Rushil Décor Limited (RUSHIL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Earnings Conference Call of Rushil Decor hosted by Asian Markets Securities Private Limited. [Operator Instructions] 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. On behalf of Asian, we welcome all to the Rushil Decor 1Q FY '27 Investor Conference. From the management side, we have Rushil Thakkar, Joint Managing Director and Hiren Padhya would like to hand over Rushil for his opening remarks. We can open the floor for Q&A. Thank you, and over to you Rushil.

Thank you Karan bhai. Good afternoon, ladies and gentlemen. Welcome to Rushil Decor Limited Earnings Conference Call for the first quarter ended 30th June 2026. Thank you for joining us today. I am joined by our CFO, Mr. Hiren Padhya. The earnings presentation has been shared with the stock exchanges, and we hope you had an opportunity to review it. Let me begin with an overview of our performance and the operating environment during the quarter. The first quarter of financial year 2027 saw a steady improvement in the company's operating performance, supported by the normalized operation at our Andhra Pradesh MDF facility and improved contribution from the laminate business. On a consolidated basis, revenue from operations increased to 27.8% year-over-year to INR 2,920 million (sic) [ 2,290 ] in quarter 1 financial year '27. EBITDA was INR 182 million with an EBITDA margin of 7.9%, while profit after tax was INR 20 million. During the quarter, the company also undertook a planned annual maintenance shutdown for a week in April. During the period, we continued to rightsize overhead cost, improve operational efficiency and streamline product inventory. Coming to the laminate business, it remained a key growth driver during the quarter. Revenue increased 65.3% year-over-year to INR 736 million. Supported by improved domestic demand and improving traction in export market. Domestic revenue grew 60.6% year-over-year to INR 251 million, while the export revenue increased to 67.9% to INR 485 million. Total sales volume increased 27.9% year-over-year to approximately 8.8 lakh sheets. Blended realization also improved by 29.3% year-over-year to INR 836 per sheet, supported by an improved product mix. The business reported the EBITDA of INR 52 million with an EBITDA of 7% margin. The Jumbo laminate business made a progress during this quarter. Revenue was INR 110 million, representing a 25% substantial increase, while the total sales volume increased to 20.4% subsequently to approximately 1.13 lakh sheets. The business reported EBITDA of INR 23 million, translating into an EBITDA of margin of 20.6%, in line with the management expectation. The improving contribution from the Jumbo laminate supported the overall performance of the laminate business. We continue to see increasing acceptance of our Jumbo laminate offerings across the international markets, which remains an important area of focus as we work towards improving capacity utilization. Turning to the MDF business. Operations remained stable during the quarter following the planned annual maintenance shutdown. Revenue increased to 17.2% year-over-year to INR 1,456 million. The EBITDA was INR 123 million with a margin of 8.4%. Focus remains on increasing the share of value-added MDF products, which will help improve realization, profitability and over the medium term. We are also continuing to strengthen our MDF retail presence across the key markets during the quarter. Revenue increased 13.1% year-over-year to INR 96 million, supported by 6.9% growth in sales volume. The business reported the EBITDA of INR 8 million during the quarter. The broader operating environment remains challenging. Chemical and other raw material price remained elevated, while freight costs were significantly higher and the shipping routes continue to face disruption arising from ongoing conflict in West Asia. Despite these challenges, the laminate business reported a significant increase in export revenue, supported by increasing acceptance of jumbo laminate across the international market and improved product mix. At the same time, we rationalized our domestic market mix by optimizing supplies across the selected regions. This has allowed us to focus more on market and customer segment offering better profitability across the MDF and laminate business. During the quarter, we further strengthened our domestic distribution network by adding direct 15 distributors and 46 retailers and dealers. We're also expanding our international presence by entering into two new markets, Honduras and Greece. These initiatives will help us improve our market reach, strengthen product availability and support further growth across our business. Looking ahead, our focus for financial year 2027 remains on improving capacity utilization in Jumbo Laminates business and increasing the share of value-added MDF business. We will also focus on improving the overall business through better product mix. Additionally, we continue to focus on improving our working capital and reducing debt. With no major capital expenditure plan beyond the maintenance CapEx, we remain focused on strengthening our cash flow, improving operational efficiency and creating long-term value for all our stakeholders. Thank you. That concludes my remarks. I will now hand over our call to our CFO, Mr. Hiren Padhya, to take you through the financial performance in greater detail.

Good afternoon, everyone, and thank you, Mr. Rushil. A warm welcome to all participants joining us today. I will now take you through the financials and operational performance of Rushil Decor Limited for the first quarter of FY '27. Starting with the consolidated financial performance. Revenue from operations for Q1 FY '27 was INR 2,290 million, reflecting a growth of 27.8% year-on-year. Gross profit for the quarter was INR 892 million with a gross margin of 39%. EBITDA was INR 182 million with an EBITDA margin of 7.9%. Profit before tax was INR 25 million, while PAT was INR 20 million. The improvement in revenue was supported by normalized operations at Andhra Pradesh MDF facility and higher contribution from the laminate business. Profitability during the quarter was impacted by elevated chemical and other raw material costs and higher freight costs. Moving to segmental performance, starting with MDF business. MDF revenue for Q1 FY '27 was INR 1,456 million, representing a growth of 17.2% year-over-year. The growth was driven by the India MDF business with revenue increasing 32.9% year-on-year to INR 1,447 million. India sales volume increased by 16.1% to 52,162 CBM, while India realization improved by 14.4% year-on-year to INR 27,736 per CBM. Export performance in MDF remained subdued during the quarter as the company continues to take a calibrated approach towards MDF exports with greater focus on markets and customer segments offering better profitability. Following the resumption of operations after the planned annual maintenance shutdown, production gradually normalized with MDF capacity utilization at 66% during the quarter. From a profitability perspective, MDF EBITDA for the quarter was INR 123 million with an EBITDA margin of 8.4%. Moving to the laminate business. Laminate revenue for Q1 FY '27 was INR 736 million, representing a growth of 65.3% year-on-year. India laminate revenue increased by 60.6% year-on-year to INR 251 million, while export revenue grew 67.9% to INR 485 million. India sales volume increased by 6.1% year-on-year to approximately 3 lakh sheets, while India realizations improved by 51.4% to INR 825 per sheet. Export sales volume increased by 43.4% year-on-year to approximately 5.7 lakh sheets, while export realization increased by 17.1% to INR 842 per sheet. In Laminates EBITDA for the quarter was INR 52 million with an EBITDA margin of 7%. Within the laminate business, Jumbo laminates portfolio continues to scale up. Revenue from Jumbo laminates stood at INR 110 million during the quarter with sales volume of approximately 1.13 lakh sheets. EBITDA was INR 23 million, translating into a strong EBITDA margin of 20.6%. Coming to PVC business, revenue for the quarter was INR 96 million, representing a growth of 13.1% year-on-year. Sales volume increased by 6.9% year-on-year, while EBITDA for the quarter was INR 8 million with a margin of 7.9%. To summarize, the company reported stable performance supported by normalized MDF operations and higher contribution from laminate business. The laminate segment, including Jumbo laminates, remains an important area of growth, while MDF business continues to focus on improving its product mix realizations. Thank you for your attention. That concludes my remarks. I would now like to open the floor for questions and answers.

[Operator Instructions] The first question is from the line of Rushabh Sharedalal from Pravin Ratilal Wealth.

Yes. Am I audible?

Yes.

Sir, my first question is on the MDF business. So I'm just slightly new to the company, and I would request you to explain slightly in detail. So for the entire year FY '26, we have done MDF sales of around INR 630 crores. Assuming that it would have been a normal year, what would have been the breakup of that into exports and domestic? And within domestic, what would have been the breakup between OEM and the retail sales within the MDF, and just an additional question on that. So for the current quarter that ended, so Q1 FY '26, what was the retail sales and the OEM sales?

So when we speak about domestic sales pattern, our pattern is 35% to 40% of volume has been sold to OEM and balance is done through distribution and retail channels. Talking about the export, our strategy is really clear that we'll be exporting somewhere around 4,000 to 5,000 cubic meters a month. So in order to just maintain the -- what I would say, we can maintain the production capacity in a better manner. And because of this 4,000, 5,000 cubic meters export, there is less pressure on domestic sales as well.

Right. So normally, our sales to OEMs are closer to 30% to 40% of the MDF sales, right? That understanding is correct, right?

35% to 40%.

Right. So what has been the volume growth in the MDF sales for this quarter to OEM and to retail? What has been the breakup?

As per Q4, it is same.

Right, sir. Right, sir. Sir, my next question is on the industry dynamics. So the last information available in the public suggest that there was a -- sir, am I audible?

Yes, yes.

so the last information that we had in the public domain did suggest that there was significant supply as compared to demand. So can you just brush us up on what are the latest numbers and any other capacity of MDF that is coming up? Just want to understand that how will the pricing play out going ahead because there is one leader who has not taken a price reduction and there's another player which has already taken. So just wanted to know your views on the industry dynamics.

See, as we have mentioned earlier, MDF as an industry is growing at a 20% CAGR. And when we talk about 20% CAGR, that means an additional capacity of 800 cubic meters a day can be absorbed in the market easily. But as you see, there are too many new factories coming into the market, maybe it is organized or unorganized. So yes, going ahead, we see the good amount of competition in domestic market. And yes, the price what you have taken some hike, which was acceptable to the market and the raw material prices have been included in that. So yes, we don't see any negative side of pricing going at this point of time. The prices, you can say, is more sustainable at this point of time.

The next question is from the line of Anubhav Goel from Cosma Ventures. As there's no response from Anubhav sir, the next question is from the line of Ankit Gulgulia from Gravita Consulting.

Hello. Am I audible?

Yes.

Just wanted to understand how does the company looks forward for the debt overall that we are having in the balance sheet? Are we looking to steadily reduce the debt in terms of the overall debt equity? Or will it more or so remain the same what we are seeing witnessing right now?

Okay. As of now, if you see the total -- I mean, debt, including working capital is around INR 260 crores. Now we have got a scheduled repayment. And as for the -- I mean, schedule, every year, we are making a repayment of almost INR 55 crores. So if you see this quarter, in current quarter, we have reduced debt to the extent of INR 18 crores in this quarter only. So considering the schedule which we have been given by the banks and the financial institutions, approximately second quarter of FY '26 -- FY '28, we will be able to clear our debt. So practically, year 2029, FY '29 will be debt-free company. And as mentioned in the speech also, for this particular financial year, we are not planning for any additional CapEx, except a small operational CapEx to the extent of INR 5 crores to INR 10 crores. And considering the fact that we are totally focusing into, new project of Jumbo and increasing our capacity in MDF and realizations. So immediately for next couple of quarters or maybe 1 or 2 years, we are not planning for any further debt. So practically, it is a question of 2 years from now.

Yes. So effectively, if there is no further CapEx plan for at least 1 or 2 years, so we can see probably an aspiration of a net debt-free company. Am I correct with that?

Yes, yes.

The next question is from the line of Rusmik Oza from Equity Research.

Sir, my question was on laminate business. We have a capacity of 28 lakh sheets of jumbo laminates. And in Q1, we have done a volume of roughly around close to, one second, close to 1,30,000 sheets. So I just want to check out, does this mean that our annualized run rate, the utilization level is only 15% right now? Is my understanding correct, sir?

So currently, our utilization is 29%, just to correct you because this has a different product mix. And the capacity what we give you is on the base of 1 mm thicknesses. And the production which we have is of the average of 6 millimeters to 12 millimeters. So this way, we consider our capacity utilization is 29% and aspiration of utilizing this year is somewhere around 55% to 60%.

Okay. Okay. And going with the run rate INR 11 crores per quarter and that's 29% full utilization at 85%, what could be the potential revenue, sir, from this jumbo laminate?

Again, I would like to say here that this year, our aspiration, again, is to take it to somewhere around 60% of utilization, which will take us to somewhere around INR 75 crores. And going ahead, if we utilize the capacity at somewhere around 90%, the potential revenue we can generate from this would be somewhere around INR 140 crores.

Okay. Sir, my next question was on MDF. Sequentially, in Q4, our utilization level had gone up to 83% vis-a-vis 75% of the full year. Now it's come down to 66%. Any reasons you can attribute to that? And going forward, what kind of utilization levels we anticipate for the full year in MDF business?

See, every industry requires an annual plant shutdown to make sure that other months like out of 365 days, other days of the plant can be utilized effectively. So every year in the month of April, we take kind of a planned shutdown for every plant so that we are ready for other days to work with full capacity. That is the only reason we see.

Okay. Okay. Okay. So for full year, last year, we operated at around 75% utilization. So will we meet that or will you be above that?

It will go up.

Okay. Nice to hear that, sir. And my second question was on -- in case of the difference between, say, if you normalize that 1 mm sheet of laminate, what could be the price difference between jumbo laminates and the normal laminates, sir?

See, it again depends on what kind of product mix we are planning. It's not just 6 millimeters what we see. It's about the facade 6 millimeters is a different rate, then the physical 6 millimeter is a different rate, fire retardancy is a different rate. So we cannot average it out until and unless we finally prepare our balance sheet. So it becomes very difficult for us to say an average rate what can be the realization.

Okay. Okay. And sir, if I dissect the number of the laminate business, as compared to last year, the margins were around 10%. And if I remove the laminate -- Jumbo laminates, then the normal laminate business margin has come down to 5%, sir. Is it completely because of the hit on the gross margin? Or is there something beyond that?

See, our business in Gulf region is also very high, and that we used to do from our older plants. So that was one of the hit and another was the chemical hits because in laminates, we have done some further commitments over the supply. So because of this thing only these are the 2 main impacts, the margins were hit in the older laminate business. And also, there was a plant shutdown in laminate plant as well, where we did a merger of -- not merger, I would say, we had 2 boilers running in one of the plants where we implemented the jumbo capacity. Now we have done a single boiler unit. So that also was one of the reasons why the production was also less.

Okay. Okay. And sir, earlier in the last quarter, you had said that you all are aiming for that 10% to 12% EBITDA margin going forward. Any ballpark color by when we can reach that 10% to 12% EBITDA margin on a consolidated basis?

If you ask me about, again, aspiration, I want to go this quarter. But realistically, yes, we may take 1 or 2 quarters more to reach up to that level.

Okay. Okay. And any guidance you would like to give for FY '24 on the total revenue of the company, sir?

So I would just say one thing that as we have given the guidance earlier, we are on it, and we will be proving our best out of the business what we are currently doing.

Okay. Okay. Last request, sir, is it possible to actually have a plant visit to see this Jumbo facility, Jumbo laminate facility, if it's possible?

You can contact our investor relationship partner at Churchgate, and they will arrange.

The next question is from the line of Anubhav Goel from Cosma Ventures.

Sir, this 90% you mentioned the total jumbo sales of INR 140 crores, this is Phase 1 plus Phase 2, right?

Yes, both the phase put together.

Okay. Got it. And sir, my next question is, if you can just give more color on how we are planning to ramp up Jumbo? Like is it the similar set of clients and channels we have for our existing laminate exports business? Because I think the largest player here has warehouses, we have people on ground to find clients and get orders, while we are doing it largely from India. So how are we approaching this? And will it take a few years to get to this INR 140 crore number?

So first of all, these are all new markets where we are approaching. So there are some markets where we are already there. But basically, all this exercise takes a few years. We have team already sitting in India. It's not that we are not doing a different approach. We have a different approach as well. But this is typically all the certifications, all kind of necessary documentation has to be done for the countries where we are approaching. So we have already cracked many of the countries where the Jumbo laminates have been sailing as one of the biggest products. But -- these markets are like a very slow opener. Like once you are done with them, your contract is for 2 years, 3 years. So we need to crack that contracts. And we are on it and we'll be like our next aspiration about using this plant at 50%, 55% this year, and we will be utilizing like 70%, 75% next year. So yes, very soon down the line 2 years, we may reach to our targeted revenue.

Okay. Got it, sir. And sir, just my last question is it's a very volatile situation. But any color you can give, sir, on what should we expect for laminate margins for 2Q and rest of the year from this 5% in 1Q?

As you rightly pointed, laminate with older laminate, excluding this jumbo has got normal margin for the last couple of years is around in the range of 9% to 10%. So this particular quarter, we have got shutdown. So that has affected. Secondly, the chemical prices has also a negative impact as of now. Third, the war situation has also affected. So I think all these 3 aspects has affected the whole quarter. But otherwise, our normal margin is in the range of 9% to 10%. And if we include the jumbo part, I think our margin should be more than 10%, at least as a combined laminate segment. So it will further improve provided there is no uncertainty in terms of chemical pricing issue.

The next question is from the line of Resha Mehta from GreenEdge Wealth.

Sir, so one is on the MDF bit. So our volume growth was flat for this quarter. Any specific reasons? If I recall correctly, I think in Q1 of FY '26, we had a fire and our plant was shut for days. In fact, we should have seen a good volume ramp-up in this Q1 FY '27 because I believe the base was weak year-on-year.

So there is no specific reason because our volumes, which we have delivered is on the line because as we see, we had taken a shutdown, which was planned. Another thing was chemical pricing and third was situation in West Asia because we are dependent on exports in Gulf as well. So there are -- these are the 3 main reasons because of...

How have exports been in MDF in Q1? Have we exported anything or not really?

No, not a big volume somewhere around 255 CBM export.

So was there growth in the export side? Or was it flat? Or was it -- was there a degrowth for the export volumes of MDF?

No. Actually, we had the orders in hand, but because of the container shortage across the globe, we were not able to find the containers at the right price because of which the export volume was a bit on the lower side.

And sir, typically, when we take those maintenance shutdowns, and I believe this was a planned maintenance shutdown, right? So I believe normally, the way companies operate is that they stock up for the inventory for the loss of production days. And hence, ideally, there should -- it should not impact sales volume if there is demand. That would be a fair understanding, sir?

Yes, that is a fair understanding. We did plan for the [indiscernible] required for domestic. And we did the sales among that only. But the thing was the unexpected chemical price, which were fluctuating because of the people -- the domestic buyers were a bit reluctant on buying the -- either they are buying at the right price or not, either they want to pile up the stock or not. They will just ask for the requirement. They will not ask for anything to stock up because of which the volumes remained flat.

Okay. And overall, I think for the quarter, our gross margins have declined significantly, which is a 900 bps decline, if I look at it quarter-on-quarter. Of course, we've seen a lot of inflation. But just to quantify this, so if I look at MDF, MDF, I believe we had taken around 15% price hikes. So post the 15% price hike that we have taken, have we taken any more price hikes? If yes, no, what is still the gap left to be covered up?

We didn't took any price hike after 15%. And current market scenario is all about the demand supply. So everyone is playing accordingly, I would say...

So after this 15% price hike, of course, I think our margins have declined, which effectively means that there is more inflation to come. So how much more price hikes hypothetically, we would need to take to cover up for this input cost inflation?

Actually, I cannot give you any guidance on that because the reality is market is not going to accept any further price hikes.

Okay. So let me ask you this way. So the 15% price hike that we have taken, is that also still sustaining on ground at 15%? Or are we passing on some trade discounts and effectively, what it means is that 15% price hike that we have taken, it is probably actually only plus 10% or something that effect on ground?

No. So currently, the 15% hike is what we are sustaining at. And that is -- we are not passing any kind of discounts or anything. So we are maintaining our given price hike.

Okay. And sir, a similar question on the laminate side also that we had taken around 10% price hikes in the past. So any more price hikes that we took in the current quarter Q1? And again, how much more gap to be covered for inflation, if any, if you can share that number as well?

In laminate, the 10% price is covering our inflation as of now. And we don't see a further hike in that as well.

Okay. So 10% is the only price hike that...

Yes, yes. And that is covering the Sorry, I didn't get your question. Last the voice got cracked.

Okay. Am I audible?

Yes, yes.

Ma'am, your voice is breaking.

Sure, I will join back the queue.