Astral Limited (ASTRAL) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Astral Limited Q1F527 Earnings Conference Call hosted by Equideous Securities. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Pranav Mehta from Equius Securities. Thank you, and over to you, sir.

Thank you, Pranav Mehta. Good evening, everyone. Thank you for joining this call. Today, from the management side, we have Mr. Sandeep Engineer, Chairman of Engineering, Mr. Viranam Savlani, ED and CFO, Mr. Kairav Engineer, Executive Director, Thank you.

I welcome you all for the earning call Q1 FY27. As you all are aware, the polymer industry is passing through a volatile time. Prices are highly volatile and fluctuating. And it was on the negative side in Q1. Due to that, the industry degrowth by approximately negative 10%. But I am very happy to share that in spite of that, as usual, Astral is a company which always focuses on growth and at the same time on profitability. And which once again we have demonstrated in this quarter with a flat volume growth against market reporting almost 10% negative. And also we have delivered a 10% value growth with an 18.9% EBITDA which is one of highest in the industry. This clearly suggests that Estelle is continuously gaining market share for many years, and the journey is still continuing. Now let me take you through all our verticals. Plumbing. Demand was overall weak in the industry, but because of decentralization of plants, our demand was very good, and we are taking market share in new geography, where we have started As you are aware, the STL has spent almost 1,500 produce in capex in the last four to five years in all the verticals. And now it's the time to utilize the same and generate the cash flow from there. As communicated in the past, we have increased our product basket in the last three to four years. And this product basket is not only adding a good performance, but also is adding to a value performance. New product basket includes water tank, valves, fire sprinklers, OPVC, PKMT, low noise, and other products. This has given a esterial growth and healthy margin. Our Kanpur and Hyderabad plant have geared up and are giving good growth in their respective geographies. Our CPVC resin plant construction is going on as per the schedule, and we are expecting to complete it by December end. And we will take the trial runs and finish the settlement and the product stabilization in Q4. Our state-of-art new valve production facility is up and fully running. We are also adding patched aluminum patch machines, which are under installation, and we are going to complete the same in mid-September, and by end of September, all trials will be over, and the commercial production of the same will be made. Bathware business is also slowly picking up, and more and more new projects and developers are getting added to the Estrel brand. During the quarter, we have given a healthy growth in our Bathware business by 18.1%. Our Adhesive business, the quarter was once again an excellent quarter for Adhesive India business. We have delivered a robust growth of 24.9%. We are getting good response in rural and online business. At the same time, overseas business is also picking up well. I am sure you must have seen that this vertical, which was continuously growing market share by entering into new geographies, new product introduction, and focus is on both rural and overseas market as well as even the urban market. During the quarter, the margins were under pressure due to high cost of inventories and previous quarter, inventories which we had with previous quarters. But we are confident that by the year end, not only we will achieve our targeted revenue, but also deliver the guided margins. The UK adhesive business, this business was passing through a tough time last year, but we took a quick bold decision. And we are happy to see a growth is that growth is coming back and EBITDA margins are also showing signs of pickup and improvements. You can see the numbers that this quarter, it has delivered a robust growth of 26% with an EBITDA of 4.9%. Paid business. First time, after acquisition of jams, we are seeing a history high growth of 48.7% in this vertical, and not only that, we are at EBITDA break-even point. We are at EBITDA break-even. Paid business has delivered robust growth with all the six operating states, and also new launches have given good response across the geography. E.S.S., the newly acquired Specialty Chemical Company. We are happy to share that from the very first quarter, the newly acquired company not only is giving quick start of revenue, but also an excellent EBITDA of 12.9%, and we are expecting that to come, to grow in coming times, and the vertical will be delivering good value, growth, and excellent margin. With this, I am closing my initial remarks. Let Mr. Hiran and Savlani take you through the final performance of Q1.

Good afternoon, everyone. Welcome all for our earning call for Q1 FY27. Result and price release are in front of you. I just want to highlight the key numbers. First, the vertical-wide numbers are ascender. Last year, Q1, plumbing business was 953 crore. Again, this year, it is 1050. So, registering a growth of 10.1%. Adhesive business, India, last year, it was 261 crore. This year, it is 326. So, registering a growth of 24.8%. ADAC business UK last year was 96 crore. This year it is 121 crore. Registered a growth of 26%. Paint business last year it was 50 crore. Now this year it is 74.5 crore. Registering a growth of 48.7%. DSS, we already have given the number, it is 6.7 crore with the EBITDA of 90 lakh rupees. So overall, if you see that the numbers are in line what we have projected and EBITDA percentage also I am giving you. Q1, plumbing business last year was 16.4 percent. Now it is 18.9 percent. ADAC Business India, it was 14% last year, now it is 12.2%. ADAC Business UK, last year it was flat 0.2%. Now it is 4.9%. And Payne Business, last year was 1%. Now it is 0.1%. So Consolidated wages, last year it was 14.3%, which is now 15.5%. So roughly about 1.2% kind of improvement into the EBITDA. As you all know, we are always believing in consistency in number and the profitable growth for the organization. I am very happy to share that this quarter also we have delivered a very healthy 10.1% value growth in pipe and flat volume growth in pipe and again the negative growth of industry by roughly 9 to 10%. In adhesive and paint also, we have registered a very robust consolidated growth of 29.5% in which adhesive was 25.2% and the paint was 48.7%. The overall Q1 value growth is 15.9% and with the EBITDA margin of 15.5%. The key points to note here is that in the history, we have first time delivered a highest 48.7% growth in paint after acquisition of jam. As we guided in last call, we will be closing full year with 20-25% kind of growth, but with this kind of number in Q1, we are confident that we will be definitely crossing the guided mark number. Further, you will be also noted that in all the vertical, whether it is a paint, whether it is a adhesive, or whether it is a plumbing, we are continuously gaining market share, which is always a good sign for any company, and so it is for the astral. In pipe, one of the good things has come up for the industry, which is implementation of MIP, which will This will make our life little easy because we are continuously seeing, continuously seeing the volatility. Since last few years, a huge volatility in polymer prices, particularly into the PVC. Now with this implementation of MIP, this will reduce the sizeably, and which is very good for the company, as well as all of you to forecast the number. Demand scenario in pipe industry is very robust from July onward. Till yesterday, I can say, so four and a half months, we are into the double digit growth. So you can understand the kind of extraordinary growth we have achieved in the month of July and the first 11 days of the current month, which gives us the confidence that we have given the guidance of double digit growth. So, we will be definitely going to achieve on the full year wages. Since realizations are very high, which will give value growth hope, more than that, that is, right now, realization and the volume gap is 10%. And with this implementation of MIP, we are of the view that the value gap will continue. And if that is the case, our value growth for the full year will be more than 20% in top line. As communicated by Sandeep Bhai, we are slowly coming back to our UK business growth path as guided in the last phone call, which you can see in the number, and we are confident that by year end, we will be coming to the normalcy what we have guided. We have guided the double-digit growth in top line. Now, in the first quarter itself, we have delivered the 26% kind of growth. So we are confident that the UK will definitely going to surpass the double-digit mark. From Q3 onward, I think Pax Aluminum Pax, which Sandeep, I already discussed, is going to start contributing to the top line and the bottom line. This product is very well accepted in the Indian market, and it is a very high-value product and a high-margin product. Few more products we are planning to launch in Q3 which we will communicate to you in our next earning call when they will be at the advanced stage of launch. Overall, industry environment is positive in all vertical and we are confident that we will be delivering a healthy growth in the coming quarters also. With this, I want to thank everyone and open the floor for the Q&A.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, may please press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference call, please limit your question to three per participant. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Shravan Shah from Dalit Capital. Please proceed with your question.

Hi, sir. First of all, congratulations on gaining the market set both in plumbing and additive. You have highlighted many, many things just to get more confidence on that front. So, particularly on the guidance front, so far from the plumbing, we have mentioned that in four and a half months, we have seen a double-digit growth. So, in Q1, when we have a flat growth, does that mean that only the April was where we have seen a significant maybe a degrowth and then the May and June must be a growth? And July, does that mean that we are seeing a kind of a 20% plus kind of a growth?

So, your understanding is right, but little I can do the correction. The April number was not good for the entire industry, and particularly for Estral, because we implemented our new SAP HANA, so our business operation was practically shut for the dispatch for 10 days. So, definitely, April was not good, but then May onward, we started growing very fast, and in the month of July, we registered a growth of 40% in volume, not 20%. So because of that, we are on a four, four and a half one basis, we are into the double digit.

Okay, so then does this growth is just because in Q1, because of whatever the volatility was there, and now in last, since the mid of the July, 12, 13 rupees, PVC prices have gone up, and which is supporting. So this quarter and maybe then the full year, can we see a mid kind of a 15% kind of a growth that is a more likely kind of achievable? And at the same time, in terms of the margin, because we in plumbing are used to ride 16 to 18%, but this quarter also 18.9%. So, what's the possibility that we should be doing more than or maybe close to a 19% kind of margin given that the now PVC prices are kind of up and plus MIP would be supporting though. I'm trying to understand the upside risk.

So, I think the way July and August has picked up, it looks that the demand has come up very sharply from the market. One of the reasons was that dealers and distributors were de-stocked because prices were going down. So, because of that, nobody was in the mood to keep the inventory. But now, everyone is rushing to fill up the inventory. Secondly, because of MIP, now the dealer and distributor also have a confidence that from this price, Polymer price is not going to go down, at least. So downside is protected. So they are getting confidence and they are filling their stock also. So that giving us the confidence that the scenario will improve it. Thirdly, normally whenever there is a first quarter, if so weak, I played kind of number, then naturally the second quarter should be better. Last year, if you see the pattern was similar, that first quarter was weak, and then the second quarter was we deliver close to about 20% kind of growth, volume growth. So similar pattern is getting repeated. So I don't want to jump in at this stage and tell you that full year wages, we are going to deliver 15-20% volume or something. Let us wait for some more time. Let us finish the Q2 number. And then I think we will be hosting the call somewhere maybe in the month of November or so. So by that time, we'll be having more clarity. So we will be in a position to upgrade our guidance. But at this stage, we don't want to unnecessary jump. As far as your second question was relating to the margin, I think margins are pretty stable, and because of polymer volatility, 1 or 2% kind of plus minus will keep happening. So we will be definitely going to be in the range of 16 to 18, and if the market condition will be better, like what is right now, because now polymer prices are going up. So if these kind of scenarios continue for a longer period, then there are probabilities that we may increase the margin. But right now, our guidance will remain to 16% to 18%. We will change our guidance if needed post Q2.

And similarly, on the adhesive also, the significant growth, India 25% kind of a growth and UK also 26%. And both we were having a kind of a 15-20% guidance for India and more than 10%. And so there, is there, are we revising right now or still there also the similar guidance and maybe Q2, post Q2, we will upgrade the guidance.

So the chances are bright to revise upward, but at this stage, we don't want to do that thing because still we want to wait for some time because we don't want to unnecessarily misguide the street based on the one quarter number or maybe four months number. So, better we wait for the completion of Q2, and post that, if required, we will definitely change our guidance.

And the India margin will be there. Obviously, this quarter was lower, 12.2, but it will come back to 15-17% what we are guiding.

Yes, yes, yes. I think we already disclosed also in the press release also that it will be back.

Okay. Thank you, sir, and all the best.

Thank you. Thank you, Shama.

Thank you, sir. Ladies and gentlemen, to ask a question, please press star and 1 now. Participants who wish to ask questions, may please press star and 1 at this time. The next question is from the line of Praveen from PL Capital. Please proceed with your question.

Thank you for the opportunity and many congratulations for our good set of numbers. My first question is related to domestic and domestic business. As you had already highlighted, the price height has been implemented. So, how much has been absorbed in the market, and is there any further commodity inflation is there to take a further price height?

So I think, so I think overall, the RM prices were upward of overall, I would say more than 15-16% rise was there. Exact figure I'll have to say, but I can give you that, you know, it was, so we did a price increase of half of that, so around 6-7-8% price hike we had done across our boards, average. I think few things we had to absorb as a higher price, so we had to absorb in Q1, but I think with the RM softening and overall cost coming down in Q2, I think there will be definitely a positive impact going forward for the Addisive India business.

Secondly, on the Addisive, only the international, out of your 26% of the growth, how much is the currency-led?

I think close to about 10% is related, 8 to 10% related to currency, rest is on the constant currency.

Okay. And in there, they say BSS number is consolidated, 67 million.

That is consolidated in paid, because it is a subsidiary of the paid business.

Got it. Got it. Lastly, on the pipe and quitting, because in the starting commentary, you also So, you mentioned about the Kanpur and Hyderabad, which is ramping up very good for you. So, at what level of utilization are these two plants running at? And what are the, you know, because you have taken some capacity extension in this quarter as well, somewhere around 3,000 yards. So, how has been the capacity for this and at what level of utilization?

Kanpur has gotten a very good response in the local market. So, the Kanpur plant is majority sold out. So, very high utilization, but again, the Kanpur capacity is very small. We are planning to expand the Kanpur facility in the coming year to take care of the growing demand. And Hyderabad, I think, will be operating at around utilization of around 50%. But there also, you know, we are slowly and gradually getting a foothold in that local domestic market. So we have enough land and space there to expand also. But the capacity is obviously higher than Kanpur. So that is why utilization point of view, you are seeing a slightly lower number. And capacity addition, whatever we have done is basically we have added, we have just done some de-bottlenecking at the existing facilities, added some molds and some fitting machines and PEX machine and some other new product lines that we are developing. So substantially no new facility work has happened.

Okay, good to hear that. Last questions are related to the paint, because that's 48% of the growth. Can you give more color on how has been the volume growth or, you know, the geographical expansion which led the growth for you? If more color on that will help for us?

So, as our last guidance, we are not expanding into more states. So, the south states we will finish. We have finished three states in south. We have two more states in south, which we will finish when the time is right and when we feel it's right. And in the West, we have opened the Gujarat, Rajasthan, and Maharashtra markets, three states. So now we are taking very conscious call in terms of understanding that how our bottom line is also going with our top line. And accordingly, we will invest more in states and more in manpower. But now it is getting this state stable and growing within this state. So we are consolidating in this state. So that is a very positive sign that we are seeing around 48% growth from this existing state where we have opened. So, the acceptability is good, and the volume growth, I think, would be around 35% to 40%, I could put it. The rest would be, I think, the value growth due to the increase of the pricing of the products which we have taken.

Thank you so much, and all the best for future.

Thank you.

Thank you, sir. Ladies and gentlemen, to ask a question, please press star and one now. Participants who wish to ask questions, may please press star and 1 at this time. The next question is from the line of Tejas Pradhan from Citigroup. Please proceed with your question.

Yeah. Hi, sir. In terms of volumes in the plumbing business, obviously, we have done much better compared to the other players, right? So, just to get some additional color on this thing, how much of this was a function of product mix or geomix, and how much have you been probably more aggressive on pricing in terms of versus competition? I mean, considering in April also, you have 10 days, as you mentioned, you had lost because of the transition as well, right? So, despite that, the very strong performance on volumes.

I think product mix has not changed much because we are a more focused company on the plumbing side of the business. So, I don't think product mix has changed. And that is why you see that the margins are also pretty stable. Normally, within the 16 to 18 percent, we deliver this time a little more. So, product side, I don't think any big change is there.

And on pricing, I mean, was there any, probably more aggression in the quarter to achieve the volumes or no change versus the historical point?

Actually, we are very blessed that we are taking the, getting a good set of distributors from the competitors who are willing to join us. And so, a lot of network expansion has happened. So, without sacrificing on the margin, we are able to deliver these numbers.

Understood, understood. And secondly, in the address segment, in the last quarter, you had some one-off branding expense. There is nothing of that sort in this quarter, right?

No, not much this quarter. Maybe routine branding cost will be there definitely, but not one-off kind of.

No one off. Okay, understood. And lastly, on the paint assets, roughly, what would be your capacity utilization right now?

Paint, we will be somewhere around 60% kind of utilization, 60 to 65.

After the volume, after the growth that you have seen the cost, right?

Yeah, 30-35% kind of growth.

Oh, understood. That's all.

Thank you, sir. The next question is from the line of Indrajit Agarwal from CLSA. Please proceed with your question.

Hi, thank you for the chance. My first question is on-ground end-user demand, while we have seen a strong uptick in the month of, let's say, June and July, how much of it do you think is driven mostly by restocking, and how is the end-use demand, and which segments are actually contributing to this demand?

So, is it

both from rural or urban or anything to call out that urban is growing stronger than rural, And that is why probably we have outperformed the industry.

No, no. Across the board, only in the piping size, the agri demand was a bit muted. Otherwise, overall, all products are doing very well.

Sure. Lastly, any change in inventory number that has contributed to the margin in this quarter, whether inventory gain or loss? Not really. All right. Thank you. That's all from my side. Thank you.

Thank you, sir. Ladies and gentlemen, to ask a question, please press star and one now. Participants who wish to ask questions, may please press star and one at this time. The next question is on the line of Smeha from Novama. Please proceed with your question.

Hi, good evening. Team and congratulations on super strong numbers. Just a couple of questions on my end. While you already said there is no inventory gain element, while the product mix has not, you know, largely remained same, what would have led to the margin improvement? Because if I look at it from a YOY perspective, probably from the last two to three years, if I look at current margins, they are at the most highest level, especially in Q1 attaining like a 19% sort of margins. What would have led to that?

So, mainly, if you see, Sneha, that all our new plants, our overheads were very high, because utilizations were very poor. Now, with this kind of growth, what Cairo said about what's the new plant, that has supported us to improve our margin, mainly because of economy of scale of that particular two plants. Because all laborator-related costs, operator-related costs, plant-head-related costs, all your fixed labor costs, all are going to be there whether you produce or not. So with this extra production, that has supported us to improve our market.

Volume could actually be flat YOY, right? I mean, I would have got the operating leverage part of it, but with volume being flat YOY, how does it work out?

Basically, I would like to add that in the first quarter, the Agri demand was muted. So, lesser sale of the Agri product happened. But rest of the products which are plumbing products for us and valuated products for us, the sale was good. So, when you sell less of the Agri type products, automatically the margin profile will improve because Agri is having a much lower margin than the plumbing product.

Understood. So, that's precisely the product improvement change that we are talking about and what would have been the growth of CPVC this particular quarter in this entire period?

It's in a double, it's in a high single digit type.

During the quarter?

Yeah.

That's helpful. Secondly, Bathware revenues, just a bookkeeping one for this particular quarter?

The next question is from the line of Anup Parag from Anandrati. Please proceed with your question.

Yeah, hi, sir. Just one question from my end. What was the KPVC amount spent in Q1FR27, and what are we budgeting for FR27?

So, I think this quarter we have spent 137 crore rupees in KPVC, in all the verticals put together.

Because even the CPVC plant work is in full scale.

So, if you want break up, I can say close to about 87 crore we have spent in plumbing. In DEC, we have spent a down 29 crore. Sorry, 29 plus 3. So, 32 crore. UK, roughly about 2 crore. And then 16 crore on CPVC resin block.

And for the budget for FY27?

I think we have said 300 kind of level, 350 kind of level will be there.

Hello. Hello.

Thank you. Thank you, ma'am. Ladies and gentlemen, to ask a question, please press star and one now. Participants who wish to ask questions, may please press star and one at this time. The next question is from the line of Shravan Shah from Dalaj Capital. Please proceed with your question.

Sir, in Bathware, now, are we, are we, for this quarter, is it a kind of a video positive, because till last quarter, we were kind of a break-even?

Still, we are at a break-even.

Okay. Okay. And in the UK, for full year, in terms of the margin, now we can see 8 to 10% kind of margin we can build in?

Yes, yes. We are targeting that only.

And for paint, how we can now see, because the growth is there, so from Q2 itself, can we start seeing EBITDA positive and what number one can look at, kind of a 6-7% kind of a number for full year EBITDA.

Last call, we have guided that we will be delivering lower single digits EBITDA growth.

Okay. Okay. Okay. That's it from my side. Thank you.

Thank you, sir. The next question is from the line of Durge Shukla from InCrit Capital. Please proceed with your question.

Hello, sir. Thank you for the opportunity. I just want, can you reconfirm your volume and EBITDA guidance?

Volume and EBITDA guidance for plumbing?

Yes.

So, we have given the guidance of minimum double-digit growth for volume. And EBITDA, we have given 16 to 18%.

Okay. Okay, sir. And what about the paint sector?

Paint? Yes, paint, we have given guidance of 20 to 25% kind of top line growth.

Okay, top line.

And ADAC, we have given 15 to 20% kind of growth.

Okay. Thank you, sir. And any margin guidance on the same, which you would like to give?

Taint, we have given lower signal digit guidance, and ADAC, we have given 15% kind of guidance.

Thank you, sir, so much. That was from my side. Thank you.

Thank you, sir. The next question is from the line of Keshav Lahuti from IDFC Securities. Please proceed with your question.

Hello, hi. Thank you for the opportunity. Firstly, I am from HGFC Securities.

Sorry to interrupt, Keshav, sir. May we request that you speak a little louder?

Am I audible? Yes, sir.

Yeah, now, you can proceed. You are audible.

Yeah, so I was saying, firstly, I am from HGFC Securities. The first question is when you say July has been a 40% growth, is it the market has been good or possibly you would have No,

market has been good, and we are gaining the market share, so it's a combination of both.

So, you see, the market share process, it's not one quarter basis. Last 10 years, continuously, every year, we are gaining market share. You pick up the last 10-year number, every year, we have grown market share. So that is an ongoing process because we are continually adding our new location, new geographies, new products. So that exercise is still continuing. And we'll continue for some more time.

Understood. Got it. Answer on the inventory. How is the channel inventory right now? Secondly, when PVC prices have declined this quarter, still we have not seen inventory loss. Why is that so? And secondly, Q2, should we have a good inventory gain as PVC prices have been swing?

So, see, it depends at what price you are buying your inventory. Based on that inventory, gain and loss will be decided. And secondly, how much is the contribution from your value-added product is there? So, if your contribution from value-added product is also increasing, so inventory loss little bit here and there is not considered. So I think Q2, very difficult to say at this stage because still a lot of time to come, but it looks that prices are continuously going up. But everyone is sitting with a low growth, so everyone is passing on support to the market. So we have to see how much we have to give the support to the market, and based on that, the volume will be decided, and based on that, the inventory gain will be there or not, that will be decided by the end of the quarter. So I think it's too early to say, but one more thing is also going on in the industry, which can also be materialized in the near term. It looks like that government is also seriously thinking for the value-added duty also on the Chinese product. So, like MIP there, the similar kind of entry dumping, kind of duty, kind of value-added thing is also going on. So, if that is also going to be there in place, maybe in one month, two months, down the line, because the process is going on with the government. So, that is also going to support the industry in the coming time. But again, it depends on the government outcome. So, we cannot give with us assurance that it will be there. But that is also going on. If that is the case, and further polymer will go up from here, definitely the inventory gain will be there. I think now it is an okay kind of inventory, neither low, neither high, I can say. Whatever they have bought it in the month of July, they have consumed in the beginning of August, because secondary sale is going very well in the market, and across all the cities, we We are monitoring the number, so it doesn't look that the channel is sitting with a high inventory. They are mostly sold out.

Sir, what was the idea earlier? We were planning for a merger of two units and possibly we decided to hire Big4 and decided to call off the decisions. So what was the entire thought process and how should we see, let's say, if you will find the line whether the merger will be again on card?

I think we thought that it is good in the interest of the shareholder, and earlier that we do, that will be a better control on the organization. But I think at the end of the day, we have to respect the majority of the shareholders' point of view also, because at the end of the day, we are the trustee of shareholders. If the shareholders are not happy with any of the reasons, then I think we should respect. And considering that in mind, I think we don't mind to reverse any of our decision, which is not in the interest of the shareholder. So, we decided to call out. And similarly, the independent advisor has also guided us that it is not the right time to do the demerger because you are still a priceably low company in terms of top line. If you pick up a side after that, if you are doing that will be better option. And same, I think, was expressed by many of our shareholders who are holding the sizable equity in our company, even if the low equity holding, even the many of the well-wishers, our analyst community also, they also expressed the same view. Then the board also thought that we should also respect this kind of view. And based on that, we've taken out.

I understood. Got it. But till what time, you know, as you highlighted, you know, shareholder also didn't want the demerger thing. Till what time the demerger won't happen? I mean, how many years are possibly at what revenue days? What is the thought process?

I think there is no clear thought process that we will be doing at this level. But I think now it will be sizable top line growth and maybe the sizable EBITDA level, not less than 5-6000 top line. And by that time, we may think over that. But you know, business is very difficult to predict at this stage. But we are of the view that that should be the ideal size, 5000 crore plus kind of size will be the ideal size. But that doesn't mean that the moment we cross 5,000, we will do that thing. So, we will see the situation on ground at that particular point of time, and then we will take a call what to do.

Got it. One last question from my side. The UK adhesive 8 to 10% EBITDA margin guidance is for the entire year, or possibly this number will reach by end of the year?

No, for the full year.

Got it. That is helpful. Thank you so much. Thank you.

Thank you, sir. The next question is from the line of Rahul Agarwal from Ikigai Asset. Please proceed with your question.

Yeah, hi. Good evening to all on the call. Am I audible?

Yes. Yes, Rahul.

Okay. Sir, three questions. Firstly, on the industry side, right? I mean, last year was tough on the piping, clumping sector. Even this quarter is tough. At the same time, I'm sure smaller players would have struggled, you know, handing their, you know, pricing on inventory. So, over and upwards of that, we have seen some branded players trying to build up their volume. You know, we have seen some couple of large names getting into the market on pipe fittings. Just your thought on what is really happening in terms of industry, right? Larger players have gained market shares, there's no doubt about it. But just first question essentially was to understand, how do you see the industry overall panning out? Because it's been a real volatile period. So, obviously, it should benefit you, but just some thoughts on that.

So, I will answer your question on, see, first of all, last year, I don't think was challenging, not for us, and neither was this quarter challenging for us. Because our priorities are very simple, and our goals are very simple. So, I don't know, but we are outperforming the industry by a fair bit since the last five to six quarters, you can say. And as far as the larger company goes, I think we are eating away the market share from all the larger players in the market. And you can obviously see from the number that small to mid-scale companies are struggling in this particular business environment. And when you are talking about the other big brands coming in or other new players coming in, I don't see anyone significant coming in who will disrupt the market, Or I have not seen any player who has entered in the last 5-6 years to disrupt the market in any way.

Okay, I get that, Kherom. But just one question here, you know, we always end up discussing the PVC for Astral, right? I mean, that's the highest profit for you. But just on the PVC side, and which is also bulk, it also is like, I'm assuming that it's close to 50%, more than that on volume for Astral. What is happening over there? Does market share gains are happening on the CPVC side or even on the PVC side?

It is happening across the board, all product segment.

Okay, okay. Second question was on primary sales versus secondary. Do we track secondary sales for as well?

We track tertiary also.

Okay, so, you know, my understanding was, obviously, 1Q had a lot of de-stocking issue, which is why July is 40% growth. Base is low. We are seeing stocking again. But if you can just comment on tertiary sales for 1Q, that is one question. And second is, is primary equal to secondary now?

Tertiary and secondary were both higher than primary in Q1, obviously, because the channel was de-stocking.

And secondly, Q4 sale was very high. So, because of that, the secondary and tertiary sale in the Q1 is always high.

That is why the channel has restocked largely in the month of July, and still the restocking is happening, because the channel was very dry in the Q1, because largely all the secondary and tertiary sales had happened.

Rahul, it is not only that July we have delivered the 40%, but even August also so far we are at a double-digit growth. So, it looks that the secondary and tertiary is going well. Otherwise, distributor beyond the point cannot restock that much. So, genuinely on ground, demand is picking up. And that is a reflection of this number.

Got it, sir. Got it. And last question was on the sourcing of PVC resin and CPVC resin right now for Astral. What is the important domestic mix for both these resins separately?

I think we are not sharing this number. These are the confidential numbers. So, it depends. Every quarter, the percentage will be different.

Sure. While asking it was from an import perspective, how is the sourcing for resins? Because, you know, forex is depreciated. There are lead times which have increased because of freight issues. Shipping costs have also increased. I know this is a pass-through industry.

I think we have to stick to, you know, that we will continue to grow at a double-digit volume and deliver a 16-18% EBITDA. I think we should not extrapolate into what is happening and where we are sourcing from. I think that is a proprietary information of the company.

Okay, sure. So, one point I was trying to drive was, is sourcing all of them.

We have mentioned enough inventory, so no concern.

Okay. Okay. All right. Thank you so much and wish you all the luck for the rest of the year. Thank you.

Thank you.

Thank you, sir. The next question is on the line of Akash Shah from UTI Mutual Funds. Please proceed with your question.

Yeah. Hi, sir. Am I audible?

Yes, sir.

Yeah. So, thank you for the opportunity. Sir, just wanted to ask on gross margin side, sir, in India as a business, if possible, can we share what is the gross margin decline on a YOY basis?

So, we don't share individual number, Akash.

Oh, okay. No worries. Sure, sir. And, sir, in India's adhesive business, now that, I mean, fair bit of time has passed, so, sir, how is the ramp-up in south and west region because of the hedge plant? So, are we sort of being able to ramp up the sales in this part of India?

Yeah, yeah. South for us has always been a weak point since we have acquired Visinova, but last two years for India adhesive business has been very robust and it's a lot of legwork and market development activities are going on. So, parallelly with sales, we are also developing south equally, and we are looking south as our big focus for our sales increase for coming years, and south will deliver. And west, we are already doing fairly well, and we have a good market share for the product lines we are present in for the west region, and we have good counter share as well. So, we will keep focusing on and making our position even stronger in West also. And the hedge plant is definitely helping in that.

Sure, sure, sure. Yeah, those were my questions. Thank you.

Thank you. Thank you, sir. Ladies and gentlemen, to ask a question, please press star and one now. Participants who wish to ask questions, may please press star and one at this time. The next question is from the line of Shiv, an individual investor. Please proceed with your question. Mr. Shiv, your line has been unmuted. Please proceed with your question. As there is no response, we will move to the next question. The next question is from the line of Udkarsh from Anandrathi. Please proceed with your question.

Sir, I just wanted to reconfirm, like you said, that we will reconsider the de-merger of chemical business once it reaches a revenue of 5,000 crores. So, last year, the chemical business revenue was close to around 2,000 crores. So, does this mean that we are not going to consider the de-merger of chemical business over the next 5-7 years period? Okay.

It depends. I said in the early remark that if it comes early and the situation is necessary to do that thing, we will relook. But it is not a fix that we have kept in mind that, okay, at this level, we are going to do that thing. We can do it 7,000 also. We may not do also. It depends on the market conditions and the situation needed to grow the business, particularly that vertical. Based on that, it will be taken the decision. So there is no fixed timeline in our mind.

Okay, sir, like, if you can give some sense, like, what kind of a scale, return ratio, and margin we are looking at before taking the call of day merger?

I told you that we will take the call at that particular time. Right now, we are not taking the call, so there is no point to unnecessarily discuss in detail this kind of thing. At least from number, at least 4-5 years will be there, minimum 5 years. So, no need to worry on that side.

Okay. Thanks a lot, sir.

Thank you, sir. The next question is on the line of Roshan from Antic Stock Broking. Please proceed with your question.

Yeah. Thanks a lot for the opportunity. So, the bathroom segment grew by around...

Sorry to interrupt, Roshan, sir. May we request that you speak a little louder?

Is it better now?

Yes, sir.

We are still a very new entrant in the market and have a very low base. So we are just starting out. So we are working with a clean slate. So some territories we are entering through Some territories were entering through retail. But we are happy that we can deliver this 20-25% type kegger in the bathware business for the coming 4-5 years.

I think 2018, we are not happy, to be very frank. We should be growing fast because our base is still low.

Understood.

My second question is, you attributed improvement in utilization of food plants as a major contributor for the plant.

So, I think we have given the guidance, so it depends how much which plant is getting utilized, because now both the plant has started utilization at a sizable level. So, little bit further benefit can be available in the coming time, but cannot be a substantial benefit Now, from here on, we can see.

Wonderful. That's all, sir. Thank you. Thank you, sir.

Ladies and gentlemen, to ask a question, please press star and one now. Participants who wish to ask questions, may please press star and one at this time. The next question is from the line of Shravan Shah from Dalot Capital. Please proceed with your question.

Hi, sir. I just wanted to clarify. Initially, we said that in terms of the value and volume growth, so which was a 10% in this quarter, and we are looking at more than 20% kind of a gap for this FY27. So, that means that the realization for plumbing for the entire full year F527 versus F526 should be that kind of a growth that we are looking at kind of.

No, no, no, no. I think you have misunderstood me. I said that if the volume will be 10%, then the value will be 20. So, 10% kind of gap will be maintained for the full year. That is what we are forcing from the current market situation. It can be 102% plus, it can be 102% minus, it again depends on the product mix also. But right now, after so many years, we are seeing that the first time that the value will be higher sizeably compared to the volume. Last three years, if you see, all the piping industries were sufferer because volume was there, but the value growth was not there. So because of that, all our overheads were continuously going up, and that was continuously giving us the pressure on the margin. But this is the first time after so many years, we are seeing that the value will be at least 10% kind of plus compared to the volume. Now, hypothetically, 15% volume will be there, then the 25% kind of growth will be there in value term. So that is going to help us to improve into our margin because our overheads are going to remain at a certain level. And if the top line grows, then it is going to support us into the margin front. So, I am not telling you 20% plus, I am telling you 10% compared to volume.

Got it, got it, understood. And in terms of our stand, once our new CPVC plant will be there by Q4 this year, FF28, let's say this year, if we do a kind of a 15% volume growth, so then next FF28, the growth rate would be higher than the FF27 growth rate.

Definitely, your understanding is perfect. Not only growth will be higher, but the margin expansion will also be there.

Yeah, that is definitely will be there. So, that's why I was trying to push that given the margin that we are already there, 18.9% for plumping. So, what is stopping us still to not increase that upper band of the guidance? Why 16% to 18%?

But right now, industry is passing through the up and down kind of scenario. So in that case, unnecessary misguiding the investor, that is not the philosophy of Asperger. We always want to be transparent with you and unnecessary. We don't want to put up pressure on us also and unnecessary misguide you. So keep patient. We are already in the month of August. September is not far away. Then after the situation will improve, we are definitely going to change the guidance. And in the past also, we have done the same thing. Whenever there is a market situations are positive, we have upgraded our guidance. Whenever market situations are not in our favor, we are happy to downgrade also.

Yeah, no, no. Why I was saying that? Because if I look at even last two years also, for 25-26, the margin was 19% and 19.6%. And given that the value growth for this year, as you are highlighting that it should be a 10% plus kind of a value growth. So, in that case, and then obviously the volume growth will be there. So, if we are confident in terms of the value growth would be higher, then the confidence should be higher.

Your understanding is absolutely right. You are thinking on the right direction. But for that, you have to keep little patient because I don't know which quarter inventory gain will be there, which quarter inventory loss will be there. And if we improve the guidance, hence tomorrow something goes wrong and PVC falls, and then the inventory loss comes, then you yourself will say that why, what was the need to increase the guidance. So, with the appropriate time, only we will be able to guide you. And what is going to make difference to the long-term investor? Is the long-term investor of Ashtal waiting for a one-quarter number or two-quarter number? Investors should think for the company from the next two to three-year point of view, rather than thinking for one-quarter or two-quarter. When management is telling you that wait for the one-quarter, I don't think any of our investors have any concern. And we are giving always the industry-based number in terms of top line, in terms of bottom line. And we are continuing our stand on that side, that we will be maintaining that kind of thing. But exactly improving the margin and improving the top line guidance on a quarterly basis, I think it is too early to jump in. Please, please, humble request to you that wait for some time. At an appropriate time, we will be guiding you.

Got it, sir. Thank you. Thank you.

Thank you. Thank you, sir. I want to understand it.

Thank you, sir. Ladies and gentlemen, we'll take this as the last question for today. I would now like to hand the conference over to management for closing comments.

So, thank you very much, all of you, for being with us for the Q1 numbers. And we look forward to again connecting you with the Q2 numbers. So, thank you, everyone. Thank you very much.

Thank you, everyone, for participating in the call, and thanks, Pranav, Equirius, for hosting this call.

Thank you, sir. On behalf of Equirius Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.