 1 for 50-liter. Capacity utilization continues to improve across these lines. We remain optimistic about delivering even stronger results. Now coming to IBC. As anticipated, our IBC segment posted 44% year-on volume growth and 30% year-on-year revenue growth. Importantly, the revenue contribution from IBC rose to 37%, up from 31% last quarter, even in the face of rising competition. Our second IBC line has now been commissioned, and the first line is operating at around 60% capacity utilization, laying the groundwork for sustained momentum. Now the strategic expansions. So we remain committed to our long-term expansion road map with ongoing investments in capacity enhancement. With Unit 6 MS drum plant, we have successfully expanded capacity from 50,000 to 90,000 units per month. Trial runs are underway will continue through June -- from June onwards with commercial output expected by September. As volumes ramp up, margins are set to improve. Unit 7 as the new unit we implemented last year. IBC segment, we have now commissioned our second IBC line with the first one, which went live in September 2023 is running at about 60% utilization. This sets up well to meet growing demand in the segment. SDP segment. We wrapped up the civil pattern in December 2024 only active across 4 SDP drums lines for 200-liter capacity and one for 50-liter capacity. This gives us a solid in coming quarter. Now coming up to new unit. So we are gearing up to commence operations under Phase 1 and here is how things are shaping up. So SDP drum, so we are setting up 50-liter, per liter trials are currently underway with commercial supplies expected to begin by end [Technical Difficulty] line 1 installation is in progress. We are targeting commercial supplies output by end of next month. Metal drums. Production is expected to go live July end. So -- and now with coming up to our recycling plant. So we'll be the first company to set up a current, with a approach to for backward integration. So we have acquired already the land, constructions are [Technical Difficulty] so to set up a -- that's recycling plant. Construction is now complete, and we are on track to start operations by July, August 2025. The total CapEx, including land is estimated to around INR 8 crores to INR 10 crores, with a payback period of around 2.5 to 3 years. Along with our scalability, we are consciously making efforts to expand our margins like sustainability growth. As part of our commitment to sustainability and cost optimization, our 15-megawatt captive solar power project is progressing very well, with commissioning scheduled in phases starting -- so now it has already started for implementation. So this initiative is expected to reduce annual power cost by around 10 [Technical Difficulty]. Financial, now coming up to financial performance. So revenue for Q4 FY '25 INR 172 crores, up by 12% quarter-on-quarter and 28% year-on-year, reflecting continued growth despite the market dynamics. EBITDA stood at INR 12.1 crore with a margin of 7%. We believe that benefits of economies of scale, cost optimization will start reflecting in the coming quarters. Net profit of Q4 FY '25 stood at INR 6.7 crore. Margins saw some contraction in Q4, primarily due to a rise in other expenses driven by scaling operations and EPR related expenses. However, as we ramp up operations and push forward with our expansion plans, this temporary uptick in cost is a natural step toward building long-term capacity and driving sustainability growth. So our balance sheet remains healthy as always, with net debt to equity is 0.20x. With ongoing expansion and strategic 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 operations, we remain committed to deliver consistent growth and value for our stakeholders. And we have also announced dividend to our shareholder as committed earlier. So now we are open with the questions and answers. I would request everybody to start one-by-one question answers.

Thank you, sir. [Operator Instructions] So the first question is from Mr. [ Dipesh Sancheti ].

Sir, just wanted to know, what is the volume growth this time. It is sales growth, almost [Foreign Language] and this quarter, the sales growth was good. But what about the volume growth?

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[Foreign Language] MS drum is around 35% volume growth year-on-year. SDP drum is around 11%, IBC is 44%.

IBC is 44%? And margins have been lower because of...

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But this is temporary because as we scale our production, [Foreign Language]...

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That is, okay, [Foreign Language] FY '26.

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[Foreign Language] for polymer drums, so June onwards we'll get a sale of some portion of sales from Wada unit also in the next quarter.

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Next up we have [ Saket Kapoor ].

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[Foreign Language] So this financial year, our target is to improve on bottom line also, we have already taken many initiative like backward integration plus utilization of all the production capacity across the segment plus solar implementation and we are coming up with our own recycling plant. So altogether, it will definitely help in improving all the -- including top line and bottom line. So now we will get start -- we will start getting results from coming quarters. But surely, we'll start getting for this financial year.

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It will definitely improve on from the last quarter, but full-fledged [Foreign Language] coming quarter onwards [Foreign Language] for only polymer drums across all segment [Foreign Language].

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Next in line we have [ Naitik Mohata ].

Sir, my first question is, what is our current utilization level across all our units?

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Also sir, this unit 8 which we are recently commissioned, so when are we expecting [Foreign Language] 100% utilization.

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Ashwath sir, request you to please mute yourself.

Yes, so I understood that you said, when the production will commence in 3 months, we've -- can get up to optimal utilization.

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Next in line we have [ Ashwath Rajan ].

So first question is in line with INR 1.5 crore [Foreign Language] that we have on. So for on Q4, how do you see this margins normalizing EPR liability on Q4?

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So as and when customers are getting registered on the EPR because government has mandated that manufacturers and user has to get registered on the portal. So slowly and gradually, customers are getting registered. So our liabilities are getting transferred. So this is going to -- this is across all the manufacturers. It is not with us only. So this is what we are continuously chasing customer. We are educating customers who doesn't know about this.

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Got it. [Foreign Language] in terms of margins, do we see, [Foreign Language].

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[Foreign Language] or it will be more or less similar?

It will increase only in coming quarter.

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And another question is, I mean with your upcoming plant, [Foreign Language] do you anticipate any material reduction in the EPR liability over the next 3 years?

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Next we have [ Swetha ].

Yes. [Foreign Language]

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Next we have [ Majin Ahamad ].

Sir my first question, sir, is, what is your going forward capacity utilization going forward because when I see the capacity utilization for polymer drum it is 75%, for MS drum it is 69% and IBC it is 61%, right? And going forward, are you going to increase volume in peak [ signal ] with 20%, 35%, 50% and but your revenue growth you're showing 15% to 20%. Is it because of the realization compression or what is it going forward?

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Got it, sir. But the realization, would it easy, sir, would it remain the same for next year?

No, no it will increase, the realization will increase, as we utilize the production capacity higher, the realization will increase.

But, sir when you're showing that you're showing it, overall when I see the volume is higher for FY '26, but your revenue growth projection for FY '26 much lesser than that, you're showing 15% to 20% revenue growth, I'm not able to understand so why is the reason?

The figures which are very, conservative figures we have added. We don't want to put very large figures. So that is why we have been very conservative in our approach.

Next in line we have [ Jave Ankaria ]. I will take up the next question as of now, [ Diwakar Rana ].

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So, we have taken limits, but we will utilize as and when required.

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Next up we have Dipesh Sancheti.

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But it is the total need, it will give a lot of...

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[Foreign Language]. So, how is the raw material prices linked to crude? Is it linked to crude?

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July, August, it is a fully automatic plant. We just need to fit material and we'll get a finished product in hand, so 50 is already done. So now it will start commissioning in next month onwards. So July, August [Foreign Language].

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Discussion with all major, major customers. I myself is looking after this...

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[Foreign Language] now we have started marketing on this with customers. So, I'm sure that things will many customers will start getting onward with this product.

So, sir, customers, EPR liability, what will happen to that, [Foreign Language] as soon as they give you the raw material.

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Next we have [ Naman Bhansali ].

Sir, first question, [Foreign Language] there are multiple other players who have similar type of products in IBC and all. But still the market is majorly duopoly. [Foreign Language].

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[Foreign Language] we were selling many IBC product pan India. So we will shift some IBC business [Foreign Language]. We will onboard new customer. So we don't look any challenges coming up. It is a win-win situation for customers and for us also both.

Next question we have from Saket Kapoor.

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We are the few major players of MS drum in the market. [Foreign Language] So we are expanding our capacity. We see a lot of growth coming up in that segment also. So we don't want to leave that opportunity untouched. So we have been ramping up our capacity. [Foreign Language] so it will help us improve our top line and bottom line both. And we see a very lot of scope coming up in the lateral drum.

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Next question we have from [ Ankit Kanodia ].

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And largely export driven.

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So, plus we are one step ahead with our competition. We have been adding products. We have been adding product mix, [Foreign Language] plus we are coming up with recycling, which is a demand -- which is a current demand. Our customers also want us a good reputed supply to come up with the facility. So we are always a step ahead and we want to become a role model for others. So this is what we have been taking ahead, and we would like to be a very a large supplier of manufacturer in India. This is what...

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Absolutely, who are the manufacturer are repacking, they are putting their chemical, putting their products all over the world. Plus we are exporting our IBC. We have appointed several and they have been kind enough and...

Sir, you're in mute, Bijay, sir, you are on mute. Next in line we have Diwakar Rana.

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We do give customer as and when required.

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Next question we have from [ Rishi Kothari ].

I had 2 questions that I have to ask. What's the current overall utilization rate across all units, petroleum if I see on a combined basis? And what would be the optimal utilization across new capacities eventually, let's say, when the plants are ready?

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On a combined basis.

Combined, if you see the combined, it is around 70%, including all categories. And if I tell you segment-wise, it is polymer drum, it is more than 75% and IBC which is around 65%. And then metal drum it is, right now it is around 63%, but eventually it will come up as and the machine will get -- installation will get completed. And for this, Wada, the Maharashtra unit, so first year, we -- so overall capacity, we see around 30%, 35% capacity utilization in this first year, this financial year.

Okay. And by second year...

Financial year, we will complete more than that.

Any number 60%, 70%, just to give it a number?

It is around INR 60 crores, INR 70 crores, INR 70 crores we are seeing -- looking on the -- in terms of revenue around INR 70 crores to INR 100 crores from our Maharashtra unit.

Okay. Got it. And the other question being in terms of automation nearing 90% in the MS drum segment, how do we -- and further enhancing manufacturing efficiency across other product line in terms of be similar -- will the manufacturing efficiency eventually be seen in other segment for our business or not?

So, we -- so for polymer drums, we have already -- it is -- we have been utilizing optimal capacity, like the most optimal way we are producing that polymer drums. IBCs also, we have already automized everything, and we have been utilizing capacity as per that. So we have been doing R&D every time, and we are increasing the capacity. For metal drums, we saw a scope of 100 -- the utilization, how to increase the utilization. So that is what we are doing it right now. And it will definitely improve by 80%, 85%, more than that, in fact. So in coming quarters, maybe next quarter onwards, you will see definitely further improve in capacity of MS drums. And by that time, we will give you a good news about Wada also, Maharashtra unit also.

But just adding on to that, this type of automation on our different segments, will it give us a good cost optimization of cost efficiency per se in our product line?

Yes, yes, definitely. By utilization -- by making further more automization, we will definitely get cost reduction in terms of more output, less labor and everything.

So just to give any sort of percentage increase, incremental increase in the margin front EBITDA level, what should be the increment change we see probably next 1, 2 to 3 years? Of course, we right now anyway running at 7%, 8% EBITDA level, but there was a time that we were running at around 11%, 12%, right?

For the EBITDA more than 10% in coming -- this financial year. So hopefully, we are on top of that.

Hopefully at 10% EBITDA level margin.

Correct, correct. Absolutely.

And this will be purely because of the cost efficiency in the product line.

It will not only cost efficiency. It will -- we will have -- we are -- I'm expecting it, the cost optimization plus we will get a reduction from power saving coming up. So altogether, I've been very -- it's very conservative. So we are targeting this financial year, it is up to more than upward of 10%.

So eventually, we can see EBITDA levels of 12%?

Upward of 10%, I'm not taking any figure as of now.

Eventually after, let's say, 2, 3 years down the line, we can see that to achieve the same EBITDA that we used to have.

Because for that we need to utilize the entire capacity also. So we are on track to utilize the capacity of all the units. So as and when -- as we start getting utilization, we'll definitely improve on EBITDA level.

Next in line we have [ Ganesh Nagashekar ].

[Foreign Language] 5% to 6%, that is going to 8% to 9%. So is that increase happening in FY '26 itself, yes, will it take a few years to get to that 8% to 9% figure.

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Next question we have from [ Kush Bankiya ].

So my main question for the management is, what is the major reason why our margins are lagging much behind than our competitors because...

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And sir, second question is on our recycling plant.

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And another question is on the recycling plant. So, when we are expecting it to start contributing to our top line?

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From FY '26, September FY '26?

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Okay. And will it help to boost our margins or [Foreign Language] will it have same margins as existing business or will it have better margin?

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Last question is, even our closest competitors are also been able to grow at around 15% annually. So do we have plans to outage them, how will we are going to out phase them?

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So, what I get from your answer is, we already have demand from our existing customers, more demand. So we are not able to fulfill it right now because we are already at 100% utilization.

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Next in line we have Saket Kapoor.

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Next question we have from Dipesh Sancheti.

[Foreign Language] are we going to go international also?

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No comments.

[Foreign Language] Jai, do you think the sales growth will come from CapEx only or will it come from better efficiency, I mean, where do you see sales growth coming from?

It will add up. See, we are already running at 75%, 80% in polymer drums. IBCs, we are running up and at full utilization. Metal drum, we have certain scope coming up, we have already explained. So now whatever extra sales will come, so 2 factors, either we add machines, that's what we are already doing it, plus if the prices will increase. So for that, we are ready in both the way. So increasing the capacity, we are already doing it. Prices increase, so we will definitely get the advantage of that.

And just wanted to know how big is the Maharashtra land?

It is around 10 acres.

10 acres, plus 2.5 acres, which you have recently acquired or...

No, no, 10 acres.

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[Foreign Language] And what is the acquisition cost, if you can tell me per acre?

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Okay. Because the prices have increased significantly [Foreign Language].

So, we are focusing on our unit right now and continue sell it off.

We have to focus on all the balance sheet, as well as everything [Foreign Language].

Next question we have from [ Jay Venkaria ].

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Thank you, sir. [Operator Instructions] We have next question from Kush Bankiya.

So, sir, I missed one number. So at peak utilization, how much Maharashtra plant can add to the top line?

INR 200 crore.

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[Foreign Language] We can take up the volume without [Technical Difficulty].

Okay. So as in first year, we are targeting around 30% utilization, right?

INR 70 crore to INR 100 crore.

I think we are done with our questions. Thank you, Bijay, sir. Thank you, Jai, sir for your time, and thanks to all the participants as well.

Let me take -- let me just add on some last speech. So I'll thank to all the participants. Thanks for joining. Thanks for asking questions. Thanks for correcting us. And I'll tell you, so we have been focusing on past few years on the CapEx to increase the capacity. So we have -- infrastructure is ready. So this year, we'll definitely see a lot of growth coming up from the top line. And for the bottom line, this year, this financial year, we have been targeting to increase our bottom line also and we have taken many initiative. And definitely in coming quarters, it will start giving -- and definitely, when we next join on the con call, I'll see asking you this question that how this increased. So thanks for joining, and hopefully, to see you again. Thank you so much.

Thank you, sir. Thanks, everyone.

Thank you. We'll close the session now.