Stylam Industries Limited (526951) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Stylam Industries Limited Q1 FY '24 Earnings Conference Call hosted by Systematix Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Poddar from Systematix Institutional Equities. Thank you, and over to you, sir.

Yes. Thank you, Yusuf. Good afternoon, everyone. Thanks for joining us today for Stylam Industries 1Q FY '24 Conference Call. From the management, we have Mr. Jagdish Gupta, Managing Director; Mr. Kishan Nagpal, Chief Financial Officer; and Mr. Manav Gupta, the Whole-Time Director. Without much ado, we'll straight away getting to the Q&A. We believe that you all have seen the results and the corporate presentations, which are uploaded on the Exchanges. So Yusuf, you can start the Q&A.

[Operator Instructions] First question is from the line of Keshav Lahoti from HDFC Securities.

It's good to see the expansion in EBITDA margin is back to something like 18.5%. I just want to understand if we see your quarterly performance. This time, the gross margin have dipped Q-on-Q while the case is reverse for your peers? And secondly, there is a sharp drop in other expenses. What is the reason for that?

First off is the revenue side. There is a drastically decreased in the -- is due to ocean freight. Ocean freight is drastically decreased in this quarter. Main difference is this. And this difference is also reflecting the total revenue also.

Okay. So whether there is a major shift in ocean freight, I am seeing on Q-on-Q basis not year-on-year?

Sorry?

I'm seeing the performance on a Q-on-Q basis. I'm comparing versus March '23. So whether there is a significant difference in ocean freight.

Yes, yes, yes. Significant difference. Yes, correct.

Okay. Got it. And the reason for a dip in other expense?

[Foreign Language].

Yes. So other expense drop is a normal, like the INR 400 million, which has dropped by...

[Foreign Language].

Okay. Okay. Got it. And what's happening on the export front, we are seeing some dip in export is the..

No, no, that dip is -- there is no dip actually whichever dip is that dip is also in part of the ocean freight. You calculating that there will be this year, if everything goes well, ocean freight down by almost INR 20 crores in 1 year. Will be down. So that is affecting. Overall, there is no much -- overall, you see there is a worldwide recession. Even then, we are at par. As for last year is concerned. Hello?

It seems that we have lost the connection from the current participant. Meanwhile, we'll move to the next question from the line of Mr. Viraj Parekh from Carnelian Asset Management.

Jagdish Ji, congratulations on your result. A few questions from my end. What kind of demand are we seeing from exports for the rest of the year? So this question is mainly specific. Are there any new regions this year from which you will expect some revenue coming in, which was not there last year? Are we moving into new geographies, if you can speak a bit more on that front?

Correct. You see, first of all, our existing customer, there is increase from our existing customer also. Secondly, we are focusing on this North America, America these country are still -- South America. We are getting response from them, and we are getting more revenue this year from this area. It will be growth in export also.

Sir, is it possible for you to quantify this in terms of numbers? I mean, how much contribution was from these regions last year, let's say, if it was nil versus this year, how much incremental growth we see from these regions?

You see, overall, we are definitely expecting if you go through even due to this recession period, even if you compare it in the lead ocean freight factor, even our first quarter of this financial year is definitely same in export like last year. This we also treated a very good sign in this way. Ramp in prices are coming down, and we are expecting there -- we are quite hopeful that business will -- export will grow even in Far East country. Our sales increased in this quarter.

Okay. Okay. Sir, what kind of annual guidance would you be willing to give like for this year in terms of export growth?

If you ask me, nobody can predict future, too much anticipation. But we don't think so. Whatever -- which we are feeling -- which we are expecting that this year also, we will same type of figure, our desire 30%, 20% to 30% achieving more increase from last year. That may not mean we will achieve that. Still 8 months is there. We are quite hopeful that definitely, it should increase somewhat but this is the only challenge which we are thinking. Same figure is going on fourth month also. So don't think so big challenge.

Understood. Second question in terms of a second product, which is the acrylic sheet. So this year, we had around INR 226 crores of top line this quarter, so how much did acrylic contribute to that, if you can give a number?

INR 9.52 crores.

INR 9.52 crores of acrylic sales in Q1?

Yes.

Okay. And sir, can you -- is it possible to give any understanding whether this is being driven by domestic sales or export sales in acrylic?

50-50, both are 50-50. In domestic also, we are doing good now.

[Foreign Language].

Okay. Understood. Understood. And sir, can you give some idea [Foreign Language]?

[Foreign Language].

[Foreign Language].

No, whole year.

[Foreign Language].

I think INR 12 crores or INR 9 crores [Foreign Language].

Understood. Sir, last question from my end before I join the queue. [Foreign Language] around this year, we've done an estimate of INR 9 crore, so in which areas in which region are we witnessing good traction in domestic?

[Foreign Language] South is a market for this. Actually, the total sale is on our own brand name, whether it is in export, we are not doing anything OEM or anything else, to make a brand name takes so many years. Still, we are happy. We are not at loss. And gradually, sales is increasing. This quarter, we are expecting more.

Okay. So sir, just last question before I join the queue, in terms of annual growth in terms of domestic, I mean, what is an achievable target on our organic brand growth if you're seeing good amount of INR 4 crore, INR 5 crore of traction this year, should we build up on that number only for the upcoming quarters? Are we seeing some more growth opportunities in the domestic markets for acrylic? Increase to, let's say, INR 7 crores, INR 10 crores in the upcoming quarters. What is your sense in terms of domestic?

We are quite hopeful that this quarter will definitely should be and will be more than last quarter. But again, total worldwide if you see everything except tourism industry, freights, everything in danger, if you go everywhere, I traveled so many countries. Everyone is crying for business, except for tourism. But quite hopeful that this quarter will be much -- that should be better than last quarter in domestic market.

Next question is from the line of Praveen Sahay from Prabhudas Lilladher.

So my first question is, is it possible for you to give a domestic and export volume contributions?

[Foreign Language] [indiscernible].

Sorry, can you repeat, sir?

[Foreign Language].

In domestic, 14 lakh sheet.

And in export 14.20 lakh sheet.

In export 14.20 lakh sheet. 1.4 million.

Yes, sir. Got it. Got it. And the next question is related to the realization. So your realization, if I look at has down sequentially and even the Y-o-Y. As you had already mentioned, it is because of the export, the product mix. But is it also because of a correction in the raw material prices?

No. That is, yes, of course, that is also certainly as of the domestic sales increase this quarter. Secondly due to ocean freight also. On this quarter, there is an impact of INR 6 crores, INR 7 crores of ocean freight only. And number 3 in domestic, we have a less realization, but our sales increase in this quarter that also reflect less realization.

Okay. Okay. And as well as the raw material prices going up?

Yes, yes. Correct. Correct.

Okay. The next question is related to the capacity, how much the capacity do you have right now? And with the INR 40 crore of investment, how much it will be?

No, no, no. INR 40 crores we discussed many times. We already that is modernization and the balancing of equipment only. We already invested almost INR 15 crores, INR 16 crores already on that.

So what is the capacity right now, sir?

No, capacity. Again, every time discussing, we go for a number figure-wise, we are going for -- if we produce tin sheet capacity can be more, if we go for compact laminate capacity -- number wise. We are discussing about volume-wise and now we are 70%,80% of the capacity utilization of the HPL plant now.

Next question is from the line of Dhaval Shah from Girik Capital.

[Foreign Language].

[Foreign Language]

[Foreign Language].

Yes, Yes.

[Foreign Language].

There were [indiscernible] of no reason also. We are resisting a trend of our customer. Our sale is not decreased if we want to throw the totally reduce the prices are we go to unorganized market, then we can -- a little bit, we can increase the sales, which we don't want. There is a brand value in the market.

[Foreign Language] .

[Foreign Language] This is one of the reason also, we are resisting kind of a customer, our theory is not the creed we want throw the or totally reduce the prices or we go to unorganized market, then we can little bit increase the sale, which we don't want because there is a brand value in the market.

[Foreign Language]. Which are bigger months for you?

[Foreign Language]. Bigger means sometimes -- now Europe are holidays. This is also one of the small effect last first quarter. June, July, August in Europe country to country there's holiday, summer holiday, 3 week, 4 week. [Foreign Language] now it will come. Next month, it will be peak for them [Foreign Language]. This whole month is almost holidays, July [Foreign Language].

[Foreign Language].

[Foreign Language]

[Foreign Language] the export could not happen out of India because of the cyclone. [Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language]. Every quarter, there is increase in the sales. That we are doing. We don't know about 3 years, but we are quite hopeful that things are going better and better.

[Foreign Language].

Amount INR 125 crores to INR 150 crores.

[Foreign Language].

[Foreign Language].

Sorry, please come again?

[Foreign Language] we already start our CapEx, land is already with us, government, we applied for the government approval. We are quite hopeful that we will complete this project within -- maximum within 1 year, 10 to 12 months from now onwards.

Okay. And how much sales can we generate from that project?

INR 400 crores to INR 600 crores. Again, depending on the capacity utilization.

But at peak, you can do INR 600 crore?

INR 400 crores to INR 600 crores. Depending on the value addition, which value addition things are going.

Got it. And this EBITDA margin, what we have done for the quarter, do you think you can maintain it looking at the -- at least for the next 2 quarters, can we maintain that looking at the current raw material prices?

Definitely.Definitely.

Next question is from the line of Depesh Kashyap from Invesco Mutual Fund.

[Foreign Language] you said 1.4 million of exports in this quarter and 1.4 million in domestic this quarter. [Foreign Language].

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[Foreign Language] Let me means have a total figure again, even if it's a difference, the difference is like this. Maybe this quarter, we have to evaluate. We are selling less new -- people -- in that quarter last year, as volume is concerned, there can be cheaper products, which we are selling as a commodity. Begin this, if you go for sale-wise, value-wise value is same. And rather it is more realization in this quarter from export. As it is 1.6 million and 1.4 million.

[Foreign Language].

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[Foreign Language] there will be a difference of almost INR 20 crores this year [Foreign Language].

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Definitely.

Correct.

[Foreign Language] if all the chemical prices are going down, so why your gross margin was not better than last quarter? In fact, it was lower [Foreign Language].

[Foreign Language] that was factored everything, now are going to import melamine, we are importing. [Foreign Language] we have to plan for 6 months. [Foreign Language] now which is in pipeline. It will come to us from now or now onward [Foreign Language] there is increase in the prices. That effect will not go to us immediately.

[Foreign Language].

[Foreign Language].

[Foreign Language] 20% kind of growth we weren't expecting. Now it looks very difficult [Foreign Language].

[Foreign Language] if it has increased from the last quarter.

[Foreign Language].

[Foreign Language] better than INR 236 crores.

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[Foreign Language] are you like changing in the CapEx plans now? [Foreign Language].

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Next question is from the line of Udit Gajiwala from YES Securities.

[Foreign Language].

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[Foreign Language] It will take 10 to 12 months to finish the -- start the production. This is my answer.

Okay. So, sir, 10 to 12 months from today or you are saying...

[Foreign Language] As per plan, it should be in production before 1 year.

[Foreign Language].

[Foreign Language] you can charge from the customers. [Foreign Language] expenses should be reduced and it will reduce.

Understood. Understood, sir. [Foreign Language].

[Foreign Language] in the market, we are winning more domestically also, export also. Still, we are not at loss in this -- even on these figures. And there is no such manpower, not much power supply our charges. Everything is mostly automated.

Next question is from the line of Bhavya Gandhi from Avendus Wealth.

[Foreign Language]

[Foreign Language].

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[Foreign Language] if we go for any new products like acrylic [Foreign Language] it is a new product for us [Foreign Language] that customers are asking us from batch sizes and we will get sizes -- it will be first in India. [Foreign Language].

[Foreign Language]

We can get it very soon [Foreign Language]. Not at all a problem from day one. [Foreign Language].

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Next question is from the line of Alisha Mahawla from Envision Capital.

[Foreign Language]

[Foreign Language] if there is no recession like this [Foreign Language].

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[Foreign Language] that is more important. For this reason, what I mean we have it now going for a very quality, very good distributor all over India, [Foreign Language] there is an increase in domestic market.

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[Foreign Language] but there should be availability of product in the market, whole market.

[Foreign Language] this will be funded through internal accruals or debt [Foreign Language].

No, we have sufficient, enough even still we're totally debt-free rather we have more FDI in our account.

Next question is from the line of [indiscernible].

[Foreign Language] scale-up plan, have you given it out?

[Foreign Language].

[Foreign Language] can you share the scale-up plan for the same?

[Foreign Language] we can produce from here, volume-wise, if I tell you, value-wise, it will be better, volume-wise, there is 2 thicknesses 6mm, 12mm [Foreign Language] from both machines.

Okay, sir. Okay. And this will maintain [Foreign Language] margin currently of the company?

Sorry?

The capacity [Foreign Language] it will maintain the current margins of the company?

[Foreign Language] there is always decrease in the expenses.

[Foreign Language] contribution to EBITDA [Foreign Language] from laminate, MDF and acrylic surface, individually?

[Foreign Language] we are not lost, it will be breakeven point. [Foreign Language] laminates or short cycle and hard coating, it is already 18.5% [Foreign Language] if you see the figure.

Next question is from the line of Divyansh Gupta from Latent Advisors.

[Foreign Language]

[Foreign Language] They cannot buy it, they cannot use it without NSF certification. Immediate, there is a demand. [Foreign Language].

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[Foreign Language] they have offices in India, they have brand value, LG, Samsung, [Foreign Language]. We are getting a good market share.

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No, we have make it subsidiary at that time for plywood unit [Foreign Language] as it is now not in plywood, totally different. There is a raw material, 100% same. Everything is same. So we are doing it in the same Stylam.

[Foreign Language]

[Foreign Language] plywood company, plywood factory. Now we go for laminates. So we will get to Stylam Industries Limited only. Same company.

[Foreign Language]

[Foreign Language] not going for subsidiary.

Next question is from the line of Viraj Parekh from Carnelian Asset Management.

[Foreign Language]

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Your voice is breaking, Mr. Parekh.

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[Foreign Language] but one thing I know, we are not at loss even on this scale. [Foreign Language].

[Foreign Language] compared to the capacity we have.

10% [Foreign Language]

[Foreign Language]

[Foreign Language] we are getting all expenses, there is no loss from that and there is no profit from that [Foreign Language].

Next question is from the line of Alisha Mahawla from Envision Capital.

[Foreign Language] but domestic revenue has only grown from INR 66 crores to INR 77 crores [Foreign Language].

[Foreign Language]

[Foreign Language] considering competitive scenario, [Foreign Language].

[Foreign Language] it goes in trucks. There's no -- [Foreign Language] there is no need for any advertisement or anything. Nobody can depend on the community [Foreign Language] it should be mix [Foreign Language] same thing happening with us 20 years back in export. [Foreign Language] now we are almost selling to every part of the world.

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[Foreign Language] export is more lucrative and more better.

Next question is from the line of Dhaval Shah from Girik Capital.

[Foreign Language] Sir, if you can explain me the nature of the industry, say, organized players, [Foreign Language] unorganized competitive scenario [Foreign Language].

[Foreign Language] 4,5 maximum full organized [Foreign Language] the reason being GST is only 18% [Foreign Language] make in India [Foreign Language] still unorganized figure is much, much more than organized.

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[Foreign Language] then we go through distributor otherwise not.

Okay. And what will be the proportion of that sales for us right now?

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Given we are doing so much of advertising activity, we are doing correct. And sir, last question, any particular reason for selecting this cricket team as a sponsor, this Kings XI Punjab.

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[Foreign Language] So this will continue? This sponsorship every IPL?

[Foreign Language] depending on the game cost, how much cost it depends. [Foreign Language] then we will go for.

Correct. So we are currently region-wise [Foreign Language].

[Foreign Language]

So the first is South, South and North will be the top one. The west is a very large market where you are yet to penetrate base?

Yes, yes.

Ladies and gentlemen, we will take this as a last question for the day. I now hand the conference over to Mr. Ashish Poddar for the closing comments.

Yes. Thank you, everyone, for joining us today for the call. Thank you for management for giving us this opportunity to host the conference call. Have a good day.

If there is any question unanswered, we will give you the figures you can pass on.

Sure sir.

On behalf of Systematix Institutional Equities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.