Sahyadri Industries Limited (532841) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Sahyadri Industries Limited Q4 and FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Tuljaram Maheshwari, CEO, CFO and Whole-Time Director of Sahyadri Industries Limited. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for joining us on the Sahyadri Industries Limited Q4 and FY '25 Earnings Conference Call. I'm accompanied by Mr. Hanu Bhubna, Senior Manager accounts and SGA, our Investor Relations adviser, on this call today. I hope everyone had a chance to view our financial results and investor presentation, which was uploaded on the company's website and stock exchanges. The operating environment in FY '25 was marked by subdued demand across key end user segments, which pose challenges to growth. As a result, our total income for the year declined by 4.6% to INR 608.8 crores. However, I'm pleased to report that despite these external headwinds, we have deepened our focus on non-asbestos product. The sales of our non-asbestos product portfolio grew from 22% in FY '24 to 26% in FY '25 for overall sales. EBDITA for the year stood at INR 58 crores, while margins were under pressure due to the pricing dynamics in the domestic market. We were able to partially offset deep challenges through prudent inventory management and an improved product mix. In addition, the relative stability in input cost over the year supported our ability to manage expenses effectively. We have also made significant improvement to our balance sheet as the debt equity reduced from -- debt-to-equity ratio reduced from 0.32 to 0.21. This was achieved through the repayment, a portion of our outstanding borrowings and underscores our ongoing commitment to maintaining a conservative and resilient capital structure. During the year, our overall capacity utilization stood at 68%. In April, we experienced normal seasonal demand. However, from May onwards, demand was impacted due to heavy rains across several states starting May 20th caused by cyclonic activity in the Arabian Sea and the onset of early monsoon in Kerala from May 23rd. However, we remain optimistic about recovery in the coming weeks. Now moving on to financial performance. Q4 FY '25 highlights, total income stood at INR 152.6 crores, a decline of 1.4% Y-o-Y and a growth of 15.9% quarter-to-quarter. EBDITA was INR 13.9 crores, down 6.3% Y-o-Y and up 54.3% quarter-over-quarter. EBITDA margin stood at 9.1% compared to 9.6% Y-o-Y and 6.8% quarter-to-quarter. Profit after tax was INR 4.3 crores. PAT margin stood at 2.8% compared to 2.8% Y-o-Y and 0.6% quarter-to-quarter. FY '25 highlights. Total income was INR 608.8 crores, a decline of 4.6% Y-o-Y. EBITDA stood at INR 58 crores, a decline of 17.8% Y-o-Y. EBITDA margin stood at 9.5% compared to 11.1% in FY '24. Profit after tax was INR 19.5 crores, a decline of 26.2% Y-o-Y. PAT margin stood at 3.2% compared to 4.1% in FY '24. Looking ahead, we remain optimistic about the future. Our focus will continue to be on strengthening our core product lines expanding with presence across domestic and international market and driving efficiency across our operations. Lastly, I'm happy to inform you that the Board of Directors has recommended a final dividend of INR 1 per share of face value INR 10 for FY '25, subject to shareholder approval. With that, I conclude my remarks and would now be happy to take your questions.

[Operator Instructions] The first question is from the line of Niteen from Aurum Capital.

A couple of questions. So what is the capacity utilization currently?

68%.

Okay. And consolidated debt on the book, what is the total debt we have?

Our total debt is around INR 9.2 crore.

INR 9.2 crores, okay.

Plus vehicle, the total is INR 10.3 crore.

Total is INR 10.3 crore. This includes working capital as well or that is separate?

Long term.

Long term, no, what is the working capital debt that we have?

Working capital was INR 45 crores as on 31st March. That is there in the balance sheet, if you can see it.

Sure. And how do you see the demand shifting up now, sir?

As I mentioned, April was good, May because of this -- first was the cyclonic impact and second is the early set of the monsoon. So we have to see how it is going forward.

And the CapEx status and by when we will have a steady state in this CapEx that we have put up?

CapEx is the same. As we have said earlier, whatever the two expansion is still, it is going on because land acquisition is not yet completed. So that's going on, Palghar and as well as Odisha, both.

So is there a delay in the CapEx we are seeing?

Yes, there is a delay because land acquisition is getting delayed.

So when do you see, sir, this is getting completed?

This would be Q4 FY '27 and Q4 FY '28. Q4 '27 would be Palghar and Q4 FY '28 would be Odisha.

Okay. Just final one, which is a suggestion, as in a suggestion. Slide #5 where we highlighted our business performance. And our business is more seasonal where Q4, which is March quarter is the strongest and Q2 which is September is the weakest, while Q3, which is December quarter is in between. So it will be more opt to compare Q4 with Q4. We compared it with Q3, then it will be good to give Q4 also in that slide. That will give a better picture. Just a small suggestion, maybe you would like to include next time.

No, if you see our results, the results are -- we have made a comparison with the Q4 versus Q4, if you see our results.

That is mandatory sir. I'm not talking about that. I'm talking about the presentation.

The next question is from the line of Gunit Singh from Counter Cyclical PMS.

Sir, I just want to understand the current demand scenario. You mentioned May wasn't good because of rains. So as compared to last year, April, May, how does the demand side look like? And have we taken any price hikes in Q1?

Q1 so far, there is hardly any price increase because, as I said, demand is subdued. And now again, this cyclonic and this impact of the early monsoon, so it's early to say whether any increase would come or not. But what we are trying to work is how we have to reach to the last year numbers.

What kind of utilization are our Southern units running at currently for the first 2 months of...

Southern unit is around between 45% to 60%.

So sir, I want to understand about the value-added product. So what percentage of revenues in FY '25 are value-added product?

Value-added is, one second, I will just give you. Value-added is 14% at present.

And what kind of margins do we see for value-added products versus conventional?

See, generally, it is 10% to 15% extra than the normal one.

And, sir, I mean, what kind of growth are we seeing in the value-added segment? And what are our targets for FY '25 as a percentage of total revenues and beyond for the coming years?

See the next year, we are looking around 20% the value-added product.

In FY '26?

Yes.

So sir, from your commentary, I mean, it looks like demand has been subdued this year as compared to the same time period last year, the first 2 months. So I mean, what kind of -- I mean, if the monsoon continues to be heavy, I mean, do we not, I mean, foresee reaching the last year numbers as well? And given that Q1 is the strongest quarter, so, I mean, I would like to understand your thoughts about -- I mean, how you're planning the current year, given the current monsoon scenario?

See, that's why I mentioned in my opening remarks also, hopefully, because generally, cyclonic monsoon has a less impact. And once the market opens up, post the cyclonic gets slowed down, I think things will be better. But we are hopeful to manage last year number and something plus.

So sir, last year, the Southern units were running at about 30% capacity utilization, if I'm not wrong.

Yes, now it is 45% to 60%.

So I mean we are seeing some green shoots.

Yes.

[Operator Instructions] The next question is from the line of Rohan Mehta from Nexus Capital.

Firstly, sir, we had earlier mentioned expanding our presence in Maharashtra to support the export markets. Can you share any update around the progress made so far in that side?

As I mentioned in my -- one of the questions that one gentleman has asked because that is getting delayed on account of the land acquisition. So now it is slated to be commissioned in FY '27 Q4. But we are compensating the requirement of exports by supplying from a plant, that means Southern plant.

Understood, sir. Fair enough. Sir, secondly, with exports now forming a large part of our revenue mix now, how do we see this supporting the company's growth strategy going ahead? I mean, will we continue to remain focused on exports?

Yes, yes, export would be our focus.

So exports would continue to become a clear growth driver for the company's growth, is it?

It will be focused.

Sure. Sir, for your nat sales, first of all, so how are you managing the risk of this recent depreciation in rupee against the dollar especially considering we are importing areas like fiber from Pakistan. So just wanted to get a sense of how we are managing the rupee depreciation?

See, if you see from the peak of INR 88, INR 89, now it is back to INR 85, INR 86, so accordingly, we have the export also. So there also we get the better this thing, realization. So it gets partly compensated from the export and rest with the optimization of other operational activity. We are not getting impacted if it is within that INR 85. It goes above INR 85, and that's again, INR 90, then definitely would be impacted.

Sure. So there is no outside hedging that we are doing currently, right?

See, we are not doing any hedging because it's an automatic hedging, natural hedging because export is there, so it's an automatic hedging naturally.

The next question is from the line of Samarth Singh from TPF Capital.

Just 1 clarification on the price hike. You mentioned there was no price hike that we took in this quarter 1. Have we taken a price hike in Q4 by any chance?

Q4, it's minimal. I would say this time, hardly any price increase, I would say. The reason is, there may be 1 or 2 increases that may be, in the percentage terms, not more than 1% because the reason is the demand itself is very subdued. And we thought that it's better to push the volume and going for the price increase across the industry. It's not only we, everybody has done into the line. So there's no any price increase, material price increase, minimum figure may be there, but not material.

So in Maharastha area, our channel checks had suggested there was about a 6% to 8% price hike across the industry. So was that rolled back or did that not happen?

Actually, I have not seen 5% to 6%. Who told you?

We have done some channel checks. So maybe it was from the distributor side.

No, no. There's no price increase as such.

The next question is from the line of Saket Kapoor from Kapoor & Company.

Sir, firstly, if we look at the year-on-year comparison, the revenue has gone down by 5%. So the RM pressure, I think also looks a bit relief. So firstly, [Foreign Language].

As I said, there's no any cost increase on the fiber side. So there is in between price increase happens in the cement. You know that's, again, a different type of industry. [Foreign Language]. So there's no any cost increase as such. As regards the price increase, similarly, as I mentioned earlier, price increase has not happened substantially this time, 1% or 2% would have been there, but not much. And also Q1 because of demand and as well as early set of the monsoon, so far, there's no any price increase. Going forward, something may happen in June if the demand increase substantially.

Okay. So sir, if we take the RM mix, what percentage would be towards cement, and fiber would be the major consequence. So can you provide the split between the same?

[Foreign Language].

[Foreign Language] So cost of material consumption INR 341 crores is what the P&L show. So out of that, what would be attributed to fiber and the other major part...

I don't have the exact figure. But generally [Foreign Language] considering both the product.

And secondly, as you were mentioning that because of the onset of monsoon -- earlier onset of monsoon, that may postpone the buying because I think so good monsoons are a good indicator of the spending from the rural side. And that should have a multiplier effect on the product and thereby still increasing the demand.

So the point is one side what you say is correct. But generally, what I've seen is that whatever the construction in the rural area happened before the monsoon, that is the final. And thereafter, everybody is busy into that harvesting. So practically [Foreign Language]. In that case, definitely, I think demand may come up.

[Foreign Language]

[Foreign Language] because they are cautious because of the early monsoon [Foreign Language].

[Foreign Language]

More or less same. There is no any [Foreign Language]