SUPREMEIND — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
SUPREME INDUSTRIES LIMITED · MR. R. J. SABOO – COMPANY SECRETARY AND VICE
MR. P.
C.
SOMANI – CHIEF FINANCIAL OFFICER – THE
MR. R.
J.
SABOO – COMPANY SECRETARY AND VICE PRESIDENT, CORPORATE AFFAIRS – THE SUPREME INDUSTRIES LIMITED
Moderator · Conference Operator
MR. AASIM BHARDE – DAM CAPITAL ADVISORS The Supreme Industries Limited April 28, 2023
Thank you very much.
We have our first question from the line of Venkatesh Balasubramaniam from Axis Capital.
Please go ahead.
V Balasubramaniam
Yes.
Thank you for this opportunity.
You had communicated that in the inventory loss in the first half of the year was between INR200 crores to INR250 crores.
Can you tell us if there was any inventory loss or inventory gain in the second half of the year and especially the fourth quarter?
M. P. Taparia
Inventary gain of around INR50 crores to INR70 crores .
V Balasubramaniam
Okay.
M. P. Taparia
First half, we lost INR250 crores in inventory loss.
V Balasubramaniam
Yes.
M. P. Taparia
Net-net we lost INR180 crores inventory loss for the year.
V Balasubramaniam
Okay.
The INR70 crores, was is the second half or was it in the fourth quarter?
M. P. Taparia
Fourth quarter
V Balasubramaniam
Okay.
Thank you for that.
Now what is your volume revenue and margin expectation for the next year?
Volume growth, revenue growth and margin?
M. P. Taparia
We anticipate 15% volume growth.
V Balasubramaniam
Okay.
M. P. Taparia
And margin will be between 13.5% to 14%.
V Balasubramaniam
Okay.
Now, why are you why is your…
M. P. Taparia
In the Current year the revenue will be excess of INR11,000 crores.
The Supreme Industries Limited April 28, 2023
V Balasubramaniam
Okay.
Now because your 13% to 14% margin expectation seems very, very low because in the fourth quarter, you have done almost like 18% plus kind of margins and it is, yes, it is almost 18.5% kind of margin.
Even if we adjust for that INR70 crores kind of number, you will still get to almost.
17.5% margins.
So why are you guiding for such a low number for the next year 13% to 14% margin?
P. C. Somani
After considering INR70 crores, the margin comes to 16% for the quarter.
V Balasubramaniam
Okay.
Still that is like 15.5%, right?
P. C. Somani
Yes, yes.
Ultimately, the products are seasonal, agri pipes does not command such margin in rest of the year.
So we have to consider this.
V Balasubramaniam
Okay, okay.
P. C. Somani
Over the last quarter.
V Balasubramaniam
Okay, understood.
Can just add one last thing.
What was your capacity at the end of FY’22 and what would be your capacity at the end of next year?
M. P. Taparia
Our capacity as on 31st March, 2023 is 8.05 Lakhs ton and as on 31 March 2022 it was 7.25 Lakhs tons.
V Balasubramaniam
Okay.
Thank you very much.
All the very best.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Rahul Agarwal from Incred Capital.
Please go ahead.
Rahul Agarwal
Hi, sir.
Good evening, and congratulations for a strong recovery in business.
The first question is how has been the start to the first quarter?
April of this month, PVC prices have now stabilized, so any views on PVC prices and the start to the volume for this season, please.
M. P. Taparia
Now the first quarter is going to be volume wise higher compared to last year’s first quarter.
This year, demand for agriculture sector is quite good because PVC prices have gone down substantially.
But this year price, pipes demand is quite robust due to low price and certainly the demand for infrastructure for plastic pipe is quite good because they can be laid before the rainy season.
So if the demand from infrastructure and agriculture sector are better than last year.
Rahul Agarwal
But sir, any outlook on PVC pricing?
M. P. Taparia
PVC prices outlook, may range around $50 plus minus continue ie around 4 rupees.
Now the prices has dropped to such a low level, it can drop by INR4 or it can go up by 4 rupees.
Going up is difficult due to the world economy not in great shape.
Rahul Agarwal
Got it sir, and my second question was on, you know, for Mr. Somani, income tax rates for a company on effective basis have been pretty low, like 19 to 22% for the last three years.
Any specific reason, sir, why is that and what is the guidance for fiscal 24?
The Supreme Industries Limited April 28, 2023
P. C. Somani
Can you repeat again?
Rahul Agarwal
Sir the income tax in the P&L, the rate is about 19% to 22% average for even fiscal ’23 and last two years.
Any reason why the income tax rate is lower than the marginal rate?
And what is what should we built in for fiscal ’24?
P. C. Somani
You see the previous result, we have a good income from dividend from Supreme Petrochem.
If we are distributing the dividend more than they so those income of dividend become tax free, Section 80M.
Rahul Agarwal
I looking at consol numbers, sir.
I’m looking at consolidated numbers.
P. C. Somani
In consol numbers, because of the profit share of profit from petrochem is being considered.
Rahul Agarwal
Okay.
That explains.
Thank you so much, sir.
All the best.
I’ll come back in the queue.
P. C. Somani
Thank you.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Sonali Salgaonkar from Jefferies India.
Please go ahead.
Sonali Salgaonkar
Sir, thank you for the opportunity and congratulations on a great set of margins in Q4. Sir, my first question is broadly towards this pipe drinking water in Nal Se Jal.
You did mention some part of it in your opening comments, but it would be useful to have sort of an update as to what is the development of this project.
And if at all you could share what kind of sales have we accrued so far out of this.
M. P. Taparia
Now that work has started now more effectively, they are trying to see that by 2024, the complete Nal Se Jal throughout their country.
It doesn't look possible because some states are not cooperating or some states are not doing the thing.
But quite a large portion of the country is going to be covered by Nal Se Jal by 2024, means within 20 months from today, they will be covering most of the country, Nal Se Jal will cover 600,000 villages.
It is a very gigantic task.
But central and state governments both are working very effectively and strongly nowadays.
Just today's paper, the news is they are getting 40,000 connections only in UP per day.
They may achieve the complete covering the entire country by December 2024.
Sonali Salgaonkar
Sir, you did mention that some of the states are not cooperating.
So approximately how much of the country is already covered?
M. P. Taparia
What is in the paper item I can tell you.
I don't know the states which are not cooperating.
Personally, I believe they all must be cooperating.
Sonali Salgaonkar
Okay.
M. P. Taparia
So Nal Se Jal, who will not like to provide in their state?
The Supreme Industries Limited April 28, 2023
Sonali Salgaonkar
Right.
So sir, for Supreme, is there anything, any kind of sales or margins you could share that you have accrued from Nal Se Jal so far?
M. P. Taparia
We don't have separate figures.
Sonali Salgaonkar
Okay, sir.
All right.
Sir my second question is regarding to Mr. Somani.
If you could help us with the segment-wise capacities as of March ’23.
P. C. Somani
Yes.
So piping division is 600,000 metric tons.
Industrial product, 84,000 metric tons.
Packaging product, 90,000 metric tons and consumer product, 29,000 metric tons.
Sonali Salgaonkar
And what’s our average utilization?
P. C. Somani
We see this 800,000 tpa capacity was at the year end, beginning year capacity was 725,000 tpa.
Sonali Salgaonkar
Right.
P. C. Somani
If you look from the opening capacity, then we have showed utilization close to 510,000 tons ,.
So it will be around 65% to 70%.
Sonali Salgaonkar
Got it.
Sir and just one last question.
The value-added sales in Q4, correct me if I’m wrong, but are they showing a minor decline in absolute terms compared to last year?
P. C. Somani
This was our silpaulin film which was at one point of time was 100% value added due to the the poor margins or the margins falling below 17% it has gone out of value added products.
M. P. Taparia
So it has been out of the value added product.
The total value of the value added products in the 4th Quarter has gone down from INR972 crores to INR943 crores.
Sonali Salgaonkar
Understand, sir.
Sir, silpaulin has now gone out of value added, because the margin has slightly come below 17%, is that right?
M. P. Taparia
Yes.
Sonali Salgaonkar
Understood, sir.
That’s all from my side.
Thank you.
Moderator · Conference Operator
Thank you.
We have a next question from the line of Dhananjai Bagrodia from ASK.
Please go ahead.
Dhananjai Bagrodia
Sir, congratulations on a fantastic set of numbers.
Would this volume growth be predominantly our company have we gained share or would this be an industry-wide phenomena in piping?
M. P. Taparia
Industry wise the growth was 32% of PVC resin and we have grown 37%.
Dhananjai Bagrodia
Okay.
Sir industry wide would be 32%.
Okay.
And sir, for your other businesses, the other verticals, do we have any like revenue guidance or what we’re seeing in those?
P. C. Somani
The other verticals are in range of 10% to 15% growth.
The Supreme Industries Limited April 28, 2023
Dhananjai Bagrodia
Okay, sir.
Sure.
Yes.
Thank you so much.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Bhargav Buddhadev from Kotak Mutual Fund.
Please go ahead.
Bhargav Buddhadev
Yes.
Good afternoon, team, and congratulations for the good set of numbers.
My first question is, sir, we’ve started this is Erode plant in South India.
Sir, can you quantify what could be the savings in freight cost towards supplying material to say, Tamil Nadu, Kerala, South Karnataka?
And also, what could be the improvement in terms of delivery time because I believe earlier, the material used to come from the Jadcherla plant in Telangana.
M. P. Taparia
There is a saving of the freight and it all goes to my customer or to go to my users.
The freight from Gadegaon to Kerala and Erode to Kerala difference is 3.5%.
Bhargav Buddhadev
Sorry, sir, how much?
I could not hear it.
M. P. Taparia
The difference between Gadegaon to Kerala and Erode to Kerala is 3.5%.
Bhargav Buddhadev
3.5%.
Okay.
This will help you make you competitive in South India.
M. P. Taparia
It makes my goods more affordable to the customer of Kerala.
Bhargav Buddhadev
Okay.
M. P. Taparia
And Tamil Nadu also.
It makes more affordable and goods can reach in the same day.
Bhargav Buddhadev
Same day.
And earlier it used to take what two, three days?
M. P. Taparia
Three days now its the same day.
They can work with low inventory also.
Bhargav Buddhadev
Okay.
M. P. Taparia
Can work with a low stock of finished goods.
Bhargav Buddhadev
Okay.
And secondly sir, we’ve started this plant in Cuttack as well.
So how about the economics in East India, there also we’ll have savings in freight cost and delivery times.
M. P. Taparia
Yes, same.
It's very obvious.
If it's in the same location going to Odisha then it's definitely our plant is close to Cuttack.
The Cuttack's freight will go down dramatically.
Cuttack and Odisha are big commercial area.
Plant is very close to Bhubaneshwar and Cuttack.
Bhargav Buddhadev
Okay.
Sir, earlier the delivery used to happen from which plant in the eastern part of the country?
M. P. Taparia
Kharagpur.
Bhargav Buddhadev
Kharagpur.
Okay, sir.
Okay.
And lastly, sir, just wanted to know what has been the growth on the CPVC portfolio for us in FY’23?
The Supreme Industries Limited April 28, 2023
M. P. Taparia
Somaniji, you get that question.
P. C. Somani
Yes.
Volume growth was 24%.
Bhargav Buddhadev
34%?
P. C. Somani
24%.
Bhargav Buddhadev
24%.
Okay.
And value growth?
P. C. Somani
More than 40%.
Bhargav Buddhadev
40%.
Good.
Okay, sir.
Thank you very much and all the very best.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Keshav Lahoti from HDFC Securities.
Please go ahead.
Keshav Lahoti
Hi.
Congrats on a great set of numbers.
Just a follow-up on the last question.
So what will be the mix of the CPVC right now broadly?
M. P. Taparia
Sorry?
Keshav Lahoti
What is the mix of CPVC portfolio in terms of revenue?
M. P. Taparia
The share of CPVC is a very classified information.
Keshav Lahoti
Okay.
Got it.
And what is the sense on the agri demand as of now?
M. P. Taparia
Agri demand is quite good.
Keshav Lahoti
Sorry, I missed it.
M. P. Taparia
Agri demand is quite good.
Now, this is just started, so it will continue up to middle of June.
So, too early to say what growth we can get.
But growth is looking quite good compared to last year.
Keshav Lahoti
Okay.
One last question, as you highlighted the capacity by year-end would be 9,50,000 tons , can you give some bifurcation among the four segments?
P.C. Somani
You see, I have given the bifurcation for the current capacity.
The maximum expansion is taking place in plastic piping.
So, 90% of capacity increase will be in the plastic piping itself.
Keshav Lahoti
Okay.
Got it.
Thank you.
That’s it from my side.
M. P. Taparia
Thank you.
Moderator · Conference Operator
Thank you.
We have a next question from the line of Praveen Sahay from Prabhudas Lilladher.
Please go ahead.
The Supreme Industries Limited April 28, 2023
Praveen Sahay
Yes.
Thank you for taking my question.
Sir, can you give some indication on the industry growth for the piping pipe and fittings segment for ’24?
M. P. Taparia
Industry Growth - 13% to 15%, our company may grow 20%.
Praveen Sahay
It’s a volume term?
M. P. Taparia
volume growth , how can you forecast price growth?
Praveen Sahay
Yes, yes.
And second question, sir, on the geographical mix for the pipe segment.
Can you able to give the geographical mix of your pipe segment, like how much is from North?
How much is from South?
M. P. Taparia
We sell throughout the country.
Praveen Sahay
So equally throughout the country?
M. P. Taparia
throughout the country.
Praveen Sahay
Okay.
And lastly on the capacity, sir.
The three plants you initiated that’s in Guwahati, Erode and Cuttack, is it possible to say the capacity of these three plants?
M. P. Taparia
Yes, all three put together.
Yes, 80,000 tons.
Praveen Sahay
Okay.
Thank you, sir.
All the best.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Sneha Talreja from Edelweiss.
Please go ahead.
Sneha Talreja
Thanks a lot.
Hello.
Congratulations on great set of numbers.
Sir, just two questions from my end.
We would like to know the contribution this particular quarter from agri pipe.
I mean, the growth rate in agri pipe and infra?
M. P. Taparia
Which one?
For the quarter?
Sneha Talreja
For the quarter as well as, let’s say, here in case you can just give some highlight.
Like you mentioned because CPVC, it was 24%, what would have been the case contribution from infra and from agri?
M. P. Taparia
We took a proportion percentage before we just now to tell you how much growth came from infra, how much from plumbing, how much from agri, cannot say.
Sneha Talreja
Okay, but was agri present in Q4?
P. C. Somani
Pardon?
Sneha Talreja
Sir, was agri demand present in Q4 or will we see the major growth only in Q1?
The Supreme Industries Limited April 28, 2023
M. P. Taparia
Agri demand starts from Q4 but big growth comes only in the first quarter of the April-June quarter.
But demand starts growing from after Pongal, after 20th January demand starts.
Sneha Talreja
Okay. so was this year better in terms of demand compared to last year?
M. P. Taparia
Demand better than last year for sure, otherwise how can we grow 39%?
Sneha Talreja
Okay.
Sir, second I wanted to take them an update on the Maharashtra project that we have received from HDPE pipe which was some INR480 odd crores to be executed for the 24-30 months.
Any numbers there how much have we achieved or any other government projects, added some details will be really helpful?
M. P. Taparia
There are 15-20 crores we are supplying per month.
This is to contract to go and run for 24 months.
Sneha Talreja
Any other government regime that we are working apart from Maharashtra?
M. P. Taparia
In Maharashtra, we are supplying them INR15 crores to INR20 crores every month to Maharashtra government.
Sneha Talreja
I’m just curious, Any other government project that we are working on apart from Maharashtra at this point in time?
M. P. Taparia
Other projects also we are supplying but through contractors.
We are supplying from our Kharagpur plant, we are supplying from our Malanpur plant, we are supplying to various state government requirements from our plant in different locations.
But in Maharashtra we are supplying directly to Maharashtra government.
Sneha Talreja
Understood.
Thanks, thanks a lot, sir, and all the very best.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Achal Lohade from JM Financial.
Please go ahead.
Achal Lohade, I have unmuted your line.
Can you please ask your question?
Achal Lohade
Yes.
Good afternoon, sir.
Thank you for the opportunity.
What I wanted to check, sir, if you look at the past the in the plastic pipe business, the blended realization, the realization to average PVC resin prices to be about 1.3 to 1.4.
For last three quarters, we have seen this number going up to 1.7.
So is there a -- any structural change in the mix, which is driving this markup or gross margins from the plastic pipe segment?
M. P. Taparia
In our piping system we are not only PVC pipe.
We increased the percentage of polyethylene pipe.
The polyethylene is much more expensive than PVC.
We increase our sale of CPVC which again much higher price than PVC.
We increase the sale of polypropylene that is also much higher price than PVC.
Achal Lohade
And would that also have a higher margin as well?
Is that a fair understanding compared to…
M. P. Taparia
Margin, I cannot say, margin differs product-to-product.
The Supreme Industries Limited April 28, 2023
Achal Lohade
Okay.
M. P. Taparia
But overall, it will definitely indicate the value.
Achal Lohade
Understood.
And with respect to HDPE PP, is that also driven by the project business?
M. P. Taparia
No, PP is mostly private only.
Achal Lohade
Okay.
M. P. Taparia
For plumbing PVC and CPVC for plumbing.
And polyethylene we have got both the set of business, trade market and government business, both.
Achal Lohade
Right.
And just one clarification.
In terms of the sales project versus retail.
Would you be able to share some sense of what is the mix of the from your sales company to project or company to area distributors?
M. P. Taparia
It’s not really available with me.
Achal Lohade
But is there a substantial change compared to what it was, say, two years back or three years back, or it would be similar?
M. P. Taparia
We supply to to trade and to government.
Achal Lohade
Right.
Would there be a change in the mix?
That’s the question.
M. P. Taparia
Because government, there are many customers.
We supply to both markets.
I don't have percentage for me so I cannot talk differently.
We supply to trade also, we supply to government also.
Achal Lohade
Understood, sir.
M. P. Taparia
CPVC supply for plumbing.
Achal Lohade
Got it.
And just a clarification.
With respect to the ratio, what I was asking in terms of the realization PPVC resin price, this is more sustainable one, is that a fair understanding here in terms of the explanation what you gave, what has driven that is more structural change or ongoing ratio, would that be a fair assumption?
M. P. Taparia
I can't say because we were never only in PVC pipe company.
Now we are increasing capacity of polythene also, we are increasing capacity of CPVC also.
So, PVC also we are increasing capacity.
So we are increasing capacity in all the segments where we are operating.
Moderator · Conference Operator
Got it, sir.
Thank you so much.
I’ll come back in the queue.
Thank you.
Ritesh Shah
Thank you.
We have our next question from the line of Ritesh Shah from Investec.
Please go ahead.
The Supreme Industries Limited April 28, 2023
Hi, sir.
Thanks for the opportunity.
Sir, couple of questions.
First is, sir, on silpaulin , you indicated that the margins are below 17% right now.
Sir, what is the strategy that we are adopting over here?
Are you looking to push volumes or increase prices?
How should we understand that, sir?
M. P. Taparia
Firstly, we increased the price there.
Ritesh Shah
Okay.
Sir, anything beyond increasing prices?
Any new product variation?
M. P. Taparia
Just allow me to complete the answer.
Ritesh Shah
Sorry, sir.
M. P. Taparia
There are so many lookalikes fake products that came in the market and they were selling at a much lower price than us, 20%, 25% lower.
So we were forced to drop the price, but finally in the last three, four years, they found out that their quality was absolutely useless.
So they were forced to sell at kilo basis.
Their quality cannot meet the comparable of our silpaulin.
So now we are taking our silpaulin product at its right price, which was there, and we were required to drop, and now we are correcting the price.
We are correcting the price to the justifiable level.
We can justify the investment.
Ritesh Shah
Sure, sir.
This is helpful.
Sir, my second question is over time the company continues to launch new products.
Sir, just if you can help us with the list for what all categories the company will be clocking, say more than INR150 crores sales, few variables, which come to my mind would be probably like tanks, tiles, walls.
Can you list down price and the new categories, which over the last three years that we have come in and which will be selling more than INR150 crores of top line?
M. P. Taparia
No, three years is too short a period to achieve such a turnover.
Normally we calculate five-year time frame.
I can only say one thing, that we are happy to report that whatever product we launched in the last five years, every product has been well accepted in the market.
They are very appreciated, and we are further adding to their range.
So presently I don't have a figure as to what was the quantum of target we achieved by the new products in the last five years.
We don't have.
So I cannot give you an imaginary number.
But one thing I can only say that whatever product we launched, all were successful.
Ritesh Shah
Sure, sir.
Sir, just last question, it is more from an industry standpoint, it is not something with respect to Supreme Industries.
Sir, when all the companies report pipes and fittings volumes, sales volumes, should we assume that it is only pipes and fitting?
It has not at all resin trade volumes included over here.
Sir, if you can speak on behalf of the industrials, there would be great sir.
M. P. Taparia
All right.
But can you repeat your question. please.
Ritesh Shah
Sir, my question is many companies report pipes and fittings sales volumes, does it only include pipes and fittings or there is scope that it could also potentially include resin over here?
The Supreme Industries Limited April 28, 2023
M. P. Taparia
Resin sales?
We don't make resin.
We don't make resin.
Normally should not.
Resin is only made by Finolex.
Ritesh Shah
Fair, sir.
Sir, I am referring to the traded volumes on resin, so if we buy at a lower price and if we sell at a higher price, we would not put it in our pipes and fittings volumes, right?
But is that an industrial practice as well?
Questions and answers
Corporate Office
7161 & 7162, Solitaire Corporate Park, Bldg.
No. 11, 167, Guru Hargovindji Marg, Andheri - Ghatkopar Link Road, Chakala, Andheri (East), Mumbai 400 093, INDIA. ~ +91 (022) 6257 0000, 6257 0025 [8] [identifier removed] ~ www.supreme.co.in “The Supreme Industries Limited
(R.J. Saboo) · Research Analyst
Ritesh, even in the industry for other companies, resins will be excluded, it will be pipes and fittings only - how resins can be included it?
It’s not a product sale.
It is traded sales.
Ritesh Shah
Correct.
Sure, sir.
This was very helpful, sir.
Thank you so much.
Moderator · Conference Operator
Thank you.
We have our next one from the line of Rishab Bothra from Anand Rathi.
Please go ahead.
Rishab Bothra
Congratulations on good set of numbers.
M. P. Taparia
Thank you.
Rishab Bothra
Can you just tell me the quarterly volume for each of the segments, volumes-wise?
M. P. Taparia
Quarterly.
Okay.
P.C. Somani
For piping systems for quarter four it is 1,12,293 metric tons.
Rishab Bothra
1.12,000?
P.C. Somani
1,12,293 metric tons.
Rishab Bothra
Okay.
P. C. Somani
For industrial product, 16,508 metric tons.
Rishab Bothra
Okay.
P.C. Somani
For packaging segment, 13,532 metric tons.
Rishab Bothra
Right.
P.C. Somani
And for consumer segment it is 5,081.
Rishab Bothra
And sir, secondly, the new three plants which have been commissioned, what is the revenue potential from the plants and by when will it optimally utilize the capacities?
M. P. Taparia
Everything will be operated this year only.
Rishab Bothra
This year only.
The Supreme Industries Limited April 28, 2023
M. P. Taparia
Markets is already there.
Now we have put up the capacity to meet the local requirement from the plant for the state.
Earlier it was being supplied from other plants.
Rishab Bothra
Okay.
M. P. Taparia
So market was there and capacity started running so they will be all sold-out this year.
Rishab Bothra
Okay.
M. P. Taparia
Actually, in Erode plant, we have now taken in hand to double the capacity.
Rishab Bothra
Okay.
M. P. Taparia
Present capacity is 3,000 tons monthly now we are making additional further 3,000 tons it may start by November this year.
Rishab Bothra
Okay.
And sir my last question is on the associate company that is Supreme Petrochem.
Last year, I think there was a substantial profitability in the company and how do one should look at the company profitability going forward?
What would be the contribution like?
M. P. Taparia
I think the best reply can be given by Mr. Rakesh Nair the Chief Finance Officer, the Director of Supreme Petrochem.
Rishab Bothra
Is he on the call?
M. P. Taparia
Maybe he will reply to your question.
Rishab Bothra
Yes, yes.
M. P. Taparia
We’ll ask Supreme Petrochem.
Rishab Bothra
Okay.
Is he on the call today?
M. P. Taparia
Sorry?
Rishab Bothra
Is he on the call?
P.C. Somani
They have a different call or different presentation, so you can connect with them.
Rishab Bothra
But if you could throw some insight on that?
M. P. Taparia
Just I did.
Rishab Bothra
Okay.
M. P. Taparia
Thank you.
Rishab Bothra
Thank you, sir.
The Supreme Industries Limited April 28, 2023
Moderator · Conference Operator
Thank you.
We have our next question from the line of Praveen Sahay from Prabhudas Lilladher.
Please go ahead.
Praveen Sahay
Yes.
Thank you for taking my question again.
So it’s related to industrial product, where we had seen for year ’22, as well as ’23 there is a very good volume growth and also you had mentioned about the growth here from the home appliances, white goods share has increased and growth were there.
So can you guide us for the way forward like the similar kind of growth you are expecting the way forward as well in this segment?
M. P. Taparia
We have a good year for them this year also.
Praveen Sahay
And the same home appliances or white goods that are driving the growth, the way forward also, you are expecting from there only?
M. P. Taparia
Composite cylinder also.
The other part of the division.
P.C. Somani
So all three, industrial component, material and product and composite cylinder.
Both have done good and they are expecting a good growth continuing.
Praveen Sahay
And cylinder utilization level can you give like you have now 1 million cylinder capacity, how much is the utilization level there?
P.C. Somani
Yes.
Last year this expansion has gone into production have commenced early in the February.
So last year capacity -initial capacity of 5,00,000 cylinder.
The last year we have attained 90% plus.
Praveen Sahay
And now you have visibility to utilize this 1 million as well.
Yes.
P.C. Somani
Ultimately…
P. C. Somani
We hope so.
Praveen Sahay
Okay.
Great.
Because you have given answering to one of the questions that’s other vertical to grow at a 10% to 15% of growth.
So that’s why just asking if industry so growth was higher.
M. P. Taparia
Higher industrial injection molding product volume grew by10% this year.
Praveen Sahay
Okay.
Thank you.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Rahul Agarwal from Incred Capital.
Please go ahead.
Rahul Agarwal
Yes.
Thank you for the follow up.
Sir, it’s been some time, the new HR had joined the company.
Could you elaborate a bit or could you whatever you can share in terms of what changes you’ve made in the organization, what kind of recruitments have happened and what should we expect going into next 12 months?
The Supreme Industries Limited April 28, 2023
M. P. Taparia
He started coaching set of leaders in the company.
He's already engaged with two coaches.
He's involved in all our new recruitment.
And we are very happy the way he's moving forward to improve the capability of our key people.
He's working hard to improve the capability, the human factor..
Rahul Agarwal
Sir, any specific gaps you want to fill where he is helping or is it like very general across the company?
M. P. Taparia
There's no gap but always potential.
Human being has got great potential.
So the potential will further generate.
That is what we're doing very nicely.
Rahul Agarwal
Okay.
Got it.
And secondly, sir, in terms of piping plastic pipe division, what is the count of distributors now and the thought process for fiscal ’24 in terms of new additions in case we are thinking on those lines?
P.C.Somani
Plastic piping, the total distributor strength is of 31st March is 1,443.
And the target is to add another 100 channel partners during the current year.
Rahul Agarwal
And how much did we add in this year?
P.C. Somani
So it was 1,250 to 1,443.
Rahul Agarwal
Okay.
Got it, sir.
Best wishes for fiscal ’24.
Thank you so much.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Bhargav Buddhadev from Kotak Mutual Fund.
Please go ahead.
Bhargav Buddhadev
Yes, sir.
Just one follow up.
You mentioned INR70 crores inventory gain in this quarter, is it possible to quantify what was the inventory gain in the same quarter last year?
M. P. Taparia
Last year there was no inventory gain.
Price started dropping last year, fourth quarter.
Price started dropping in I think January, March last year.
In the peak October it was INR160 per kilo per kg.
October 2021.
And then on 1st April it came down to INR140.
Bhargav Buddhadev
All right.
M. P. Taparia
I don't see any reason of gain in January, March 2022.
I don't see any reason.
I don’t have records today but there is no reason for any inventory gain.
Price is falling.
P.C. Somani
Yes, sir.
144 to 137 to 144, so as we’re referring to…
M. P. Taparia
That we gained.
Bhargav Buddhadev
Okay, sir.
Thank you.
Moderator · Conference Operator
Thank you.
We have a next question from the line of Mohit Agrawal from IIFL.
Please go ahead.
The Supreme Industries Limited April 28, 2023
Mohit Agrawal
Yes, sir.
Thanks for the opportunity.
My question is on the volume growth guidance for FY’24, 15% Now, the last five years volume CAGR has been around 6.5%, 7%.
Just wanted to understand that this 15% number, does it include impact of some pent-up demand that you expect on the agri side or is it more like a sustainable number 15% going forward?
M. P. Taparia
Last five years when you calculate, remember two years of COVID.
There was a degrowth in the economy.
Two years of COVID, please don't forget.
Nothing to compare.
But now because we are putting more, we are reaching more areas of the country.
We are adding more product portfolio.
We are expanding more distributors.
We are increasing our capacity.
We are increasing our range.
So we believe we should go on growing between 12%, 15% going forward.
Mohit Agrawal
Okay.
Understood, sir.
And, sir, any comments on the level of channel inventory?
Now, you had earlier stated that February onwards the restocking will start.
So any comments on that?
M. P. Taparia
Now presently the channel, according to our knowledge, that only normal inventory.
No extra stock because the trend is not bullish.
The PVC price, the polymer price may go down or may remain at this level only.
Because the commodity prices worldwide are remaining soft.
There is no apparent reason for them to build and keep extra inventory.
Normally inventories are running the business.
Mohit Agrawal
Okay, sir.
Understood.
Thanks a lot.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Chirag Lodaya from Valuequest.
Please go ahead.
Chirag Lodaya
Sir, thank you for the opportunity.
Sir, just one clarification.
This 13.5%, 14% margin is for the overall company or you are talking about plastic product as a division?
M. P. Taparia
Overall company.
Chirag Lodaya
And what could be plastic products division margin, sir, going ahead?
M. P. Taparia
It is difficult to forecast for the full year.
Today we can tell overall the company 13.5%, 14%.
Because the resin prices plastic remains so volatile.
The range bound also, we can't say.
It is very difficult to say.
Chirag Lodaya
Okay.
So earlier you used to guide about 15% to 16% is the normalized margin.
M. P. Taparia
Last year the margin was 13.3%.
Chirag Lodaya
Sorry.
M. P. Taparia
margin of 13.3%.
Chirag Lodaya
All right.
EBITDA margin.
M. P. Taparia
Yes, we are talking EBITDA.
The Supreme Industries Limited April 28, 2023
Chirag Lodaya
Got it.
Okay.
Thank you.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Navid Virani from Bastion Research.
Please go ahead.
Navid Virani
So thank you for the opportunity.
Just wanted to understand on the I just wanted to have some understanding on the competitive scenario for the packaging business, sir.
M. P. Taparia
Packaging this segment because we are making three products in packaging.
Protective packaging, cross-laminate film, and performance packaging.
Navid Virani
So can you give us an update on the competitive scenario as to how is it shaping up, because most of these products, if I’m not wrong, you have to qualify as value-added products resource which might not be the case currently due to increased competition.
So just wanted to understand there.
M. P. Taparia
So only out of three components of the packaging, cross-laminate film only was qualified as value-added.
Now this year we have removed it.
As the margins have gone below 17%.
That business went into difficulty for the last three years.
Every year the margins are sinking.
Now we believe that the reduction will be contained now.
Navid Virani
Got it, sir.
Thank you.
That’s helpful.
Thank you, and all the best.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Devansh Nigotia from SIMPL.
Please go ahead.
Devansh Nigotia
Yes, sir.
Thanks for the opportunity.
Composite cylinder frequently that is on the current capacity and the orders that we mentioned?
And also, in order of what is the value for composite cylinder?
P.C. Somani
The letter of intent what we received from IOCL for 735,000 cylinders, the order value is close to INR170 crores, out of which about 472,000 cylinders have been supplied till March ‘23.
Our current capacity, which was 5 lakh cylinders per annum, has been doubled now in February 23.
Now we have a 1 million cylinder capacity per annum.
Apart from the balance order of IOCL, we expect further order from IOCL.
We are also looking at many inquiries from the other geographies of the world market.
Last year we were utilizing 90% plus capacity.
This year it is yet to be ascertained how much inquiries get fructified.
But we are quite hopeful of utilizing the capacity to an optimal level, between 70%, 80%.
Devansh Nigotia
Okay.
And 1 million, how much of that is translated to value?
The current capacity if utilized fully.
And also, over the next three, four years, what kind of trigger, I mean, how big this opportunity can become In terms of revenue contribution from it?
P.C. Somani
In terms of utilization, the current capacity transfers to about 200 crores per annum The Supreme Industries Limited April 28, 2023
Devansh Nigotia
Okay.
And in terms sale over the next three, four years, how big it can become and constraints that we have seen for it scaling up to, let’s say, INR400 crores, INR500 crores?
P.C. Somani
It all depends how the composite cylinder is accepted in the market or is promoted in the market by oil refining companies.
That is yet to be seen.
Devansh Nigotia
Okay.
Thank you.
And last, you have seen a lot of capacity in by itself going around, utilization has actually dropped down significantly with some recovery shown this year.
So do we see a risk to the margins structurally any risk if we see?
M. P. Taparia
I don’t think.
Devansh Nigotia
Yes, sir.
The total capacity expansion that has happened over 3-4 years by the new players and even the existing players and volumes actually have not come into it.…
M. P. Taparia
We are expanding, we gave you numbers.
We are expanding in terms of…
P.C. Somani
There is a good potential to grow.
M. P. Taparia
We will go on growing.
Devansh Nigotia
Okay.
Thanks a lot, sir.
We’ll wait for it.
Moderator · Conference Operator
Thank you.
We have a last question from the line of Aasim Bharde from DAM Capital.
Please go ahead.
Aasim Bharde
Okay.
Yes.
Just one question from my side.
I heard your comments on the packaging business, especially the cross-flam film one.
You will be introducing new products, we already have stated that we will be hiking prices gradually.
But on margins, will this segment be at 10% to 12% margin business from here on or current go back to old levels, say three to four years?
Any outlook on packaging segment margins?
M. P. Taparia
First, we are trying to make it a value added item, which means we have to bring it to 17% level.
First, our effort is to make it back to 17% level, which came down below 13%.?
Aasim Bharde
Sir, gradually I think that 13% will take time to reach 17%, so the segment margins will still be somewhere around 11%, 12% over the next two to three years?
M. P. Taparia
No, why?
It should happen this year only.
Aasim Bharde
Okay.
P.C. Somani
We have been targeting the systems.
M. P. Taparia
We are working to make it 17% this year.
There is no reason.
First, our products.
We have just reduced the price because of the look-alike products were selling 15-20% lower than my price.
Now it is discovered by the customers?
The Supreme Industries Limited April 28, 2023
Aasim Bharde
Sir, but this commentary is something that you’ve been giving for the past three quarters, then our margins have been sub 10% in packaging, so just wanted to get a set of the outlook on margins.
So will that jump this year because you already put in place new product at a high price…
M. P. Taparia
One or two divisions I can show.
P.C. Somani
There are other packaging businesses.
Protective packaging products also had inventory losses.
Therefore, this year the packaging margins were -- because the quantum of business is comparatively small compared to piping divisions.
They are also having inventory losses.
But going forward, crosslaminated products margins will definitely improve to the 17% plus ,what we are talking.
In other segments of packaging, they are also going to improve.
So, definitely you will see a remarkable change in the margin profile.
Aasim Bharde
Can you give any rough quantum as to what kind of growth in margin can we expect in FY’24 for example or in FY’23?
P.C. Somani
For packaging if you talk, a combined margin -- between 13% to 14%.
Aasim Bharde
13% to 14%.
Okay, sir.
Thank you.
M. P. Taparia
Thank you, sir.
Moderator · Conference Operator
Thank you.
I would now like to hand the conference over to management for closing comments.
Over to you, sir.
M. P. Taparia
We thank all the participants, thank all the investors for their very incisive questions and we are very thankful for their support extended to the company throughout the year.
Thank you very much.
P. C. Somani
Thank you.
(R.J. Saboo) · Research Analyst
Thank you very much
Moderator · Conference Operator
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.