Rushil Décor Limited (RUSHIL) Q1 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Rushil Decor Limited Q1 FY '26 Earnings Conference Call, hosted by Asian Markets Securities Private Limited. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhatelia. Thank you, and over to you, sir.

Thank you, Anushka. A very good afternoon, and welcome all to Rushil Decor's First Quarter FY '26 Earnings Conference Call, hosted by Asian Market Securities. From the management side, we have Mr. Rushil Thakkar, Executive Director; Keyur Gajjar, CEO; and Hiren Bhai, CFO. I now hand over the call to Rushil Bhai for his opening remarks, post which we can open the floor for Q&A. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. Welcome to Rushil Decor Limited's earnings conference call for the first quarter ended 30, June 2025. I would like to thank everyone for taking the time to join us. Today, I am joined by our CEO, Mr. Keyur Gajjar; and our CFO, Mr. Hiren Padhya. The earnings presentation has been shared with the stock exchange, and we trust you had the opportunity to review the material. Let me begin by addressing an unfortunate event during the quarter. In early April, a fire broke out at our Andhra Pradesh MDF facility. Thankfully, there were no injuries and no damages to the core manufacturing assets or inventory. The incident was contained to an area outside the main operational zone. Production was disrupted temporarily and resumed in mid-May. While this impacted our performance for the quarter, we have initiated the insurance claim for the process and are covered for both material loss and the loss of profit. In the MDF business, the revenue for the quarter was INR 1,242 million as compared to INR 1,692 million in quarter 1 financial year '25. On the profitability front, the temporary shutdown impacted our EBITDA margins and the business reported a negative EBITDA of INR 73 million. The loss of 43 days of production, which also includes 8 days of planned maintenance shutdown has led to a decrease in volumes, which stood to 52,074 cubic meters during the quarter. However, it is encouraging to note that the blended realization improved by 4.5% year-over-year, supported by the disciplined pricing and improved product mix. Despite of disruption, we have observed a steady recovery in the operations since the resumption. Turning to the laminate business. Revenue was INR 445 million at 5.6% decline year-over-year. The decline was primarily due to the lower export volumes, which were down by 16.9% year-over-year. However, the blended realization improved by 5% year-over-year with export market realization rising 5.7% and the Indian market realization increasing 7.3% year-over-year, respectively. Driven by the selective price adjustments and a favorable product mix, during the quarter, Phase 1 of Jumbo laminate facility in Gandhinagar began the commercial production. However, the dispatches were deferred as we awaited key certifications required for exporting to certain regions. With these certifications now secured and the machinery aligned to the targeted production mix, we are set to begin the dispatches from the second quarter Additionally, Phase 2 of Jumbo Laminates project is progressing well and is expected to be operational by October 2025. As part of our sustainability efforts, we continued our plantation program in Andhra Pradesh and Karnataka, having planted over 24 million saplings to-date. This initiative, which works closely with the local farmers reinforces our commitment to responsible sourcing and long-term environmental stewardship. Looking ahead, the impact of the fire incident was limited to quarter 1. Operations at Andhra Pradesh MDF facilities are now running at the close to optimal level. With normalized production, improved capacity utilization and contribution from the Jambo Laminates facility, we expect a strong performance in quarter 2, and we remain committed to disciplined execution and strengthening our product offerings. That concludes my remarks. I will now hand over the call to our CFO, Mr. Hiren Padhya, who will take you through the financial performance in the greater detail. Thank you.

Good afternoon, everyone. Thank you, Mr. Rushil, and a warm welcome to all participants joining us today. Let me take you through our financial performance for the quarter ended 30, June 2025. The first quarter of FY '26 was operationally challenging, largely due to temporary disruption at Andhra Pradesh plant. As previously shared, a fire incident in April led to a suspension of production, which had a significant impact on revenue, volumes, capacity utilizations and overall profitability. During the quarter, our consolidated revenue from operations was INR 179.2 crores, reflecting a decline of 20.4% year-over-year and 22.4% quarter-on-quarter. Gross profit was INR 74.4 crores with a gross margin of 41.5% compared to 45.4% in Q1 FY '25. EBITDA for the quarter stood at was negative. However, if forex loss of INR 5.7 crores is excluded, then the EBITDA would have been INR 3.5 crores with a margin of 2% positive. Now moving to segment performance, starting with MDF business, revenue was INR 124.2 crores, down by 26.6% year-over-year. Volumes declined by nearly 30% year-over-year due to the temporary shutdown of operations and significantly lower exports, which were strategically reduced to optimize blended realization. As a result, blended realization improved by 4.5% year-over-year. Additionally, it is important to note that around 40% to 50% of our domestic MDF revenue is recorded on an ex-factory basis is reported on FOR basis. Our domestic realization would be approximately 4% to 5% higher than the currently stated. This will provide a more comparable view with industry peers. Now turning to Laminates business. Revenue for the quarter was INR 44.5 crores, a decline of 5.6% year-over-year. The domestic market remained resilient with revenue growing by 9.3% year-over-year. Laminates EBITDA for the quarter increased 5.9% year-over-year to INR 4.5 crores with a margin of 10.2% and blended realization improved by 5% year-over-year. In terms of balance sheet position, our net debt equity ratio improved to 0.4x as of 30, June 2025. On the fundraising part, we received INR 93 crores out of INR 122.7 crores which was proposed as a preferential allotment. A small portion of allotment was forfeited due to non-conversion, but this has not impacted the Jumbo Laminates Phase 2 expansion plan. To summarize, Q1 impacted by an unforeseen operational disruption impacted the overall performance. Having said that, we have resumed full operation at MDA plant. The laminates business continues to remain steady, and we are confident of regaining growth momentum as we move into the second half of the fiscal. Thank you for your attention. I would now like to open the floor for questions-and-answers.

[Operator Instructions]. We take the first question from the line of from Rehan Saiyyed from Trinetra Asset Managers.

I have a couple of questions. First on the capacity utilization side. With MDF capacity utilization at 8% this quarter, how quickly do you expect to ramp up back to pre-visited level? Would you see any temporary outsourcing to demand for this?

I would like to say that first of all, during this incident, our Chikkamagaluru plant reported the capacity utilization of roughly around 99%, and hopefully, we'll be doing the same in the same quarter as well. Coming back to the Andhra Pradesh plant because of the incident, we were reported to have a 43% capacity utilization. On the earlier quarter, if you see, we have already utilized the capacity up to 80% to 85%, which we are targeting for this quarter as well.

My second question is around the MDF volume. Sir, you have mentioned that company aims for 50% of MDF volumes from value-added products in FY '26. What proportion was achieved in quarter 1 and what new SKUs is being introduced to drive this shift? This is my last question.

See this quarter, we have achieved almost 41% in terms of quantity. Usually, it's around 44% to 45%, but because of the AP plant issue, we couldn't achieve 45% or more. I think in coming quarters, we'll be able to manage 50%, and we are fully concentrating on achieving 50% of value-added business. That's our main objective because we really wish to increase our value -- our realizations, and I think this is one of the best way.

You are expecting this thing in second half or by quarter 2?

Yes, gradually by second quarter or third quarter, we'll be able to close.

[Operator Instructions]. We take the next question from the line of Sandy Mehta from Evaluate Research.

I think it's been a little bit frustrating for shareholders because the company has plans in place for higher-margin products, exports. The revenues have grown for the last few years, but the margins and the earnings have been disappointing to be very honest. Can you just talk a little bit about where you expect margins to be? What are your margin expectations for this year and next year? What should shareholders look forward to as a normalized level of margins or profitability going forward?

Yes, I think it is a good question. See, in the starting of this financial year, we were just hoping for overall margin of around 12% to 13%, EBITDA, because of this event, I think first quarter impact has already been done. For this financial year, we would be expecting -- I mean, the guidance from our side would be around 11% to 12% EBITDA margin so far as this financial year is concerned. However, I think as you know, the new project of Jumbo has already started not only production, but we have received a couple of orders also and we have started dispatching also. Compared to the existing margins of laminates, which is hovering around 8% to 10% for the last 1 year, Here, the jumbo has got margin of around 14% to 16%, so overall margin of laminate, if you consider those things together, I think next year would be a relevant year for improving margin of laminates to the extent of 12% to 13% on a yearly basis, that is '26-'27. Coming to MDF, again, utilization-wise, we have got ample space in terms of additional capacity. The second part is, as rightly mentioned in the last question, value-added proportion, which is in the range of 40% to 43%, which will definitely go up to 50% in terms of quantity and 60% in terms of value. Third is BIS standard implementation, and this all 3 factors together, we can definitely expect that the margin which we are going to have this financial year will improve by at least 1 or 2 percentage in terms of EBITDA so far as next year, that is '26-'27 is concerned, so we are very much hopeful about it.

'26, '27, what sort of EBITDA margin are you looking at overall next year?

That is what I was trying to tell you. We're expecting 1% or 2% higher than the current. Current, we are targeting 11% to 12%, so next year, we can target around 13% or 14%.

Earlier, a few years ago, the company had reported as high as 15% to 18%, so is that possible or unlikely now going forward? We should look at 13% to 14% as your normalized level going forward?

We are saying that's what we are targeting to achieve minimum 13% to 14% next financial year, but yes, 15% to 16% is also possible, and we are working hard on that product mix.

[Operator Instructions]. The next question is from the line of Sanmant Jain from PinPointX Capital.

I have a couple of questions. A lot of your peers are talking about passing on the reduction in timber prices to customers in July. Are we doing the same?

Actually, in the current quarter, we still have a steady raw material pricing. Yes, but in coming quarters, according to the demand supply as per the requirement, we see there may be a slightly decline during the quarters coming. If at all we get an advantage, then we may consider that as well.

The second question is one of your largest peers is doing a CapEx in South India. Should we expect some realization pressure there?

As of now, for this financial year, we don't see any pressure because coming up with a plant is a 18-month to 24-month process. For this financial year, we don't see any pressure for realization for the new capacity coming in.

That new capacity is mainly for the lower thickness and our lower thickness volume is not very high.

What realization can we expect from Jambo Laminates?

Roughly, as we say that the EBITDA margins currently, what we consider is roughly around 15% to 16%. We will make sure that we try to achieve as we commit during the call.

[Operator Instructions]. The next question is from the line of Maitri from Sapphire Capital.

Just one question. What sort of revenue growth are we expecting for this year and the next fiscal year?

I think in the last to last question, I already answered. However, amount-wise in terms of sales volume and the value, the turnover-wise, we are expecting around INR 1,000 crores this particular financial year. Next year, we can further improve in terms of -- I mean, having achieved more than 70% capacity in terms of new plant that is jumbo, we can definitely expect around INR 1,150 crores to INR 1,200 crores turnover in the next financial year. So far as EBITDA, as I informed, this financial year, we are hoping for the best in terms of percentage would be around 11% to 12%, and next financial year, again, at least 2% rise over current financial year.

[Operator Instructions]. As there are no further questions from the participants, I would now like to hand the conference over to the management for closing.

Thank you all for taking the time to join us today and for your continued interest in Rushil Decor. As we continue to navigate the opportunities ahead, we remain committed to achieving our strategic objectives and delivering the consistent value to our stakeholders. For any other questions, please reach out to our Investor Relations team at Churchgate Partners. Thank you once again.

Thank you. On behalf of Asian Markets Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.