Venus Pipes and Tubes Limited (VENUSPIPES) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Venus Pipes and Tubes Limited Q1 FY '26 Earnings Conference Call hosted by DAM Capital Advisors Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aasim Bharde from DAM Capital Advisors. Thank you, and over to you, sir.

Thank you. Thank you, Nirav. Good evening. On behalf of DAM Capital, I welcome you all to the Q1 FY '26 Earnings Conference Call of Venus Pipes and Tubes Limited. We are happy to host the management team, which is represented by Mr. Arun Kothari, Managing Director; Mr. Dhruv Patel, Whole-Time Director; and Mr. Kunal Bubna, CFO. We will have the opening remarks from the management, followed by a Q&A session. Thank you, and over to you, Mr. Arun.

Good evening, and a warm welcome to everyone on the Q1 FY '26 earnings call for Venus Pipes and Tubes Limited. I have been joined by Mr. Dhruv Patel, our Director; Mr. Kunal Bubna, our CFO; [ LJ ], our Relationship Adviser. We have uploaded our Q1 FY '26 investor presentation on stock exchanges and company's website and I hope you had an opportunity to go through the same. I will begin with a brief update on the company, then move to our company's performance during the quarter. The global economy is facing several headwinds with uncertainties around tariffs and conflicts like situation in many parts of the world, the era of globalization is slowing down. And many companies, especially in the Western world, are focusing on becoming more self-reliant rather than depending on other nations for their supply chain and manufacturing. However, we believe this shift has its own challenges. While indigenous can bring benefit in certain industries, the reality is that high labor costs, rising energy prices and the lack of skilled manpower make it difficult for the West to be fully reliant. The West will continue to lead in technology, but countries like India, China and others have the advantage of skilled labor at competitive cost. India continues to hold a relatively stronger position compared to the many other economies. While we do feel some effects of the global uncertainties, India's growth story remains strong. In fact, it is expected to be fastest-growing major economy in the world. Coming to the performance of the company, we delivered a steady performance this quarter, achieving our all-time high revenue of INR 276.4 crores, a growth of 15% year-on-year for the quarter ended June 2025. Achieving this milestone despite a challenging global backdrop is a strong reflection of our enduring customer relationship, the trust in our product quality and the commitment of our entire team. Let me now share a few key updates from our operations during this quarter. Export continued to be a major growth driver, reaching INR 103.1 crores, a remarkable growth of 69% compared to the same period last year. The performance come despite geopolitical and economic challenges and it is a testament to the sustained demand for our products in the global market. While we continue to keep a close watch on the evolving global environment, we remain confident about our prospects, thanks to our diversified presence across geographies and our strong long-standing relationship with customers and dealers worldwide. On the domestic front, sales remained largely stable. We recently secured a large order from one of India's leading integrated power plant equipment manufacturers. Looking ahead, we see a strong growth potential in the domestic SS pipe and tubes market, supported by the ongoing shift from the unorganized to organized sector and revival in CapEx by end user industries. The domestic demand outlook overall remains positive. On the order book side, our pipeline remains healthy at INR 560 crores with a particularly strong inquiries coming from the power sector, an area where we expect to see sustained momentum in the months ahead. On the CapEx front, our projects for value-added fitting and stainless pipes and tubes are progressing as planned and we expect the new capacity to be commissioned in the second half of FY '26, along with Seamless as announced previously. We will also be installing piercing line to ensure we remain fully backward integrated. In closing, this quarter has further strengthened our foundation. We have proved our ability to grow even in uncertain times, leveraging both our domestic and export strength. With a good order book, demand outlook and strategic investments in place, we are entering the next phase of growth with optimism and confidence. Our focus will remain on delivering high-quality products, customer trust and creating long-term values for all our stakeholders. I am confident that best is yet to come. And together, we will continue to raise the bar for performance to the performance in the industry. Now I hand over the call to Mr. Kunal Bubna, our CFO.

We are pleased to share that our company has delivered a resilient performance in the first quarter of FY '26. On revenue front, revenue from operations for Q1 FY '26 reached an all-time high at INR 276.4 crores compared to INR 240.1 crores in Q1 FY '25, reflecting a healthy 15% year-on-year growth. The revenue mix for the quarter stood at 55% from Seamless, 38% from welded pipe. Seamless pipe registered a revenue growth of 38%, welded grew by 10%. On the EBITDA front, EBITDA for Q1 FY '26 stood at INR 44.9 crores compared to INR 47.9 crores in Q1 FY '25. EBITDA margin for the quarter was 16.2%. Profit after tax for Q1 FY '26 was INR 24.8 crores compared to INR 27.5 crores in Q1 FY '25 with a margin of 9%. In closing, we remain optimistic about the journey ahead. With a clear strategy, ongoing investment in product expansion and a sharp focus on operational excellence, we are confident in our ability to deliver sustainable and profitable growth. Our goal is to further strengthen the Venus brand and set new benchmarks in the stainless steel pipes industry. With this, I would like to open the floor for Q&A.[Operator Instructions] The first question is from the line of Parth Bhavsar from Investec India.

Sir, I have 2 questions. The first one, like in terms of this project that we won for like supercritical thermal power from the supercritical thermal power manufacturer for INR 90 crores, have we started execution? And if yes, then how much have we executed yet till now?

No, it has not been started, but we are -- very soon, we'll be starting the same.

Okay. And this is like the execution period is 15 months, I guess, right?

Yes, yes.

Okay. And sir, any update on orders from the likes of Aramco or ADNOC or any product approval that is placed yet?

See, as a company, each quarter, there are approvals being received from a few of the other companies other than what you mentioned. ADNOC is already -- we are already approved right now. So we keep on getting those approvals. And we don't categorically give the name of those approvals what are being received by the company. But again, as we said, out of the total order book of INR 560 crores, there is around 35% is from export side. So there is a healthy export order book also currently, which is maturing, which includes supply to Europe, USA, Middle East.

And sir, just pardon my ignorance, that the order book was INR 560 crores, right?

INR 560 crores, yes.

Next question is from the line of Sneha from Nuvama Wealth.

Just a couple of questions from my end. Firstly, to start with, what is the share of exports to the U.S. market, any impact on the tariffs that we are seeing? Secondly, if you could speak about -- you mentioned strong order book starting. So would you be revising your guidance upwards? Some flavor there? And when can we see stronger growth coming in from Q2, if you could just give some color on that would be helpful?

See, from the tariff perspective, there have been changes in the Section 232 tariff, which has been on our product, which has went from 25% to 50% in the month of June only. But apart from that, we have not seen much effect from that. But as a company, we are too cautious. We are also keeping a close watch on what will be going to happen. That out of the current order book of export, we have around 15% to 20% from USA side, the total order book out of the total export portion of order what we are currently carrying. And currently, we are also reviewing those situations and seeing a very close eye on pan out in going forward. And keeping the healthy order book, we definitely believe we have given a guidance of around 20% overall growth at the top line. We believe definitely we'll be able to touch at least 25% growth in this financial year.

So you are revising your guidance up from 20% to 25% for the volume?

Around 20%.

Anything on the margin front because you've given 16% to 18% range at this point of time you're closer to...

We maintain that. We maintain the same.

Understood. Lastly, on the Saudi Arabia market, there was a news in between that they put dumping duty on China and other markets. Any significant traction that you're seeing? Or would you like to highlight some new customer additions which are taking place from that particular market point of view?

It should definitely -- yes. Arun ji, please.

Yes, definitely, it will give a good demand in welded pipe segment. We had already started to receive some of the order from Saudi market, but still we are pursuing with a number of clients and discussions are ongoing with a number of clients. So we are expecting good demand from the Saudi market in the coming months.

That was really helpful. Sir, lastly, on the CapEx front, we are commissioning all the value-added portions for things. Could you give some time lines? Are they on track? When is the capacity expansions expected in these ones?

Yes. Basically, the backward integration expansion of Seamless and fitting, these are the 3 projects which are currently underway. So they are all running on track and we believe to completed by H2 -- second half of this year.

Next question is from the line of Dhruv Jain from Ambit Capital.

Sir, 2 questions. First is that on the new capacity addition that you've done and the incremental capacities that are going to come through in this year, how should we think about the capacity utilization for FY '26 and FY '27 broadly? And I'm just trying to link it to your upgraded guidance. So is the mix going to be -- the ramp-up in the value-added is going to be a lot more sharp like incremental demand that's coming through?

It will be mix. If you take the capacity utilization the way the capacity will be panning out keeping those under consideration, the blended utilization should be near to 80% what we believe. And for the coming year FY '27, it should be probably higher than that, keeping -- as all the capacity would come by end of FY '26. And again, the blended utilization if we see the capacity of Seamless and welded, it will pan out a bit and some rather 60-40 ratio would be there probably sort of that.

So this 80% capacity utilization blended you are talking about on 42,000 or 40, I mean...

Yes. 42,000 keeping just taking the [indiscernible] plant which have come at a later date.

And sir, new plant volume ramp up, how should we think about it, the second half fittings and the value-added pipes that you mentioned?

It should not be much for this year. But again, we are trying that in the last quarter, we are able to start that, but not much would be able to accrue in this year.

Get you. Sir, in terms of the cost ramp-up, right, so we've obviously seen a sharp jump off in employee cost and other expenses. Now it could be presumably going to expose kind of CapEx ramp up. But incrementally on these numbers, what kind of growth should we see or this number should now start to stabilize on a Q-o-Q basis?

See, generally, yes, it should stabilize. But again, when the contribution of welded increase, so generally, RM consumption cost slightly increased and the other costs decreased to a certain extent. But we believe it should definitely start stabilizing in the going forward quarters.

Sir, no, I'm just talking about it from an absolute number perspective [indiscernible].

Absolute number, see, again, it's very tough to give an exact number, but it should be near to this number. But again, see, what happens is sometimes you have different type of grade. We have export increase further, then this cost also changes. So there are too many permutations and combination also when these factors are taken into consideration.

And sir, on the domestic market, right, so the revenue has dropped. Just want to understand if the Indians have also considerably dropped, right? So how should we think about the yield improvement in the domestic market and the volume growth improvement in the domestic market? I know you have that new order that should contribute. But in general, apart from that demand environment, if you could just talk a little bit more.

See, primarily the demand, as we said, it has been from power sector. But other sector like not much is there. But again, oil and gas, chemical engineering are the other sector where we are looking into. So we believe going forward, there should be also demand from this sector, but not limited demands are there from this sector in quantum. But see, power, but again, power is a very huge amount of demand, which is coming into the number of tenders being floated for power and all. So which is a new demand seems to be, which was not there in the system in too much quantity. So I think that should also help.

Get the point. And sir, just it's slightly premature, but in FY '27, once all your capacity addition comes through, what kind of growth should we assume from a top line perspective or from volume growth perspective?

FY '26 to '27, again, as all the capacity would be there, so we believe at least on the top line level, 20% growth should be there.

Next question is from the line of [indiscernible] from Ambit Investments.

My first question is on export front. If we exclude the U.S. tariff impact, then where do we stand on the pricing and quality front in comparison to some South Korean or you say Chinese suppliers?

See, the Section 232 tariff, that has been increasing month of June, it is on all the entire country exporting to U.S. It is not stand-alone on India. So it generally doesn't have much effect on India or other countries.

Okay. And sir, since we are growing strongly in the export market, Europe, Middle East, so what percentage of export revenue is recurring versus one-off orders?

See, generally, see, recurring is there from USA, recurring is there from Europe, a few recurrings are also there from Middle East. And see, we are also adding a customer in all these geographies, new customers are being added, new centers -- distributors and centers are being added. So that is keep on continuing and also approvals are being -- we are working on approvals. Approvals are being received and a few more approvals are waited for which we are working towards that.

Okay, sir. And my last question is a bookkeeping question maybe. Can you please give the volume growth for Seamless and welded for this quarter? And did we book any inventory loss or gain during the quarter?

Nothing as that -- quantity figures we are not giving.

Next question is from the line of [ Pritesh ] from Lucky Investment Managers.

Sir, what explains the decline in domestic business still? So last year also, you had a challenge. First quarter, you also have a challenge. And the profitability or let's say, the lower profitability, which got set in from quarter 2 of last year because of lower realization, so that still continues in the industry and for you? Or there is any reversal in the incremental profitability on the orders that you are taking in Seamless and welded?

So from the domestic demand perspective, there has been subdued domestic demand. And also, see, our strategies are also there to move more towards export to capture many of the country of the world to -- that we did last year and also in the last quarter. But again, as we said, we are seeing good amount of demand in the power sector. So we got an order from that. And going forward also, we are -- we will be bidding in a few of the other contracts related to power and we believe those orders should be -- a few of them should also be won by us. On the margin perspective, definitely, yes, last quarter it was -- last year year-on-year, it was very high. But it has been deflecting because there are a few reasons behind that. First, there has been increase in capacity. Further in the case of welded, we were not supplying in export market like U.S. and other countries where we penetrated very newly in the last year. So those were the reasons that has taken the margin and also subdued domestic demand was also one of the reasons for [indiscernible] margin. But going forward, yes, we are trying to maintain the margin above 16% to -- between 16% to 18%. There will be a few more reasons than that more value-added products are coming into play. So those should help us to improve the margin in the coming forward quarters to come.

So which means the industry profitability is not reversed still on the incremental orders? Is that correct? So whatever drop came, the drop still persist in the industry and for your orders, correct?

Yes. But now...

Yes. Presently, we as the Venus Pipe, we have different advantage. We have the combination of the various SS pipes in all the category SS pipe with all this combination or we have newly developed the Condenser Tube pipe facility also, which is the high-end value-added product in the welded pipe or same way we are planning to go on the fitting plant also, which will serve along with the pipe, we will be able to supply the fitting also to our various clients. That will also operation in this last quarter of financial year. So now all the products which we have previously expanded, that was all the basic product we are supplying to every industry. Now in the first since last 1 year, what we are doing, we are in more value-added products, we are going forward or more value-added service we are going. So that will give the advantage in the coming years or coming quarters after the complete capacity will be established. In the new phase -- new capacity expansion, we have already commenced the Condenser Tube plant. One phase is already completed. Another phase will complete in this quarter, Q2 of this year, another in Q3 and Q4. By the Q4, all the CapEx will be done. So that will give the value-added product and value-added service advantage in the next FY '27.

So when do you start executing the condenser tube orders that you have got from BHEL?

No, still we have not the order from BHEL for Condenser Tube. We had already participated in this tender or we are expecting this tender will open in the coming next 1 or 2 weeks.

So the INR 190 crores order...

Yes. That was for Seamless, not Condenser Tube plant. That was for order too for Seamless side. So already in this quarter, we'll execute some almost 50% of the total quantity of the order this quarter. Next quarter, we are expecting almost say, 25% to 30% or by the March 25%, 30%, remaining will be the first quarter of the FY '27.

Which means that the domestic growth decline, which started last year will start reversing from quarter 2?

Yes.

So we will start seeing domestic growth coming --

Yes.

-- right? And the margin improvement will be a function of the product mix change, not to do with...

Yes. Definitely.

Right? It is a product mix change.

Yes. Yes.

Now on the volume growth side, what Bubna ji mentioned of about -- Kunal mentioned about 20%, 25% volume growth, can you tell us what was the volume growth in quarter 1? And what -- how much volumes in combined you did in quarter 1?

We are not giving such quantity figure for quarter this year.

But quarter volume growth you can share, if 15% was the revenue growth, was the volume growth similar number or...

No, no, it was lesser than that.

[Operator Instructions] Next question is from the line of [ Surya Nayak ] from Sunidhi Securities and Finance.

So just to understand the fittings volume by way of suppose we can consider, so what would constitute for FY '27 and '28? And I expect that the value-wise, it will be more than the [Foreign Language] So if you can throw some light on that?

Yes. Again, you're right, the quantity is very tough for fitting because those are fully numbers and all. So basically, in FY '27, we believe the CapEx would be in the range of INR 60 crores to INR 70 crores in fitting and the top line which will come out of it can be around 3x or more than 3x. So a certain percentage of that will come in FY '27 and beyond that in FY '28.

So in terms of realization, if you can give some color to that?

It's very tough to give. There are a number of products and [indiscernible] number as I said, there are no specific realization which currently I can currently give you.

Okay. And sir, regarding the raw material scenario, are we seeing the raw material scenario easing off or let's say maybe it will be benign for us for the current position or it is hardening?

Can you repeat? I'm unable to get you.

What is the raw material scenario or pricing scenario?

More or less not too much. It's more or less stable kind of.

Okay. And sir, in terms of industry applications, our applications majorly is from the thermal power stations or any other sectors we are actually getting major? What is the second and third contribution of the -- in terms of sectoral exposure?