Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HIL Ltd (BOM:509675, Financial) reported a consolidated revenue of INR1,107 crores for Q1 FY25, representing a robust 9% growth over the previous year.
- The Pipes & Fittings segment achieved a breakthrough quarter, crossing the INR150 crore quarterly revenue mark for the first time, with a 78% year-on-year growth in revenue.
- The Construction Chemicals business saw a 35% year-on-year revenue growth, with the tiling segment growing nearly 100% over the last year.
- Roofing Solutions maintained its number one market position with a 25% market share, recording the highest Q1 sales while maintaining a significant price premium over competitors.
- The company has made strategic investments in new product development, digitalization, and manufacturing excellence, which are expected to drive future growth and improve operational efficiency.
Negative Points
- Despite the revenue growth, the EBITDA for the quarter dropped by 290 basis points compared to last year, attributed to strategic investments and adverse price trends.
- The Building Solutions business experienced a near-flat revenue performance due to strong competitive pressures and a softer price regime.
- The market for certain product segments, such as engineered wood and resilient flooring, declined by 5% to 10%, impacting overall performance.
- The company faced intensified competition and adverse price trends, particularly in the Pipes & Fittings segment, which saw a 12% drop in price realization.
- The EBITDA losses in the Parador segment increased due to strategic investments in teams and marketing, despite an improvement in contribution margins.
Q & A Highlights
Q: Can you elaborate on the cost per tonne of the plant size of flash appliances?
A: Flash is not the only key raw material; there are several other products contributing to the cost. Prices vary by location and season, so there is no standard price to quote. We can provide exact prices later.
Q: Why are our gross margins lower compared to competitors using different materials?
A: Competitors' margins are not directly comparable as they include various products and benefits like carbon credits. We aim to improve our margins by 500-600 basis points through material cost optimization and other efficiencies.
Q: What caused the margin compression in the embedded segment?
A: The margin compression is due to strategic investments in teams and marketing. Despite this, our contribution margin has improved by 370 basis points compared to last year.
Q: Has the Parador business bottomed out, and can we expect continued improvement?
A: Yes, the Parador business has shown consistent revenue growth over the last three quarters. This growth is driven by our efforts rather than external factors, and we expect this trend to continue.
Q: What led to the spike in losses for Parador despite flat revenues?
A: The spike in losses is due to a one-time wage payout provision and a conscious product mix strategy. These are transient factors, and we expect improvements in the coming quarters.
Q: What is the impact of the election on the B2G segment of the pipe business?
A: The election led to a 70% revenue erosion in the B2G segment due to halted projects and delayed funding. However, we expect a significant bounce back from September onwards due to increased government spending.
Q: What are the strategic long-term plans for the roofing segment?
A: We are introducing adjacent products like roofing accessories and color-coated steel sheets to leverage our existing channel presence. We are also focusing on designer and aesthetic-based applications.
Q: Are there any plans to enter the OPVC segment?
A: Yes, we are closely evaluating the OPVC segment, which has promising opportunities. We are considering options to acquire the necessary technology to become a relevant player in this market.
Q: What is the outlook for the flooring business in India?
A: We are planning a conscious and well-thought-out introduction of the Parador brand in India, focusing initially on the commercial segment. This will help us build a more consumer-facing brand and premiumize our product portfolio.
Q: How do you plan to address the increasing competition in the construction chemicals and putty segments?
A: We are focusing on synergies between construction chemicals and putty, optimizing our cost structure, and leveraging our distribution model. We aim to balance volume and margins without playing a low-margin, high-risk game.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
