DUROPLY - DUROPLY INDUSTRIES LIMITED Share Price

Duroply Industries Limited's management provided a positive outlook for the upcoming year during the Q4 FY25 earnings call. They reported a significant milestone with quarterly revenue exceeding Rs.100 crores for the first time, specifically marking Rs.106.35 crores, a 25.9% increase year-on-year and an 18.4% rise quarter-on-quarter. The profit before tax for the quarter was Rs.3.25 crores, including a one-time exceptional income of Rs.1.04 crores.

For FY25, the total revenue stood at Rs.371.8 crores, reflecting a 15% year-on-year growth. Notably, revenue from in-house manufacturing increased to Rs.220 crores (+12.3%), while contract manufacturing revenues rose to Rs.151 crores (+19%). The gross margin improved to 34.7%, versus 33.7% in FY24, with EBITDA margins at 4.8%, up from 4% previously.

Forward-looking statements included expectations for continued growth, with management anticipating further improvements in margins. They outlined an expected EBITDA margin growth to a range of 8-9% within two years, driven by economies of scale and enhanced operational efficiency. The company also aims for mid to high teens growth rates moving forward.

Management highlighted their marketing spend at 3.8% of sales, approximately Rs.14 crores, focusing heavily on North India, which makes up over 60% of revenues, alongside increasing efforts in select regions of South and West India. The impact of new BIS and QCO norms was recognized, potentially benefiting organized players by reducing import competition.

Overall, management expressed confidence in Duroply's growth trajectory based on recent investments in infrastructure and strategic initiatives to expand their market presence.

Q&A Summary from Duroply Industries Limited Earnings Transcript

Question 1: Can you provide the percentage of advertisement expenses to sales and details about states of aggressive advertisement?

Answer: Our advertisement spend stood at 3.8% of sales, approximately 14 crores. We primarily invest in North India, which generates over 60% of our revenue. We are also targeting select pockets in South and West India for aggressive marketing to build a presence and develop these markets over time.

Question 2: What timeline do you foresee for South and West India to match North India's performance?

Answer: Building brand equity in new regions will take at least 2-3 years. While we've seen strong acceptance and growth recently, a significant presence in these new regions is a longer-term goal as we expand our distribution network and producer relationships.

Question 3: What has driven the growth seen in Q4 and who are your typical customers?

Answer: Our growth was fueled by investments in team infrastructure and supply chain, along with a fresh equity infusion. We draw 95% of our revenue from B2B, particularly serving contractors and furniture manufacturers, with a focus on the retail segment through channel partners.

Question 4: Can you share insights on the margins for B2B vs. retail segments and working capital differences?

Answer: Margins for both B2B and retail are similar. Our B2B focus channels into the home buyer market through contractors and dealers. Typically, debtor days hover around 40-42, while increased inventory days recently resulted from strategic decisions in anticipation of market regulations.

Question 5: What's your outlook on raw materials and their costs?

Answer: We anticipate some easing in raw material costs towards the latter half of FY25, tied to the industry's recovery and regulated supply chains, but expect occasional spikes during monsoon seasons. The focus on sustainable sourcing is crucial for long-term stability.

Question 6: What is your gross margin and how does the product mix impact it?

Answer: Currently, our gross margins are at 34.7%. The Duro range accounts for 75% of our revenue and has higher margins (44.5%), while the contract-manufactured Tower range, which contributes about 25%, has marginally lower margins at 22-22.5%.

Question 7: Can you explain the competitive landscape and market share dynamics?

Answer: The organized sector is growing, currently at around 25% market share. Strengthening BIS norms will likely encourage a shift away from unorganized competitors, allowing us to capture more market share, especially as demand for quality products rises.

Question 8: What are your plans for CapEx for the near future?

Answer: We plan minimal CapEx strictly for efficiencies and maintenance at our Rajkot plant, focusing on debottlenecking processes rather than large-scale expansion in the immediate horizon.

Question 9: Could you clarify your effective tax rate moving forward?

Answer: We follow the new tax regime at 25%. The effective tax rate will resemble this as accumulated losses from prior years have been absorbed by current profits, normalizing our tax obligations moving forward.

This summary encapsulates the key questions and responses from Duroply's earnings webinar, along with relevant figures and future guidance.