Astral Reports Below Estimates Revenue in Q4
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TVTranscript
00:00 Today we have with us Mr. Hiranan Savlani, the CFO of Astral.
00:05 Hello sir and welcome to the show.
00:06 Thank you. Thank you for inviting.
00:09 Thanks sir. So, pretty great numbers in revenue front,
00:13 but margins are a little bit of contraction.
00:15 So, what's your take on the overall result this time?
00:17 I think margins were in line with what management is guided.
00:22 We are guided 16 to 18% kind of zone.
00:25 So, we are within that zone only.
00:27 But few of the exceptional things were also there in the last quarter,
00:31 because we lost sizable money into the inventory losses
00:35 because of the polymer drop in the first three quarters.
00:37 This quarter was there was no loss.
00:39 That's why you see in this quarter the margins were better.
00:42 Otherwise, previous three quarters, because of the inventory loss, we incurred that.
00:46 Secondly, we celebrated 25th anniversary of the organization.
00:51 So, because of that, we have to run a completely special drive.
00:55 So, for that, we have to completely change everything,
00:57 all our packaging material, all our printing material,
01:01 all our boxes, all our TVC, all our social media, all our dealers,
01:07 everywhere, all the material we have to completely revamp
01:10 with this drive of 25 years, silver jubilee.
01:14 So, because of that, company has to incur a sizable cost on that.
01:18 So, like I can give a number.
01:20 Last year, we were incurring 127 crore rupees for pedotype pen,
01:24 sales promotion and all this activity.
01:25 This year, we have spent 178 crore.
01:28 So, almost 50 crore additional we have to spend because of a special drive of 25th year.
01:33 So, that was also one of the reasons that this year the margins were a little bit lower.
01:38 Otherwise, we could have delivered even much better.
01:40 Sure, sir.
01:42 Looking at the plumbing business, you had guarded around 16% to 70% of margins,
01:48 but the margins were really, really healthy at around 20%.
01:52 So, do you expect the same to maintain over the next coming quarters
01:55 or what is your outlook on the margin front?
01:58 So, we are confident we will be able to maintain the same kind of margins.
02:01 So, it should not be a challenge.
02:03 Next year, we are expecting even the growth trajectory will also be fantastic
02:07 because looking to the current scenario of the market and if post-region,
02:12 if the government is going to spend the similar kind of money
02:15 on the infrastructure and housing and all,
02:17 we are expecting that this kind of healthy growth will continue in the next year also.
02:21 Sure, sure.
02:22 That's great.
02:23 Talking about the Bathware and Paints business,
02:26 you know, the company, the business is relatively small on that front,
02:30 but you have been doing a lot of efforts in the Bathware segment.
02:33 So, what kind of revenue growth are you expecting there?
02:36 I think Bathware is going to deliver a minimum 100% plus growth this year
02:42 because the base was very low.
02:43 So, last quarter itself, we have delivered close to about 24-25 crore rupees of revenue.
02:49 If I extrapolate that only, then the 100 crore plus number will be there in the next year.
02:53 But our expectation is minimum 125 to 150 crore kind of revenue next year.
02:58 So, that division is also going to pick up very fast in the coming year.
03:02 Sure, sure, sure.
03:04 And in the Adesives business,
03:06 you had guided at around 15 to 20% kind of margins
03:11 and the margins have contracted by around 200 basis points on a year-on-year basis.
03:16 So, on that segment, what's your margin outlook?
03:19 So, like our India operation has delivered what we have guided
03:23 is close to about 15 and half 16% kind of margin was there in our India operation.
03:27 But the little setback came from our UK operation.
03:30 In the UK, last quarter, if you see, we were in a negative 3% EBITDA margin
03:35 because the chemical price dropped sharply.
03:38 So, because of that, we have to incur the inventory losses on that.
03:41 But this quarter, we have recovered very, very fast, I can say.
03:45 From -3 to this quarter, close to about 5 and half to 6% EBITDA margin.
03:50 And next quarter onward, we'll be back to again 10% plus margin.
03:54 So, next year again, we will be coming back to the normalcy of the margin.
03:58 This was the exceptional year in UK.
04:00 That's why we have seen a little cut in the margin.
04:03 Otherwise, overall, the growth trajectory is maintained.
04:06 Understood.
04:08 Okay, so in the last earnings call, you had mentioned that
04:12 you will see synergies from the Dahej plant from the coming quarter,
04:17 that is from the fourth quarter.
04:19 So, any synergies that you've seen or do you think that is elongated?
04:24 So, I think now next year onward, you will see some improvement into the margin
04:28 because the objective which we put up this plan,
04:32 that was mainly because we are sourcing sizable raw material
04:36 from the local area only, nearby only.
04:38 So, that is going to save a lot costing to our organization.
04:42 And secondly, we have to shut down our UNAV plant.
04:46 So, that was also needed to shift some of their items into the Dahej plant.
04:51 So, all these things will be operational next year.
04:53 So, next year, we are expecting even the growth will be better.
04:56 And at the same time, cost control will be there.
04:59 So, there will be some improvement into the margin front also.
05:02 Sure, sir.
05:05 I just want to have some more perspective on the raw material pricing.
05:10 You mentioned that those who were bottomed out in the last quarter
05:14 or will be bottomed out in the fourth quarter
05:17 and then have comfortable margins, will support comfortable margins.
05:21 So, what's your take on the raw material price increase?
05:24 So, I think raw material week, I did that it will be now bottomed out
05:28 and that is what exactly happened in the last quarter,
05:30 the raw material price has bottomed out.
05:32 And this quarter, already you see a couple of days before,
05:35 the reliance has already increased to 2 rupees price.
05:37 So, 2 rupees effectively 3%.
05:39 So, raw material has already started inching up
05:42 and we are expecting that further some rise is expected in the near term.
05:47 And even CPVC side also bottomed out has been there.
05:51 So, after some time, there will be a price rise into that side also.
05:55 So, that is going to be in favor of the company
05:58 because last year, because of the drop in the polymer price,
06:01 we have to incur the losses on the inventory.
06:03 This year, it may happen that there will be a gain into the inventory.
06:07 So, that is also going to support extra to the margin front.
06:10 Okay. So, there won't be any more destocking of the inventory, is it?
06:15 I don't think because now already polymer price has started going upward.
06:20 So, dealer distributor will rush to have a restocking rather than destocking.
06:26 So, recently 3 days before only when PVC price has increased 2 rupees,
06:30 lot of rush is there from the dealer distributor community to restock.
06:34 So, we don't see any destocking will be there.
06:37 On the contrary, we are of the view that now dealer and distributor will restock.
06:41 On the contrary, some pent-up demand may come because of the restocking.
06:44 Okay, sir. So, on the back of that, sir,
06:48 what kind of revenue growth guidance do you expect for FY25 overall?
06:52 I think we are expecting minimum 50 to 20% kind of volume next year.
06:58 And if the first half will be better, which looks,
07:02 then we may revise our guidance upward side also.
07:05 Like last year what we did, we already guided 15% kind of volume growth.
07:10 In the second half, we increased to 20% volume growth guidance for full year.
07:15 And actually, we have delivered close to about 23% volume.
07:18 So, we are maintaining our 15 to 20% guidance at this stage.
07:21 But there are high probability that we may
07:24 revise upward once the first half number will be with us.
07:27 Sure, sir. So, in the last earnings,
07:31 you'd also mentioned that there'll be three new plants
07:33 as the demand is very strong in the pipeline.
07:37 So, how has the progress on this plants thing happened during this quarter?
07:42 So, like our Katak plant, the operational, Gavati plant is operational.
07:45 Our Hyderabad plant is likely to start the commercial production by June end.
07:50 And then Kanpur plant will be ready by March.
07:55 So, I think next year also, means FY25 also,
07:59 we are expecting two new plants to commission.
08:01 And if the growth trajectory will be like this 20% plus kind of run rate,
08:06 then we may add a few more plants in the coming time.
08:09 So, we have not still finalized the things, but we want to monitor the number.
08:14 And if that run rate will continue, yes, definitely we are going to expand further.
08:18 Sure, sir. Sure, sir.
08:20 So, lastly, on the sale of the UK business, how has that been?
08:24 Because we had incurred losses last quarter due to the silicon prices.
08:28 So, what's your take on that?
08:30 So, I think now that is the past because last year, last quarter was minus 3% EBITDA.
08:36 But this quarter, we will deliver almost 5.5% to 6% EBITDA.
08:40 And next quarter onwards, almost majority of the inventory will be wiped out from the system.
08:45 So, next quarter onwards, we are going to be at close to about 10% EBITDA margin.
08:49 Sure, sir. I think pretty healthy outlook and confident outlook
08:55 on the business environment and macro thing as well.
08:58 So, I think this helps our viewers.
09:00 And thank you so much for joining us on this show today, sir.
09:02 Thank you so much. Thank you so much for inviting us.
09:05 Thank you, sir. Have a nice day.