The Supreme Industries Limited (SUPREMEIND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Supreme Industries Q3 FY '25 Earnings Conference Call hosted by DAM Capital Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aasim from DAM Capital Advisors. Thank you, and over to you, Mr. Aasim.

Yes. Thanks. Good evening. Welcome, everyone, to Supreme Industries Q3 '25 Results Call. We have with us the senior leadership team of the company, who will take us through the quarter performance, and post this we'll open the call for questions. Thank you, and over to you, Mr. Taparia.

Thank you very much, dear friend. I'm M.P. Taparia, Managing Director of the Supreme Industries Limited. I along with my colleague, Shri P.C. Somani, CFO; and R.J. Saboo, Vice President Corporate Affairs and Company Secretary, welcome all the participants who are participating in the discussion of the unaudited standalone and consolidated financial result for the quarter and 9-month period ended 31 December 2Q '24. The standalone results, consolidated result are already with you. I will give brief on company's product operating performance and other highlights. The company sold 162,733 tonne of plastic goods and achieved net product turnover of INR 2,488 crores during the third quarter of the current year against sales of 158,025 tonne of plastic goods and achieved net product turnover of INR 2,429 crores, in the corresponding quarter of previous year, achieving volume and value growth of around 3% and 2% respectively. The company sold 474,645 tonne of plastic goods, achieved net product turnover of INR 7,336 crores in 9 months of the current year, against sale of 444,332 tonne, a net product turnover of INR 7,043 crores in a corresponding 9 month of previous year, achieving volume and product value growth of around 7% and 4% respectively. The consolidated operating profit and profit after tax for the third quarter of the current year amounted to INR 331 crores and INR 187 crores compared to INR 400 crores and INR 256 crores, respectively. The corresponding quarter of the previous year, resulting in a decrease of 17% and 27% respectively. The consolidated operating profit and profit after tax for the 9-month of the current year amounted to INR 1,103 crore and INR 665 crores as compared to INR 1,123 crores and INR 715 crores, respectively, for the corresponding period of the previous year, resulting in a decrease of 2% and 7%, respectively. The business scenario of all the product segments of the company for the third quarter ended 31 December 2024 as compared to the corresponding quarter of previous year has been as under. Plastic Piping System business grew 4% by volume and 1% in value term. Packaging Product segment business grew 9% in volume and 13% in value term. Industry Products segment business degrew by 5% volume and remained at flat level in value term. Consumer Products segment business degrew by 7% in volume and 5% in value term. The overall turnover of value-added product increased to INR 961 crores during the third quarter of the current year against INR 853 crores in the corresponding quarter of the previous year, achieving growth of around 15%. The company continued to remain debt free and having a cash surplus of INR 290 crore as on 31 December 2024. Business outlook. The Plastic Piping System business growth continued to be adversely affected due to adverse PVC resin price scenario and demand for infra spend not picking up as envisaged. Considering better demand in the second half of the year in the segment served by the company, the company had earlier envisaged 16% to 18% volume growth for the current year for the Plastic Piping System. The Plastic Piping business was affected in the third quarter, as previously pricing in the open market were quite low compared to domestic producer prices and due to extended winter rainfall in South India and some Western states. The company expects good demand from agri and housing segment for the last quarter. The intra distributed pipeline has destocked seeing the continuous fall in PVC prices. As the prices reached a low level, the company expect good demand going forward in current quarter. The company also expect some improvement in infrastructure demand as this being the last quarter of the financial year. The international PVC prices have stabilized at a low level. Local manufacturers are increasing their price, due to import parity. However, regarding move from local producer, import anti-dumping duty on import of PVC suspension grade resin. The decision from the Finance Ministry is still awaited. The PVC resin price stand remains an uncertain arena. This company not in a position to give specific volume growth guidance. However, as several brownfield expansion of capacity are in place, the company with a large portfolio-wise, still in system, we expect to grow 3% to 4% more than the country growth in Plastic Piping System during the year. Our brownfield expansion at various locations of Plastic Piping System are progressing smoothly. The company is well positioned to cater to increased demand of the product, increased available capacity. The company has reached annual capacity of 820,000 tonne as on 31 December 2024, and with the completion of all the expansion plan undertaken in hand, total installed capacity in the piping system business vertical shall reach 900,000 tonnes by end of fiscal year 2024, '25. Three new greenfield plants for Plastic Piping Division at Jammu, Bihar and Madhya Pradesh shall be checked for execution in the coming financial year. Then at all the three places in the company's position, a detailed plan for product and capacity are being worked out. Equipment have arrived for [ PP ] silent pipe system, which have been in large in technical collaboration with M/s Poloplast of Austria during first quarter of fiscal year 2025, 2026. The newly introduced PERT Piping System and PE single wall corrugated pipe are witnessing increasing response. Plans to increase SKU and [indiscernible] segment are progressing well until now the dividend yield to 629 SKU from 421 SKU at the beginning of the year. The company Plastic Piping System is servicing 40 different application in the system and continue to explore to add both value added system. The company continues to remain focused, invest and enlarge the product basket in piping business and to increase the range of value-added product. The company now with a SKU basket of 14,234 number in piping system business vertical. The company placed orders for all necessary equipment and work on civil construction is going in full swing at a new site at Kanpur Dehat in UP for making windows. In the first phase, company has plan to put entire window-making facility at Kanpur and cater to customer in Uttar Pradesh, Uttarakhand and NCR area. The company expects to launch and supply window system -- windows in the first half of fiscal year 2026. The business of Cross Laminated Film is showing improved performance with better capacity utilization. The division is also participated in institutional business and made orders, which are under execution. Resultantly, the division expects about 20% volume growth in this business for the year in improved profitability. Trials have been successfully carried out for the newly developed Cross Plastic Film and samples thereof have been sent to laboratory for testing and certification that will add potential customer for the evaluation. The company continues to expand its range and introduce various new model of chair and cabinet in its Furniture segment. 12 new models have been introduced in the first 9 months of fiscal year 2025. The division continues to add showroom to improve awareness of the range of premium product. Total numbers of showroom is 337 by end of December, from 308 as of 31 March 2024. Focused on strengthening distributor channel and adding more retail outlet continues. In the Industry segment business, business condition remain moderate. However, company expect demand scenario to further improve in sector of home appliance and white goods constitute large part of its business. Is also working to expand its customer base and develop the business in new center. However, in the business scenario various appliance customer, the division expects better prospect going forward. The Material Handling division remain focused on introducing new products and also investing in new machine and molds. Initial model variants are seeing good growth and division continues to add new products in its range of private sector swing. Presently, the entire range of projects have been manufactured in one location in Maharashtra. Going forward, the division plans to increase present manufacturing location and likely to commence from March 2025. Equipment for Bubble Guard Board shall arrive by end of first quarter of fiscal year 2026 and likely to be in production in July, September quarter. The division continue to strive to enlarge its customer base and product portfolio, paving the way for moderate growth. Composite LPG Cylinder division continue to cater to existing overseas customers and also participate in various export inquiry. Supply of a new letter of intent issued for 10 kg cylinder from Indian Oil Corporation Limited are taking place regularly and shall be completed by February 2025. The division expect to issue orders for further quantity and continues our existing LOI. Work on cylinder design of 14.2 kg cylinder for all oil marketing companies is under progress and expected to deliver good business during fiscal year 2026, and thereafter, commercialization of newly developed CNG cylinder that will happen during this quarter of the year. The Protective Packaging Division has enough capacity utilization and focused on delivering customized solutions and it is working well. The division is continuously increasing its fabrication capacity in various geography to cater to increase demand. Expansion in activities undertaken are progressing well and shall be fully in place by end of fiscal year 2025. Negotiation for a suitable location for a new greenfield site near the port in Western region to cater to export opportunity of domestic demand has been initiated and likely to be concluded in the first quarter fiscal year 2026. The Performance Packaging Division continue to utilize its capacity optimally and work on improved product mix and post-extrusion value-added product with minimal investment. Export opportunity remains a focus area for better value addition. Looking at the business outlook and opportunity, the company's plan had committed very high CapEx including carryforward commitment of around INR 1,500 crores this year. Total cash outflow towards CapEx has been up till now INR 718 crores and likely to reach around INR 1,000 crores for the year. Entire CapEx will be funded from internal accruals. This is a brief and overall summary for the quarter and 9 months ended under reference. Thank you for your presence. Now I and my colleagues, Shri. P.C. Somani and Shri R.J. Saboo are available to reply to various queries raised by all of you. Thank you very much.

The first question comes from the line of Ritesh Shah from Investec.

Sir, my first question was on window profiling business, what you indicated. What is the sort of capacity and the ramp-up that we are looking from this particular initiative of ours?

First, I must clarify that we are not going to sell profile. We are going to supply completely customized window. And our annual capacity is 5,000 tonne of PVC profile per annum.

Correct. Sir, can this 5,000, go to 20,000, 30,000. Is the market size that big? And do we aspire to be there?

Like I said, to be more than 130,000 tonne. And definitely, we have a dream to be a big player.

Mr. Shah, I would request you to rejoin the queue for more questions. Next question comes from the line of Shravan Shah from Dolat Capital.

Sir, just to -- correct me if I'm wrong. So now we are saying for volume growth for pipe segment is 15% to 16%. So 9 months, we have done just 7.8%. So ask rate for fourth quarter is close to 30% to 34%. So -- and are we seeing that kind of a traction in the month of January, and confident that we can deliver this kind of a number?

The thing demand [indiscernible] remaining today, we are very confident. I can just recall you what I had told last time also, in the year '22, '23, we had 37% volume growth in second half compared to first half. This year the third quarter of the second half was not -- was poor. This is huge, this total getting pitch in the entire value chain, be it wholesaler, be it semi-wholesaler, be it retailer. And the demand where prices are so low, is very, very affordable product. And fortunately, we were capacity available. We got so many new system operating, and we were more than 14,000 SKU. We are very confident that we -- no disturbance express, we are going to achieve the number what we are telling you.

Okay. Okay. Got it. And sir, in terms of the capacity expansions that we are seeing, the 9 lakh tonnes by this year and the three places, Jammu, Bihar and MP. So there, how much capacity are we looking at? And how much will likely to come in FY '26?

When we plan, may we come with our final accounting year on April, that time, we will tell you the plan for the three new location. As on today, we have got the land in our position. The plant, what capacity, what product we are going to make there will be announced only on 21st April, which is our meeting to close the account of the year '24, '25.

Mr. Shah, please rejoin the queue for more questions. Next question comes from the line of Sneha Talreja with Nuvama.

Just to clarify the last -- previous participant's question, did we mention -- so our ask rate according to your interviews around 24% on quarter 4 numbers. Are we confident on the base of 41% growth of last year that we can still do 24% plus?

Yes, confident. What your number we told you, not any unusual thing happens, we will be achieving the number of what we are talking.

So secondly, sir, just wanted to understand the inventory loss that you've mentioned on the interview, what is the quantum of the same?

The right thing about inventory loss, we should talk in April, but as on the first 9 months with the inventory loss was not only in PVC, it was in polyethylene also, which was in excess of INR 100 crores in first 9 months. But currently, inventory loss or gain, we will talk in April. And our trend is, you should be bullish.

Mr. Talreja, please rejoin the queue for more questions. Next question comes from the line of Rahul Agarwal from Ikigai Asset Management.

Two questions I had. First question was, could you help us understand where is the demand so weak? Is it housing, is it agri or is it infrastructure?

In third quarter demand was very weak. The third quarter -- first is agri, the demand was wiped out, and housing demand was also not so robust because the demand was there but it was all separate from the stocks. And infra demand is nor could jump.

So that's what I was asking. Is it weaker in housing or agri or infrastructure?

Agri demand, as I told you, due to rainy season, extended rainy season, agri demand was very poor. Housing was low but not so low. And infra demand definitely was nonexistent. But we are a small player in infra.

Mr. Agarwal, please rejoin the queue for more questions. Next question comes from the line of Navid Virani with Bastian Research.

Sir, I had one question around the rapid cash depletion, which I'm witnessing. Sir, we had almost INR 1,180 crores worth of cash in Q4 FY '24 at the end. But currently, we just have INR 300 crores of cash with us. I understand that we are going through a CapEx phase, but I still feel there is some other place that the cash is getting sucked up. Is it fair to assume that we are sitting on large inventory pile right now, which is where the cash...

We have a very huge inventory pipeline. Huge inventory with us.

Okay. So we are confident that the upcoming demand will help us...

[indiscernible] liquidity in this quarter.

Mr. Virani, please rejoin the queue for more questions. Next question comes from the line of Bhavin Pande with Aethna Investment.

Sir, what is the outlook of PVC prices and revival of demand?

Demand is now -- there is no issue of -- no demand of PVC pipe. And PVC pipe, we don't see already it has come to a very low level. If you only trend it -- now crude price going up, rupee going weak and the local makers are losing money at current price, as the anti-dumping duty may come, our local maker will find difficulty to go and selling at such a low price.

Next question comes from the line of Keshav Vijay Ratan Lahoti with HDFC Securities.

Sir, what is the -- how are the thing going on OPVC pipes? And how are the expansion plan, whatever we have earlier envisaged 30 KMT capacity by FY '27 and is it running on par?

Now, we see one line. Now we have three line now. Three line, our capacity grown up now to annually around 9,000 tonnes per year.

Okay. Got it. And last question, sir, any guidance on the margin side for Q4?

Obviously, market demand -- margin is quite good.

For the company?

For the company, yes. Company we anticipate this year margin maybe between 13.5% to 14% overall.

Mr. Lahoti, please rejoin the queue for more questions. Next question comes from the line of Sonali S. With Jefferies Group.

My question remains on the demand. Have you seen or are you seeing the channels restocking again? And also, how was the demand in the first 20 days of January across segments?

Demand in all segments are good except infra. Infra demand still not come up.

So restocking, are you seeing that?

Demand is there for agri and demand is there for housing. Demand has now started.

Sir, could you share the month-on-month volume numbers for October, November, December, if that is possible?

That is not possible.

Ms. Sonali, please rejoin the queue for more questions. Next question comes from the line of Praveen Sahay from Prabhudas Lilladher Capital.

My question is again on the volume and what you are guiding for a 30% plus for Q4. So one thing you had highlighted destocking is very high at all the channels level. So can you give some color on the comparison at what level of inventory earlier versus now it is at?

Inventory level high, we don't know of our competition. We don't know. We say we have more inventory, so we are confident that we'll have adequate stock and adequate capacity. What you want there...

No, I'm asking related to the channel as you had mentioned...

We don't have record. So many distributor, retailer, we don't have, right? We were more than 100,000 retailers. I don't know what is the inventory with them. But we know that they are buying quite low. Whenever they place orders, they are after us to supply as quickly as possible, which show that they are having very low inventory. And when the price trend is going down, there is no reason for them to keep inventory. We are available to make this supply. We told them now we are your godown. Don't have to keep a godown.

Okay. Okay, sir. Sir, last question related to ADD. As you had mentioned that the Finance Ministry awaits for the implementation of ADD. What's your take on when that's going to happen, in Feb, March, when it's going to happen?

I don't know. I think that is given only by Finance Ministry. I'm too small a person. I have no idea, no clue. We only know that Directorate General of Trade Remedies have recommended some provisional antidumping duty on 5 countries, various companies, which have been sent to them in beginning of November, now already more than 80 days past. Now when the Finance Ministry will issue notification or they will not issue notification, I have no idea.

Next question comes from the line of Srinath V. from Bellwether Capital.

Sir, I want to understand how the CPVC business is growing. Is it growing higher than the 4% volume growth we saw in the Piping Division? And also want to understand there's already an antidumping duty on CPVC. Is that market a little more stable than PVC? Are retailers holding inventory? And are we seeing primaries happening for us?

CPVC there is antidumping duty import only on China and many company in South Korea. They were not a large supplier, and they were not in any way large supplier to our company. The major supply coming from U.S.A. and Japan and Thailand and now there is quite a good capacity put locally also. So we have no reason of anything to do with the antidumping duty. And CPVC market definitely grown better. Our company grown also in excess of 20% on CPVC.

Okay, sir. And how do you see, given that the fourth quarter is normally the construction-heavy quarter from a residential real estate, what is the broad outlook on CPVC now going into Q4 and next year, sir?

Q4 will be further better.

Next question comes from the line of Ashish Khurana with Ang Capital.

Sir, I had a question on this announcement that we made last quarter about having a 60 cascade capacity on CNG type for cylinders. So you said that -- in the announcement, sorry, it was said that the targeted revenue can be INR 60 crores. So just wanted to understand that it was a testing of waters kind of the thing or we see a big market opportunity there in terms of value?

Our cylinder is for cascade application, refilling the CNG stations at petrol pump. It can be supplied only in the cascade form, means cascade of 30 cylinders. We are now in the stage of building a big cascade. And once we supply to any of the petrol pump, petroleum company, then we will see success. Cylinder per se has been duly approved, all certification in place, but the commercialization will take place only by end of...

I think the reply is complete. Can you ask any other question?

Yes. So I just want to understand that in LPG cylinders, we haven't seen that much traction, but in CNG cascades, do you expect it to be different that -- because probably there could be some operating cost benefits for our end clients. So do you see that it probably will have a bigger market than LPG cylinders?

Nowadays, you see at every petrol pump, there is a CNG station. Those CNG stations are filling the fuel through CNG cascade replacement. So our cylinder, which is a newly developed cylinder would be used in the CNG cascade only. These are with -- more of the vehicles are moving either electrical or gas. There is a good market potential for the CNG cylinders.

Next question comes from the line of Swapnil Upadhyay with Motilal Oswal Financial Services Limited.

Sir, what were the reasons for contraction in margins? And what was the reason for increase in raw material cost quarter-on-quarter? Can you please elaborate?

Raw material costs are going down, not increasing...

Raw material cost as a percentage of sales, sir?

Because our margins have to go down because the open market price of PVC is lower than company price. Even the goods, we start ignoring the open -- the company price which are produced locally and we were trying to make our selling price close to import parity. Our percentage of raw material will go up.

And what was the reason for contraction in EBITDA margin, especially in Plastic Pipe segment?

EBITDA margin will come down. When I'm losing money on the local purchase, and local purchase, we don't want to give up. We will go on buying local material. We need the regular supplier. Import is a [Foreign Language]. We can't work our company based on imported material when local production is available. Local producers are very important supplier for us.

Next question comes from the line of Rishab Bothra with Anand Rathi Shares and Stock Brokers.

Sir, just wanted to understand, we mentioned that our capacity will reach by 9 lakh tonnes by March '25. How is the growth plan for FY '26? And what kind of utilization can we expect?

FY '26, we will talk in April.

April. So this 9 lakh is only brownfield expansion. Greenfield will come up thereafter?

Yes. 9 lakh tonne capacity will be available on 1st April 2025.

Okay. Got it. And with respect to the LPG cylinder, I think Supreme and Time-Techno are the two players currently. Are there any other players who are supplying to this composite cylinders?

As of now, no.

Not to our knowledge.

And lastly, what is the market size of this cylinder? And how much market share do we want to gain?

LPG cylinder is more than 40 million cylinders. Our capacity is about -- not even 2 million cylinders.

So we want to scale up the capacity in cylinder also quickly to gain market share?

Going on increasing -- based on the demand coming from the oil marketing companies. They have to decide how much they want to switch over from the metal to plastic. Plastic is a safe material. If you saw yesterday in Kumbh Mela, the explosion took place which are metal cylinders. Our cylinders would not have exploded. They would have burned out. The damage would have been minimal.

So will lobbying help and consumer awareness or marketing campaign help you out?

This is only done by the oil marketing company as you have said.

Next question comes from the line of Navid Virani with Bastian Research.

I just had one more question. Sir, can you help us with the number as to out of the 100%, what percentage of PVC are we sourcing domestically versus imports?

I think maybe 45%, more than 50% -- 50% definitely local. We are locally -- I think we are maybe the #1 customer of the Indian producers.

Next question comes from the line of Rahul Agarwal from Ikigai Asset Management.

Sir, the question last time I was asking was not -- I couldn't get a proper answer. What I was trying to know was infrastructure, the contribution to Supreme is very low. And housing, you said was okay and agri was bad because of extended rains. January, you're saying housing, agri both picked up. So just wanted to know if infra contribution is so low, 3% volume growth. Was there any other reason of this demand not really picking up?

Now demand this quarter will be quite okay. There is no issue. The demand is good from agri, demand is good from housing. There's no issue this quarter. Next year people will start [ sowing ] also and the demand will come from every segment. Now the crops are getting harvested, demand will come from agri also and from housing also. These are so many systems, so many SKUs, new distributor addition. We don't see any [indiscernible].

Sir, maybe I'll put it differently. I think first half, the industry grew 8% to 9%. What was the number for 9 months? Would you have that, sir?

9 months what -- government what is -- from local producer all combined together, all polymer combined together, the growth was only 1% in plastic piping.

Okay. And you think for the full year...

There is combination for all the polymer. PVC, CPVC, polypropylene, high-density polyethylene, linear low-density polyethylene. Altogether, the market has grown by 1%. Please don't use linear low-density polyethylene, we don't make deep system. So -- and LDP, we use it mostly for infrastructure. But all combined, there was 1%. Overall, our company was 7.5%. And other than infrastructure, we have grown by 11.5% in 9 months.

Next question comes from the line of Ashok Shah with Eklavya Invesco.

Sir, last quarter, raw material price was low. And this quarter, raw material price will be something higher. So what would be expected out of this?

I don't think raw material prices are now higher than last year...

List price are higher, but the effective price are not higher.

Not higher price. Prices are -- as on today, prices are quite low. Very competitive, very economical. Our product is very economical compared to any pipe.

Next question comes from the line of Shravan Shah from Dolat Capital.

Sir, just to get a clarification, when we said 1% growth, just previous participant reply. So 1% growth you are saying for 9 month FY '25 or for third quarter FY '25?

FY '25, with the 9 month, the country has grown 1% of all polymer going into making plastic piping. 1% for all the polymer. Don't use linear low-density is a polymer in our piping business because we are not in this system.

Okay. But in terms of the broader level, in terms of the PVC level, will this be a 2%, 3% kind of a growth for 9 months?

PVC across the country has grown by 11%, we have grown by 11% CPVC in country has grown by 9%, we've grown in excess of 20%. These are the two principal raw material we use to make in our plastic piping system in 9 months.

Next question comes from the line of Varun Jain with Dolat Capital.

So my question was in the gas piping systems business, you had expected some orders in Q2 FY '25. So has the order scale increased in Q3? And how is that going? You had told us that there's a very difficult testing procedure for these pipes.

Yes, gas piping.

Gas piping, no, we have not got any order. We are now equipped. We have got certified also. We are waiting for some order to come in this quarter. As of today, we have no orders for gas piping.

Any reason for that?

We qualified to supply gas piping system. We not only make pipe, we also make fitting. But up till now, we have not received any order. But we are -- it always take some time to breakthrough.

Okay. Sir, is there any specific reason why you didn't get any order like some requirement is not met?

Any new supplier to qualify, always take some time, dear friend.

Okay. Okay. And sir, by when do you expect to ramping up in this business?

We may get in this quarter also.

Next question comes from the line of Utkarsh Nopany with BOB Capital Markets Limited.

Sir, my first question is regarding the Industrial segment. So our Industrial segment volume has degrown for the past 2 consecutive quarters. So wanted to understand what is the reason for the same? And how this segment is expected to perform in the current March quarter?

See, in the Industrial division, the volume are really not important, because there are the various OE customers, various parts which are not related to the volume bracket. Only thing is last year in this same business segment, we had electronic voting machine orders, which is not forming part of the current year business. And that's why on the division level, you are looking at degrowth. But if you exclude that business, which was not a recurring business, then definitely, we had a moderate growth.

Okay. And sir, my second question is like what would be our CPVC pipe volume growth for December quarter? And can you please specify once again our Plastic Pipe segment volume and margin guidance for FY '25?

CPVC system, we had a growth of 20% plus in the volume. CPVC system our volume has grown 20% plus in 9 months.

Okay. And sir, can you please specify the plastic pipe volume and margin guidance for FY '25?

We said we are tracking 3% to 4% more than the country growth. But specifically number on plastic piping system, we maintain say 15% to 16%. But in uncertain time, we are scared to give any number. But definitely, we are confident we will grow more than the country.

Okay. And sir, on the margin side?

Margin side between 13.5% to 14%.

For Plastic Pipe segment?

For the company.

For the company, we can talk.

Next question comes from the line of Amit Purohit with Elara Capital.

Sir, just on your comments that Q3 you saw slower growth in the agri segment as well as infra. So plumbing would have done well, housing side. And CPVC has grown probably faster than the rest of the portfolio. And what explains the realization lower for the quarter? And if the coming quarters, there is a likelihood that agri and housing will continue to do well, what is -- assuming that PVC prices remain stable, should we see sequential improvement or stable kind of, how do I say? These are the two questions, sir.

You see price is -- normally should have slight upward bias, but we can't say, we are not clear about the antidumping duty. Antidumping duty comes in, there is no reason of PVC price to go up also. But what I say, it may not go down.

No. Sir, I was referring to our performance. I'm not -- I understand PVC price is difficult to predict. What I wanted to understand is that in Q3, our realization on plastic pipe was INR 131.6 a kg. And when I look at the reasons that you highlighted in terms of your performance, this is because agri was not doing well and infra was not doing well, which I presume that would have a lower realization than the housing. And CPVC did 20%. And still we saw a sequential reduction in realization. So I just wanted to know, is that the hypothesis correct that maybe the...

Infra, we supply high-density polyethylene pipe. This prices are much higher than PVC. You cannot go by the price by kilo basis in way. In our business, there is no price per kilo basis. We told you already, we've volume number here.

Okay. Okay. And coming quarters also, one should expect a stable -- assuming that PVC prices remain same, so it should be a stable number?

It's difficult to make a forecast, but that's why we are saying we will grow 3% to 4% more than the country growth. That part we are confident. And if it doesn't go down, then we definitely will grow nicely in our plastic piping volume-wise more than 2-digit better than the country.

Just wanted to know, why I'm asking this is just to know that is the competitive intensity so high that the -- I mean, there is too much of undercutting which is happening amongst the dealers, and dealers are asking for significant discounts from companies. Is that the scenario even in housing?

Nothing like this.

Next question comes from the line of Rohan with Turtle Capital.

My question is regarding OPVC. So what is our total capacity at this moment?

5,400 tonne  -- yes, 9,000 tonnes annually.

9,000 tonnes annually with 3 lines that you have right now.

Yes.

And what is the timeline for rest 7 lines?

7 lines, 2028.

2028, okay. And with this 9 lines -- with this 3 lines that you already have, so what will be the revenue that will be generated at optimum utilization?

2 lines have just gone into production. So once they are running properly, we have no idea. This is new market. So very difficult to give any forecast for the quantity. We should be able to sell at least more than 6,000, 7,000 tonnes next year.

It is all high value addition.

High-value added, yes. But volume-wise, we may be able to say 6,000 to 7,000 tonnes next year.

Okay. And can you just explain me the traction that is going on like replacement or supplementing the ductile line pipe. So is there acceptance increased by passing quarters?

DI pipe is smaller diameter. The OPVC pipe is replacing it at a very economical cost to the department, up to 400 millimeter. We are 110, 160, 200, 250 smaller diameter. So definitely, department going for OPVC is much more advantageous to them in cost-wise and performance-wise. So we are confident as we go on getting qualified, we will go on getting order for the capacity what we have put in place.

Okay. So you mean to say that majority of demand in OPVC is below 400 mm?

As of today, this is our impression.

Okay. And there -- and over there, how is the traction going on like?

Sorry?

How is the traction going on, the acceptance by government projects, how...

It is very much, there's no issue. The government, they are finding better than -- lower in cost and give better performance, longer life also. Better performance, water outflow is more, and OPVC compared to DI pipe, the life is longer also. So there is no issue.

Okay. And how big this can be an opportunity for a company like Supreme? And how big you want to be in this segment?

Yes, we want to be in a segment, we have to still go a long way, long way. We're still -- we have developed as [ OPVC fitting activity ] developed properly in our country. We have huge capacity -- we will see more capacity. This is a very small capacity, 9,000 tonne is very small capacity. Today, we are running with a very small capacity. We aim to become much larger capacity. This part I can tell you. It will take some time.

Next question comes from the line of Vipul Kumar Anupchand Shah with Sumangal Investment.

So my question is what was the average price of PVC during last quarter? And what are the prices ruling as on today, sir?

Company price is different, then they give you huge discount also. So I have no idea. The price was INR 83.5 company price, but then they give so many discounts, they give some specific discount to the customers. So we have no idea. No idea. It may low, below INR 80. Open market price is around INR 72. I can give you open market price. [Foreign Language] in Bhiwandi market, open market price of PVC pipe is INR 72 and local company price is, declared price INR 78.5, but then company gives huge discount based on the quantity. The price are not transparent. Only transparent -- their declared price and yield price are quite different.

So have they recovered now or they are still ruling at low levels only?

The import cargo is arriving, there is no antidumping duty as on today. So they are quite low compared to local company price.

Next question comes from the line of Keshav Bijarathan Lahoti with HDFC Securities.

Sir, as you highlighted that CPVC demand is growing more than 20% and infra demand has been poor. Can you give some sense on what is the infra mix and CPVC mix this year?

Sorry?

So as you highlighted, CPVC demand is growing very fast and infra has been very poor this year. Some sense on how much is the CPVC mix in the entire portfolio and infra mix for this year?

CPVC is served in infra?

These are mix in our CPVC and infra.

No idea. No idea. Volume will be no idea. That is classified information.

Next question comes from the line of Rishab Bothra with Anand Rathi Shares and Stock Brokers.

Yes, sir, two, three questions. Our value of -- share of value-added products have increased from 35% to 38%, but still, I think margin have lowered. So to what extent the value-added products can increase and margin trajectory look better?

Our plan is to go on increasing value-added share, we are investing more and more money. This year, we'll be investing more than INR 900 crores in plastic piping. Many investments are taking place to increase our value-added share. Normally, we get 42% value-added share, which we want to go increase. Commodity prices are very low. We want to improve our return on capital employed and want to improve our operating margin.

And sir, looking at the EBIT per tonne, if you want to compare, I think consumer products has the highest EBIT per tonne followed by packaging product and industrial product. Plastic pipe comes the last. However, when we look at the revenue contribution, plastic piping product has 65%, industrial and packaging 15% and consumer 5%. Will the expanded capacity change the revenue mix per se?

We go by return on capital employed.

Pardon me, sir?

We go by return on average capital employed in our company.

And not on EBIT per tonne.

Last year, return on every capital employed was second to furniture. Our return on capital employed was quite good. As you have seen in our balance sheet overall, we earn more than 40% on our money. So our criteria only, which business give us more return on our capital.

So better is to look at ROCE rather than EBIT margin -- EBIT per tonne.

ROCE.

Okay. Fine. And lastly, on the margin front itself, we achieved 20% annualized margin in FY '21, and we are around 16% or so. So what timeframe can we look to reach that margin level again, operating level margin?

Our margins were not the normal margins from inventory gains. You see in those times, during COVID times, the PVC prices or the polymer prices went up so high. And the increasing prices, you tend to get inventory gains. Those are not the regular margins. Regular margins, operating margin would be in the range of 14% to 15%.

Okay, 14% to 15% regular margin.

Again, we work only on one criteria each and every capital employed.

Next question comes from the line of Rohan with Turtle Capital.

I just wanted to know how does the distribution of OPVC work? Is it distributor-led business, contractor-led business or it's a tender-based business because there's a lot of bidding with government?

We supplied to some contractor, who was supplying to government.

Okay. So it's more of a contractor-based business. You supply to contractors only.

By getting order from government, we hardly supply anything direct to government. We supply to contractors against payment who supply to government.

The next question comes from the line of Deepak Lalwani with Unifi Capital.

Sir, my question was on the infra segment. What is the reason for the weakness? And as we speak, have things improved? And can you share your outlook for this segment?

As you are aware, in the first 6 months, the central government spent only 29% of their budget on infra. And we don't think much expenditure has been boosted in the third quarter also. I have no idea. Normally government spent money in the last quarter. So money coming only from central government budget or state government budget. I think government spending is lower. We have seen even the local producer who are supplying the high-density polyethylene there the degrowth of 28% by volume in the first 9 months. We sold across all the application for infra, high-density polyethylene raw material used in infra, one of the raw material, and there is a degrowth of 28% by volume in the country for the first 9 months. So we hope that government may spend money on infra more, we have no idea.

Next question comes from the line of Aasim with DAM Capital Advisors Limited.

Sir, I just wanted to understand on your pipes volume growth guidance. So when you say Q4 will be 24%, 25% growth so that you can meet your annual guidance expectation. Is it actual ground level demand that has suddenly improved that is giving us the confidence? Because as of late December and early Jan, our channel sales did not pick up any robust demand indicators. Your own Q3 volume also suggest the same, and we are 20 days done in January. So has demand actually picked up materially?

We believe this quarter we will sell more than 200,000 tonnes. This is what our distributor has given us promise. They've given us their revised target. Nothing adverse happens, this will happen also. If nothing adverse happens, suppose the -- there is unfortunate some cyclone or some rain, big rain happens, doesn't happen in January, March. Also unusual thing happens. So when some large order problem happens, who knows that? We are normally optimistic. Now January to 10 June, the demand will remain better on the plastic pipe system. These are normal experience. Beginning January or more so after the Pongal, 14th January after the Pongal, Sankranti, Bihu, Lohri, all the festival are over, the demand -- up to 10th of middle of June demand is going to be better for plastic piping system. This is normally happen every year. So there is nothing unusual this year. If anything happens, I cannot say.

Sure. I can understand what's not in our hand is not in our hand. But to get the 200,000 tonnes metric tonne  sales in Q4, you will have to run at capacity utilization of almost 100% in Q4 itself.

There is a huge stock lying with me. I can supply that much. I have huge capacity lying with me. I can give 25,000 tonnes from my stock also. Material available -- I have material.

Okay. Because the other thing is there is a gap between international PVC prices and domestic prices, domestic being higher. So that also is a factor, right? So when you say 200,000 metric tonne, clarity is there from your channel, it is eventually going into basically the end consumers are still consuming. That's the level of clarity we have, right, not inventory stocking.

We will be selling to distributor only. Distributor will passing to the market. See our normal experience. Our sales are quite good in third quarter -- last quarter.

Ladies and gentlemen, as there are no further questions, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

Thank you very much. Thank you all.

Thank you, DAM Capital, and thank you all the analysts.

Thank you. Thank you, Aasim. Thank you, DAM.

Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.