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

Ladies and gentlemen, good day, and welcome to Q1 FY '26 The Supreme Industries Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aasim Bharde from DAM Capital Advisors Limited. Thank you, and over to you, sir.

Yes. Hi. Good evening to everyone who has dialed in for Supreme Industries Q1 FY '26 Earnings Call. As usual, we have with us the senior leadership team who will discuss and talk about the quarter gone by. And after this, we can open it for all for questions. Thank you, and over to you, Mr. Taparia.

Good evening. Thank you, Mr. Aasim Bharde. Thank you very much. I am M.P. Taparia, Managing Director of The Supreme Industries Limited. I, along with my colleague, Shri P.C. Somani, Chief Finance Officer; and Shri R. J. Saboo, Vice President, Corporate Affairs and Company Secretary, welcome all the participants who are participating in the discussion of the unaudited stand-alone and consolidated financial results for the quarter ended 30th June 2025. The stand-alone results and the consolidated results are already with you. I'll give brief on company product, operating performance and other highlights. The company sold 183,793 tonnes of plastic goods and achieved net product turnover of INR 2,579 crores during first quarter of the current year against sale of 173,835 tonne and net product turnover of INR 2,612 crores in the corresponding quarter of previous year achieving volume growth of around 6% and product value degrowth of about 1%. The consolidated operating profit and profit after tax during the period under review amounted to INR 344 crores and INR 202 crores as compared to INR 425 crore and INR 273 crore during corresponding quarter of previous year result in decrease of 19% and 26% respectively. The business scenario of all the product segment of the company for the year ended 30th June 2025 as compared to corresponding quarter of the previous year has been as under. Plastics Piping system business grew by 6% in volume and degrew by 4% in value term. Packaging Products segment grew by 10% in volume and 9% in value term. Industrial Products segment business de-grew by 2% in both volume and value term. Consumer Products segment business grew 5% in volume and 1% in value term. The overall turnover of value-added product increased to INR 933 crores during the current quarter as compared to INR 925 crores in the corresponding quarter of previous year. Business outlook. Polymer prices remain in affordable range at lower level. PVC prices remain in downward range. This augurs well for growth in the business going forward this year and beyond. In the first quarter, Plastics Piping business was affected due to 20 days early break of monsoon. This resulted in agriculture piping system business. Due to fall in prices in this quarter also, there were inventory loss affecting profitability in the quarter. Country is witnessing good rainfall in most of the part, which augurs well for the economy. Going forward, the company expects good demand for housing and agriculture. The inflation is also coming down. With government commitment to boost infrastructure spend, company believes demand for that sector should also get revived. The company remains positive of envisage volume growth with increase in value-added turnover both for the Plastics Piping division and for the company during current financial year. The company entered into business transfer agreement with Wavin Industries Limited and its two wholly-owned subsidiary company that is Wavin India Pipes and Fitting Manufacturing Private Limited and Wavin India Holding Private Limited, collectively referred to as Wavin. The acquisition is a going concern on slump sale basis is likely to be completed by 31 July 2025, subject to fulfillment of terms and condition precedent provided for in respective business transfer agreement as mutually agreed between the parties. The aggregate consideration for the entire transaction including for net working capital is about INR 310 crore, net working capital is subject to final adjustment as on closing date. The company is also entering into Master Technology License Agreement with Wavin Netherlands and Orbia company to access on exclusive basis for India and other SAARC countries are with existing technology and other new technology to develop during the period of seven years pertaining to Plastics Piping system for Building & Infrastructure segment. The same will be effect from 1st August 2025. Going forward this acquisition and matching arrangement for [indiscernible] Plastics Piping division to a new scale in terms of capacity, market reach and product offering. Capacity expansion at various locations for Plastic Piping business and Protective Packaging products are progressing smoothly. Company plan to set up a new unit for material handlings product at newly acquired land at Malanpur near Gwalior to expand its footprint in Central India. Work for the same shall be taken up in hand shortly. All the equipment for PP silent pipe systems and technical collaboration with M/S Poloplast of Austria have been installed and production is underway. Commercial production is likely to commence next month. The company has successfully executed its first order for polythene pipe for gas application. Company also has the prestigious DVGW certification for the electrofusion fitting from Germany for the use and carrying water and gas. This gives the company credential to get qualified to participate in tender for gas pipe and electrofusion fitting supply. With this product and certification Supreme is the only company eligible to produce and supply both pipes and fitting for carrying gas. The company continues to invest and enlarge the product basket in all its division and to remain focused on increasing the range of value-added products. Construction work at site for profile window project is in advanced stage of completion. Equipment has started to arrive at the site. The company expect to commence large production during second quarter of the current year. Initial focus of the company is to launch the product in UP, Uttarakhand, NCR Region and thereafter, the company will plan for more geographical reach within India with setting up of fabrication facility in other part of the country. The company expect cash outflow of about INR 1,350 crores toward existing capital commitment, acquisition of Wavin business and new commitment during the year. Entire CapEx shall be funded from internal accrual. All other product division are faring well and company envisage molded growth during the year. The Protective Packaging product division is especially driving its growth plan by increasing product range and offering for customized solution. The same is yielding positive results and paving the way for achieving double-digit volume growth and revenue target to exceed INR 1,000 crores for the year from INR 855 crores in the previous year. The company issued a letter of acceptance for supply of 200,000 number of 10 kg composite LPG cylinders to Bharat Petroleum Corporation Limited and also received a repeat order of 231,000 of composite LPG cylinders from Indian Oil Corporation Limited, which will enable the company to improve utilization of expanded capacity of Composite Cylinders division to a reasonable level. This is a brief and overall summary for the quarter ended under reference. Thank you for your patience. Now I and my colleague, 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.

[Operator Instructions] Your first question is from the line of Shravan Shah from Dolat Capital.

Sir, the first question is on the volume front. So sir, in the AGM, we say for two months, April and May, piping volume has grown by 11-odd percent, but now the volume number is just 6-odd percent. That means in June, we have kind of a degrowth by close to 3.7%, 4-odd percent. So I wanted to understand two aspects. First is for this quarter at an industry level, how do you see what kind of growth was there? And in terms of our guidance, last time we have talked about 10% to 12% kind of piping and overall volume growth. So what's the new revised guidance?

In the June, the business of plastic pipe was affected due to great monsoon. [indiscernible] Agriculture pipe business at [indiscernible] But for the whole effect -- Hello?

Yes, sir. Yes, sir. Go ahead, sir.

For the whole year as now we're [indiscernible] Wavin from 1st August. Our guideline upward mean accept growth...

I'm sorry to interrupt, sir, your voice is not audible properly.

Some disturbance coming in. Hello?

Yes, now it's better, sir.

There is disturbance, madam.

It's from the participant line, sir, sorry. Yes, sir, go ahead.

So now after acquiring as we are going to acquire Wavin from 1st of August this year, now we revised our guideline upward. We anticipate that our Plastics Piping business volume will grow between 15% to 17% this year, though it has grown 6% in the first quarter.

And for overall volume growth, how do we see for full year?

Overall volume.

For the company as a whole?

Yes. All the segments put together.

Yes, between 14% to 15% should be.

Over all divisions.

So here, sir, just wanted to clarify for Wavin last time we said that we are looking at close to 51,000 kind of a volume. So that number remains intact. So if that is the case.

Right now we will be having operation only for eight months. Wavin has got installed capacity of 71,000 per annum. Hello?

Yes, sir. So how much volume from Wavin are we looking at?

We hope that in eight months, we may get 30,000.

Okay. So then why -- on what basis are we so confident that in the remaining 9-month period, the volume will pick up significantly given that the ADD has still not came and BIS has been postponed to December.

That will grew continually. Last year at the price they were [indiscernible] they were destocking at a very severe level. Now [indiscernible] We are very confident.

Okay. So broadly, we are now looking at kind of 18%, 20% kind of a growth for nine months to achieve a 14%, 15% kind of growth.

I shared the number, 15% to 17%, you can calculate for the remaining nine months. You can calculate yourself.

Got it. Got it. And second on the margin front. So this quarter, obviously, was on the lower side, close to 12% EBITDA margin.

Overall we anticipate margin of the company will be around 14.5% to 15.5%.

Okay. Got it. And what was the inventory loss in the Q1, sir?

Very difficult to quantify.

[Operator Instructions] The next question is from the line of Praveen Sahay from P L Capital.

So first question is related to the company expecting a cash outflow of INR 1,350-odd crores. And I suppose it's INR 310 crores of Wavin also included in that. So how much of the capacity expansions in the different vertical you are expecting with the INR 1,000-odd crores of this CapEx in this year?

Major expansion will coming in Plastic Piping division. Plastic Piping division will reach 1 million tonnes by March 2026. And a new capacity of 5,000 tonne of window making will also come. We are expanding capacity in Material Handling division and Protective Packaging division, but major expansion will be Plastic Piping division.

What level of plastic pipe capacity do we have right now?

Our capacity at the beginning of the year was 870,000.

Yes. So in the quarter, we have not added anything, right?

Nothing much.

Not much. Something is going on I think every month actually. We told you end of the year March 2026 capacity will grow 1 million tonnes.

Got it, sir. Sir, second question is related to your commentary on the first order of a PP pipe for a gas application. Can you quantify how is the size and also the opportunity for the rest of the year?

Now we are qualified. So now we will be eligible to participate in the tender because we have been successfully participated. The market of gas pipe in the next seven years is around 700,000 tonnes. And we are participating as on today only from Gadegaon plant in Western India. So we will be examining whether to put up in other location also. So very difficult to give you any idea how much we will get, but we are only glad to inform that we have successfully participated to supply pipe and fitting from one source, which is very unusual in Indian market. We supply pipe and also electrofusion fitting for gas use.

Okay. Got it, sir. Just a clarification, what you said of 14.5% to 15.5% EBITDA margin, that is for a full company level or that is you are expecting for Plastic Piping?

For the company.

The next question is from the line of Sneha Talreja from Nuvama Wealth Management.

Just a couple of questions from my end. You have mentioned that there was an inventory loss in this particular quarter. Can we quantify the same?

Very difficult to quantify. As you've seen the margin has eroded mostly due to the inventory loss in our stock of finished goods of pipe and also the raw material what we have committed with the world market, price have fallen. So we lost money. But now...

And sir how to quantify?

Quant maybe INR 50 crores, INR 60 crores.

INR 50 crores, INR 60 crores in this particular quarter.

Yes.

Understood. Now sir, secondly, on the margin front, with Wavin coming in, could we understand the margin trajectory for us? Our Wavin margins will be similar to us? Will it be better because of the product mix or because of their operating overheads being on the higher side, it will be lower in initial terms, some sense.

Currently, the asset what Wavin are able to produce are similar to what we are producing. When we take any new technology, then only when we take the technology, we will announce to all our partners as new product group we are adding based on Wavin technology, that benefit may accrue properly only from the beginning of next year. As on today, the asset what we purchased are making products similar to what we are already making. It only increase the volume.

Understood, sir. But on the margin guidance front, I think you've maintained your margins from 14.5% to 15.5%, while I understand the upgrade in the volume guidance is because of Wavin, your margin improvement from the current levels will only be because of discontinuation of inventory loss or any other reasons to add?

Margin, we told you 14.5% to 15.5% for the company.

And we expect that improvement coming in from which all areas because currently, the margins are much lower.

While in Pipe division we lost money due to inventory loss now. That also will be improving, and we are increasing our business of value-added product. Last year, in the first quarter, we sold INR 933 crores which is a very marginal growth of only 1% compared to previous year first quarter. So in the remaining nine months, we expect to sell more value-added product also. So overall, we believe that we will be earning between 14.5% to 15.5% this year for the company.

Understood, sir. And lastly, in case I may, any clarity on the antidumping duty levy? Recently, there was a document stating that it has got extended till September 2025. Any sense there would be helpful.

Directorate General of Trade Remedies announced a disclosure notice that this is the quantum of injury that these foreign exporters have got to the Indian industry. Now thereafter, the final antidumping duty rate recommendation is going to be announced by Directorate General of Trade Remedies. Thereafter, after the announcement, the Ministry of Finance will examine and then issued duty imposed notification. Normally it should take between three to four months. So now in the month of July, so we anticipate the antidumping duty may come 2nd of October or 1st of November. But I get more than that in [ five ] years. Ministry of Finance and Directorate General of Trade Remedies they will decide.

The next question is from the line of Pujan Shah from Molecule Ventures.

Sir, just wanted to understand on the price hike, which happened in the April and May. So Reliance has announced a price hike of INR 3.5 per kg in PVC. So just wanted to understand that price has been fallen up to the certain level that has impacted our pricing, and ultimately, it has returned to the inventory loss or what has happened in the scenario?

No, there was no price hike in April, May.

There was a price increase and they dropped the price. So net-net, the price have dropped. Then what it was on 1st April, the price dropped in the month of June, then they increased the price and again, they gave the scheme. They announced the price, but then they give the scheme. So net effective the price come down only.

Okay. Got it. So right now, we should expect the price range should be around INR 67, INR 68 per kg.

You know better. Yes. Okay.

Yes. And sir, second question would be on the JJM front. So we know that from the last 10-odd months, we have the JJM, the fund flow challenge has been there. So any green shoots being visible on that part? Do we think that, that quantum of money should be flowing in, in coming months? How do you got the trend?

What I can? I didn't follow.

Can you repeat this?

Yes, sure, sure. Hello? Am I audible now?

Yes, please.

Yes. So I'm talking on the JJM front. So we know that from the last 10, 12 months, there is a fund flow challenge in the JJM.

No, money has not come. Money has not come They owe me INR 2.75 crore today. And they owing more -- last more than six months.

Yes. So that's what I'm trying to understand. So how -- so what's your outlook in coming months? Do you think that this fund flow challenge will get resolved and green shoots happening in coming months, like I'm talking in August, September?

I don't estimate [indiscernible], but my money is bound to come, I'm sure.

Okay. Got it. So full-fledged JJM is expected, not yet, not soon.

Money will come.

The next question is from the line of Sonali from Jefferies India.

Sir, my question is, if I actually look at segmental volume growth, packaging volume growth has been quite strong at about 10%. So that despite, again, the PVC volatility. So can you help us understand exactly what we did at this point in time? And also secondly, what is the channel inventory right now? You did mention in your media interview remarks that you are seeing no destocking now. So how is the channel inventory now versus what it was in March?

You have two questions you are asking. So when you're asking Packaging division, Packaging division definitely had a good business growth, and there was no inventory loss in Packaging division. And the demand for our cross laminated product and our packaging product both segments, the demand is quite strong. In packaging film, we don't have extra capacity. Whatever capacity we have, we are already selling. So this is packaging film. On Plastic Piping system, as I told -- we told earlier that we don't see any more price erosion in the raw material price. And we have already indicated that we may grow between 15% to 17% in volume in Plastic Piping division this year.

The next question is from the line of Keshav Lahoti from HDFC Securities.

Sir, firstly, I want to understand the volume growth guidance for Plastic Piping division, which was 12% to 14%. In spite this being a muted quarter, you have raised your guidance to 15% to 17%. What is the thought process for the same?

Last year, the business was starting from 11 July when the prices started falling and they continuously fall up to March 2025. This year, we don't -- so a lot of destocking took place. Now there is no possible destocking. Now the people have proper stock. But now people have no concern about further price erosion. So -- and the demand going forward, the rains are quite bountiful. Demand for agriculture and demand for housing is going to remain very robust. And we have added several new range of products. We have added several additional distributors. We have added several additional SKU. Now SKUs are more than 15,000 numbers, and we have 45 system and all the systems are well accepted. So we are quite optimistic that the growth number in volume what we told you we will achieve.

Okay. Understood. Got it. And what sort of volume for Wavin you are looking for this year as well as for next year?

Wavin, as to date has the capacity of 71,000 tonnes. It will come in our hand only from 1st August. So this year, we hope that we may be able to sell 30,000 tonnes out of the win capacity. Next year, we will talk in the month of April next year.

Understood. Got it. Sir, lastly, what is the progress on the OPVC pipes? What sort of capacity you are adding? When will it come? And what sort of volume you are looking for this year?

We have two lines with capacity of around 500 tonnes per month, and we are getting orders.

Okay. What sort of capacity you plan to add? Earlier, you had a plan to add go till 32,000 KMT by FY '28.

We had the plant remain good even today. They have to come over a longer period by 2028.

The next question is from the line of from [ Meet ] from Motilal Oswal.

First one is on our CPVC business. So you're ramping up capacity there. So in the pipeline of CapEx from up to 1 million tonnes, how much will be part of CPVC or CPVC expansion has been done already?

Out of 1 million tonnes, CPVC will be quite large, but that remains classified information.

Okay. Okay, sir. And on the further dwell on the demand side, like of our growth estimates in the Plastic Piping System. So which segment or what gives you confidence of such a high growth if there is no destocking and where -- which demand or segment-wise pocket do you see the demand coming in from like in agri, residential, can you throw some light on that?

In our business combination, we are larger player in housing than agriculture. Infrastructure is a very small portion of business. Housing demand is going to be quite good, and we were missing the silent pipe made from polypropylene. We are making silent pipe from PVC. Now from next month, we are going to launch on 18th August our silent pipe based on polypropylene. So range which was missing also will be available. Our PERT pipe system also very well accepted. Our polypropylene pipe system are also very well accepted. So many new system what we have launched, we anticipate that there will be good growth in housing segment also. So combined number, what we told you that we will grow between 15% to 17% by volume in this year.

Okay. Okay. And on the -- lastly, on this PTMT process. So any color on that, how that segment is doing in terms of testing and launches?

We are adding several new varieties of PERT [indiscernible] and PTMT. They are very well accepted. We are going to launch a range of showers also. And our showers will be a very large range, which is going to be launched in the next one, two months.

Launched in another two months.

One, two months. Maybe a month or...

One, two months.

The next question is from the line of S. Ramesh from Nirmal Bang Equities.

So when you talk about the pipes for the gas sector, what is the kind of annual revenue you can expect from that and when you start delivering those pipelines? And secondly, in terms of the margins compared to agriculture and housing segments, is there any improvement in margins in the gas pipeline sector?

No. The gas pipe, we just started, so we can't talk much more detail about the margin or the volume. This is the we got first order. And we supplied and we cannot give any quantum idea about how much business we will get this year. And between housing, agriculture, housing definitely gives a better margin. Agriculture is gives me low margin.

Okay. So if you look at your results and the gross margin in the 33% range, do you see any levers to improve the gross margin and the share of the higher-margin products improving in the next two to three year. And secondly, in terms of the fixed cost, would you be able to get some operating leverage once you improve gross margin? What is the thought process then?

Better EBITDA this year, when we told you 14.5% to 15.5%, we are embracing that we've been talking, we will succeed.

Okay. And finally, in terms of the variety of plastics, including polyethylene, polypropylene, PVC, which should possibly see an increase in supply based on the various petrochemical projects. How do you see the increase in supply helping the plastic processing industry, including your company? And what are the areas you're working on, including new applications in, say, PE, PP and your sister company has an ABS project coming up. So any thoughts there? Which are the new areas you would be exploring in the next two to three years?

Fortunately, in India, the raw material supply is quite abundant. So there is no concern about not getting raw material except PVC. But PVC, government allow me import, so there is no issue. materials are abundantly available in our country.

The next question is from the line of Shravan Shah from Dolat Capital.

Sir, for this quarter for industry, is it fair that the 6% growth that we have seen for plastic pipes, have we done better than the industry growth?

[indiscernible] People who are predominantly only in housing, not in agriculture. We are a player in agriculture and housing both. There are some players in plastic piping were more prominent in agriculture and some players who are more prominent only in housing. So I can't give proper comparison with anybody else...

But for average, if one has to look at for first quarter, how much industry would have grown?

I have no number with me, so I cannot give you a number. But -- will be larger than the industry.

Okay. And then for full year FY '26, how do we see industry would be growing? At what rate?

We'll be growing better than the industry. Industry may grow by around 9% to 10%.

Okay. And then in terms of CPVC, that would definitely would be more than 10% kind of a growth would be there in CPVC?

Not [indiscernible].

The next question is from the line of Parikshit Gupta from Fair Value Capital.

My first question is on the PVC resin price. You mentioned that the June as well as July month has observed a price decline from Reliance. However, the numbers posted for K-6701 grade, there has actually been an increment. On May 1, the price was around INR 71 averaged around the country, which is now around INR 75.6. Can you please tell me if there is some mistake in my understanding here.

You may be checking the registered price, then you may not be knowing the discount what they give, what they give some quantity lifting in discount. So I don't think you know the current pricing. And the price and they give the monthly scheme, if we lift so much, then so much discount. If we lift so much, then so much discount. So net-net -- you may not be doing now. And they have different pricing for different customers.

Okay. Understood. And just structurally, sir, if the prices because of either antidumping or maybe further supply-demand scenario goes further up for PVC resin, wouldn't that hurt margins for players such as ourselves? I know that the quantum of pass-through to customers will also matter here. But given upward trend in pricing, wouldn't that hurt the margins?

As on today, there is no upward trend. I only say there is no more downward trend. And Upward trend -- we don't know when antidumping duty will come. But some small increase will not affect the demand for the plastic piping system because this is the best material for the given application where it is used. There is no other material which can compete with PVC.

Okay. Understood. Because most of the other companies, the competitors have guided at least a 6% growth of prices in this financial year.

You know better.

So with antidumping.

You know better.

Okay. My second question, can you please tell me the split between the more commoditized pipes such as UPVC, and the more value-added products for example CPVC, OPVC? And how do you see that split going forward?

Major market will remain always with UPVC and larger volume.

For supreme, how much was the split? What was the share of UPVC in the last quarter?

Very classified information.

[Operator Instructions] The next question is from the line of Pujan Shah from Molecule Ventures.

In terms of OPVC, you said that we are receiving some orders, and we are also seeing the markets like Gujarat is also opening up. So in terms of understanding right now, so one side, we are suffering from the JJM issue. Second is we are getting orders. So can you just broadly help us to understand how we are getting this from the OPVC and how we are panning out? Do we -- we are trying to tap in new type of opportunities for OPVC?

Can you repeat actually, we are not very clear what you are asking.

What you are asking? Yes, thank you.

Please repeat slowly. What you want to.

Am I clear now?

Yes.

So in terms of OPVC, we -- in the last participant, you said that we are receiving orders for the OPVC part. And also there is suffering from fund flow challenges in there from the JJM part. So are we tapping any new opportunities for OPVC, which can open up new market specific? And so is that what we are trying to do? Or we are getting some orders for new states like Gujarat.

I must make it clear to you, OPVC is a limited market. It is a replacement of ductile iron pipe. And as on today, the ductile pipe between 110-millimeter diameter up to 315-millimeter diameter, that only can be replaced at an economical cost to the user, which are state government or municipal corporation have carrying better. So it is a very small market on special segment only you can use OPVC pipe. And their sizes are very limited. They are being made which are up, starting from 110 millimeter. PVC pipe, people are making from 20 millimeter to 90 millimeter. That is not made from OPVC. OPVC retail market is 400 millimeter to 1.2 meter that is not made from PVC.

Right, right. Got it, sir. But we are seeing that the new states like Gujarat has been opening up. And so is that -- so just wanted to understand the order inflow in terms of OPVC. Are we seeing very green shoots in OPVC from this quarter?

When I say our capacity 1 million tonnes, and OPVC, my capacity is 6,000 tonnes. So 1 million tonnes, as 6,000 tonnes is a very small capacity.

The next question is from the line of Rahul Agarwal from Ikigai Assets.

Sir, two questions, both on cost-saving initiatives. The annual report talks about the renewable energy now being 30% across Supreme Industries in terms of power and fuel cost. I believe the intention is to have over a longer term, 100% of this coming from renewables. If I have to understand the power and fuel cost savings on a per tonne basis or overall company basis, how should we understand that? That's the first question.

Yes. You see, going forward in every year, every month, we are looking how to increase the share of renewable energy. But with the constraints of DISCOMs, constrain of the regulatory approvals, et cetera, the last year, we had a share of 21.4% of these from renewable. This year, we are targeting for the year should be 30% plus. All our plants, wherever we have the space, we are going with the solar and -- apart from our own plants, we are also participating to the purchase of green energy from other sources. But although it's very easy to say how we should go for 100%, but in real life, because of the various regulatory challenges, you cannot -- you have to remain dependent upon the DISCOMs and state power. But yes, from 21% to 30% this year and 35% next year. This is how we have to make the progress.

So, Somani ji, is this like all the benefits are completely passed through in terms of pricing? Or do we retain something on the margin side? Like how does it work? Is it like completely volume benefits on sale volumes? Or is it like cost savings?

You're talking of energy or you're talking of the prices of the product?

No, I'm saying if we save money from renewable energy, do we decrease the selling price of the product?

We have so many increased costs, also their front.

Yes, sure. I understand that.

We balance all the cost together, each. No single cost, each.

Okay, sir. And second question, similarly on freight and forwarding because we have seen new state locations, new plants have been added. I think most of these savings are also getting passed through? Or is it some -- is the saving also part of EBITDA margin?

Passed on to my customer.

Sorry, sir, I was -- you were not audible. Could you pardon me, please?

I said the benefit of the lower freight is passed to my customer.

Okay. Got it. So that is basically leading to higher volumes.

If I get lower cost of buying from my company.

The next question is from the line of S. Ramesh from Nirmal Bang Equities.

So if you're looking at your capacity utilization, it seems to be in the 60% range. So when you talk about improved performance for the rest of the year, what will be the capacity utilization by the end of the year?

The overall capacity utilization for the company should remain between 65% to 70%.

And after FY '26?

Many of the capacities come during the year. So they are not available for the full year. So we were to take the opening capacity and then whatever capacity has been expanded during the year, it will come gradually. So if you take the effective capacity for the year, then 65% to 70% is a reasonable number, what we achieve.

Okay. And beyond that, is it assuming that the market improves, can you go up to 80%, 90%, say, in future over the next two to three years? Is that possible? And will that give you -- sorry?

We'll go on expanding our capacity.

The next question is from the line of Utkarsh Nopany BOB Capital.

Sir, my first question is on the pipe segment. So just wanted to know like how has been the pipe demand from housing segment in June quarter compared to previous year? And if you could quantify the CP pipe volume growth for June quarter?

No, housing demand was good, but we can't quantify because many areas, the agriculture pipe are used for housing also. So we are not able to identify how much has gone for housing, how much is going for agriculture. But our housing -- the customers who are dealing in housing, they had growth in the business, they had no degrowth. Degrowth came only from those customers who were dealing agricultural pipe business only. There the business became completely, very much depressed in the month of June.

Okay. And sir, what would be your CPVC volume growth for June quarter?

Classified information.

Okay. And sir, second question is regarding the channel inventory. So if you could provide some color like how is the inventory level at the dealers? Is it at normal or below normal at the end of June?

We believe below normal.

Okay. And so you expect the dealers to restock -- start doing the restocking of inventory from September quarter onwards?

It start coming from September.

The next question is from the line of Shivkumar Prajapati from Ambit Investment Advisors.

So my first question is, do we have any internal volume growth target across our product categories, for pipes, furniture category? And if yes, then what's our target for the next three years?

Next three years.

[indiscernible] for the year. For the next year...

I'm sorry to interrupt, sir. Your voice is not audible. Hello?

No, we can't talk anything about material. This year only we have [indiscernible].

Okay. But sir, do we have some separate internal targets based on the segments that we operate? Or is it a consol target?

We are [indiscernible] target than share.

Okay, sir. And sir, would you be able to share the percentage of premium products as a percentage of total volumes or say total revenue?

Now impact [indiscernible]

For the first quarter, plus 36.2% revenue from the premium products.

Okay. And sir, my next question is on this composite cylinder that we are trying to crack. So right now, it is very minimal, but as per your assessment, how huge this opportunity can be in the coming years?

Composite cylinder. You see we have a capacity of much, much bigger. Right now, we are getting that capacity fully utilized. Now this time, we have got the letter of acceptance from BPC, a repeat I receive. So we really get the continuous order intake. For any expansion or any opportunity is meaningless.

Okay. So sir, on a rough estimate, I mean, as per my estimate, suppose INR 2,700 per unit and there are around 30 crore plus LPG cylinders. And if we take a conversion ratio of, say, 5% to 10% and the opportunity size comes between INR 4,500 crores to INR 9,000-odd crores. So what do you think like how fast this conversion can be? I mean, in the next three years or five years down the line, do you see that the conversion would be 50% or 60% or something similar to it? And which are...

We wish whatever you are suggesting can happen. We are seeing for the last several years how the things have moved. So totally dependent upon the Ministry of Petroleum and Government, foresee and plan based upon that.

The next question is from the line of Arun from ICICI Securities.

Sir, just one clarification. Sir, when I look at your raw material cost, it is at around 68.6% against ballpark 68.1%. So around 50 bps has increased. So the inventory loss doesn't look so big based on these numbers. Am I missing something, sir?

What you are saying is right, but you see our total inventory has increased. And when the inventory gets increased, the inventory value at cost, which includes your power fuel, which includes your other manufacturing overheads. So those gets added to the inventory valuation. So the inventory valuation gets added with the overheads also. So total material cost, what you are looking would include the part of the overhead. That's why you are not finding the difference between the raw material cost that way.

So, do you mean...

Overheads come in the separate line and the value get added to the inventory.

So part of it will be other expenses?

We have a substantial increase of inventory in this quarter, about INR 167 crores. Yes, please.

Okay. And sir, even if you look at the other expenses, they went up dramatically. So is this the way we should think this number should be broadly in that range or there something one-off in that?

No, other expenses, I mentioned to you because of the inventory getting valued above the line and overheads coming the line. Our production has increased by 14%. Although our sales volume has increased only by 6%, by 14%. So certain overheads are linked to the production volume.

And second thing, sir, just with regard to our guidance, we had a guidance -- we knew of Wavin acquisitions. We were expecting 30,000, 35,000 tonnes even last quarter when we did the call on 24th of April. So is there a demand changed so dramatically between the two months post that?

No, in the first quarter, as mentioned earlier, because of the early breakout of monsoon, the June month was very bad.

No, no, sir, I appreciate that point. I'm just trying to say is when we gave our guidance on 24th of April, that is after Q4 results, we knew Wavin acquisitions happen, right? And 30,000 tonnes, we mentioned 30,000, 35,000 tonnes even last quarter. So basically, your core business is going to see much better growth. So has the market conditions become so better in the last two-odd months? Is that the case?

Our earlier guidance, we have not factored any business from Wavin at that point of time. We wanted to have everything fall into place.

No, sir, you had mentioned clearly guidance for Wavin in the last call. You had made -- that's why you are saying because you were saying industry will grow at 6% to 8%, and we'll do a bit better with Wavin. That was the thing we had mentioned last year.

Not without Wavin, we said the industry -- we will grow better than the industry. Remember what we told. We said the plastic pipe industry grow 2%, 3% more than the GDP growth. And we will grow 2%, 3% more than the country growth.

So basically now the industry. Okay. So now the industry growth look much better for us, right? So the industry growth looks much better now compared to what we saw in Q1.

Growth will be better also and our company will grow better than the industry.

The next question is from the line of Puneet, an individual investor.

So I was wondering in terms of margin, I understand pipes is not a very margin-accretive segment. So in terms of the difference between the pipes sold to agri, how -- what is the difference in margin for the Piping division? And what is the difference -- what is the margin that can be for the value-added division? And one more question is regarding the pipes offtake in the agri segment. I understand June has been a little off for agri. But how do you see the overall state and central policy affecting? And in terms of rest of the -- which states are [indiscernible] the payments.

Overall, for the full year, we believe the demand for the pipe will be better than last year. But the prices are low and farmers -- now there are so many pumps enough water, they will spend money for development for water supply to their field. So we anticipate the demand for agri segment overall for the year will be better. In spite of whatever happened in the last week of May and first half of June, demand will be better for the full year.

So about the margins, like what can we expect Piping segment margins compared to the value-added segment margins? What could be the difference between that?

Value-added segment is also part of Piping system. Piping system not only pipe. We have got more than 15,000 SKU in Piping system. And out of that piping is a very small number. We have a huge variety of piping products we make, injection molded, glow molded, fabricated, molded, are all value-added item in Piping system.

But like I was wondering -- I understand, but what could be the margin that we can expect to forecast for the pipes? Because you mentioned that for the value-added segment, the margin is higher for rest of them. So I was wondering because piping contributes to a majority chunk of the overall revenues, what can be the margin for that? And incrementally, as the contribution level changes to the overall revenues?

Margin, I can't earn 14.5%. And we say 14.5%, we cannot earn because my major [indiscernible] is coming from Piping system.

So 14% is what we can expect from pipes also.

We don't have pipe only. We are doing Piping System. And Piping System more than 15,000 SKU.

The next question is from the line of Anchit from CLSA.

Sir, can you repeat the value-added product sales number, please?

First quarter, we sold INR 933 crores. Our overall turnover INR 2,600 crores, and value-added was INR 933 crores.

Okay, sir. And so we expect this to be better than last year on a full year basis?

Sure.

No. So I'm asking.

Yes, sure, it will be better, definitely better.

[Operator Instructions] The next question is from the line of Mr. Aasim from DAM Capital.

Sir, I wanted one clarification on the -- or your comment on the Plastics Pipes capacity. So earlier in this call, you said you will reach 1 million metric tons per annum by March of 2026. This was also your target earlier too. But in the AGM or rather in the Chairman's speech, it was mentioned that you will reach 940,000 by March 2026, and that included Wavin 70-odd thousand. Now you are saying 1 million again. So have you greenlighted one of both of the greenfield pipe plants you are planning? And if yes, basically, what has changed in June end and now for that March 2026 target to increase to 1 million?

No, this 940,000, which was mentioned was without Wavin actually. It was -- you can say is. The total will be 1 million tonnes.

Okay. So basically, no change, 1 million is the same number.

Yes.

The next question is from the line of Karan Bhatelia from AMSEC.

Sir, just wanted some clarity on the greenfield CapEx we were referring earlier at Bihar and Jammu. So any concrete update on that?

No. As on today, we are doing nothing on the Jammu land.

And Bihar also. Bihar and Jammu both.

Bihar and Jammu both location, we are not doing anything. We'll be adding five new plants this year, three from Wavin, one plant we are putting for material handling system into Gwalior, in Madhya Pradesh, and one plant in UP where Kanpur Dehat where we are putting a plant to make profile for windows.

Okay. And sir, one more...

Five new plant will be added to our existing 30 manufacturing plants.

Right. Sir, we were planning for packaging unit near port. So what about that?

Up till now, we could not acquire the land.

As that was the last question for the day. I now hand the conference over to the management for closing comments. Over to you, sir.

Thank you very much. We are very thankful to all the queries who made very intelligent and very answering questions. We are very thankful for the time and for the guidance to us. Thank you very much.

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