DUROPLY - DUROPLY INDUSTRIES LIMITED Share Price

In the earnings call for Q3 FY26, Duroply Industries Limited management provided an outlook emphasizing continuity and improvements despite recent challenges. The management highlighted that Q3 revenue reached Rs.93.05 crores, indicating a 3.6% growth year-over-year but an 11% decline from the previous quarter. The profit before tax was reported at Rs.1.37 crores, marking a year-over-year increase of 13.7%.

Key forward-looking points included an anticipated improvement in EBITDA margin, projected to be between 6% and 6.5% by the end of FY26. The current EBITDA margin for the quarter stood at 5.8%, up from 4.9% in the same period last year. Management believes that an increase in revenue, alongside improved gross margins, will help achieve the stated EBITDA target. The gross margin for the quarter was reported at 37.1%, a notable rise from 34.2% in the prior year.

Management also noted a positive trend in the premium product segment, shifting from contract manufacturing to in-house manufacturing, with in-house revenues reaching Rs.60.7 crores, reflecting an 11.6% growth year-over-year and a 15% quarter-on-quarter increase. They aim for an in-house manufacturing revenue split of approximately 65% in the upcoming year, up from the current 64%.

Challenges particularly in markets like Delhi NCR due to environmental restrictions have been acknowledged, but management is optimistic about recovery, stating increased activity expected in Q4 FY26 and early FY27, contributing to improved financial performance.

Overall, the management's outlook is cautiously optimistic, focusing on margin improvement and leveraging the stronger brand identity Duroply has established over its 69 years of operation.

Q1: So, one is that in the previous call, you mentioned that our own manufacturing will get better in H2 FY26 as the premium product segment grows. So, what is an update on that? Do we see any traction on the premium product segment?
A1: Yes, Nishita. There has been traction in the premium product segment. For this quarter, we observed a significant shift from contract manufacturing to in-house manufacturing, with in-house revenues at 60.7 crores, which is up nearly 15% quarter-on-quarter. This shift reflects positively in our gross margin improvement, indicating we are moving in the right direction.

Q2: You mentioned that we will end the year FY26 at 6.5% EBITDA margin. So, do we still see that happening?
A2: Yes, we anticipate finishing FY26 with an EBITDA margin between 6% to 6.5%. We expect improved revenue in Q4, and while we faced challenges in Noida due to pollution restrictions, our gross margins have started to improve, contributing to this outlook.

Q3: Are we going to increase our in-house manufacturing more? What is the percentage range that it will be in?
A3: In-house manufacturing will continue to improve in Q4. We currently see a 64% contribution from in-house manufacturing and expect it to maintain or slightly increase to around 65% next year. This reflects our ongoing commitment to enhance in-house capabilities.

Q4: So, what is the current scenario on imports? How do we hedge ourselves for that risk?
A4: Importantly, the QCO norms implemented have minimized incoming finished goods, but the unorganized sector has slightly revived due to reduced imports. While we're facing volume challenges primarily due to competitive pressures in the branded segment, we remain disciplined with our finances to manage the situation effectively.

Q5: When can we see timber prices stabilizing or reducing?
A5: Timber prices have stabilized recently; however, I don't expect them to soften much in the near future. Factors like the weakening rupee could influence domestic timber prices moving forward. Currently, I see no major changes in prices over the next few months.

Q6: Would that mean that secondary demand, the consumption is still lagging?
A6: Yes, secondary sales have improved significantly, but this hasn't fully translated into primary revenue growth due to our disciplined credit management with channel partners. Recent work restrictions in Delhi NCR also limited cash flow, impacting our performance. We expect recovery in Q4 and Q1 next year.