Hindware Home Innovation Limited
8,854words
157turns
13analyst exchanges
5executives
Management on call
Rakesh Kaul
WHOLE TIME DIRECTOR AND CEO, HINDWARE HOME INNOVATION LIMITED
Rajesh Pajnoo
CEO, PIPE BUSINESS
Sudhanshu Pokhriyal
Business
CEO, BATH
Naveen Malik
CFO, HINDWARE HOME INNOVATION LIMITED
Key numbers — 40 extracted
98%
rgely owing to the higher input and commodity prices. On a year- on-year basis our topline grew by 98% to Rs.678 crore on a consolidated basis. On an absolute profitability basis, consolidated EBITDA
Rs.678 crore
wing to the higher input and commodity prices. On a year- on-year basis our topline grew by 98% to Rs.678 crore on a consolidated basis. On an absolute profitability basis, consolidated EBITDA grew 292% and
292%
s.678 crore on a consolidated basis. On an absolute profitability basis, consolidated EBITDA grew 292% and amounted to Rs.67 crore. Consolidated profit after tax after considering results from joint
Rs.67 crore
idated basis. On an absolute profitability basis, consolidated EBITDA grew 292% and amounted to Rs.67 crore. Consolidated profit after tax after considering results from joint venture stood at Rs.11 crore
Rs.11 crore
Rs.67 crore. Consolidated profit after tax after considering results from joint venture stood at Rs.11 crore in Q1 FY2023. Hindware Home Innovation Limited August 16, 2022 Coming to o
Rs.535 crore
yet another healthy performance during the quarter. In Q1 FY2023 revenue from operations stood at Rs.535 crore registering a growth of 102% year-on-year. EBIT grew 185% year-on-year to Rs.43 crore translating
102%
g the quarter. In Q1 FY2023 revenue from operations stood at Rs.535 crore registering a growth of 102% year-on-year. EBIT grew 185% year-on-year to Rs.43 crore translating into a margin of 8%. It is
185%
evenue from operations stood at Rs.535 crore registering a growth of 102% year-on-year. EBIT grew 185% year-on-year to Rs.43 crore translating into a margin of 8%. It is important to understand that t
Rs.43 crore
s stood at Rs.535 crore registering a growth of 102% year-on-year. EBIT grew 185% year-on-year to Rs.43 crore translating into a margin of 8%. It is important to understand that this decline in EBIT on a q
8%
h of 102% year-on-year. EBIT grew 185% year-on-year to Rs.43 crore translating into a margin of 8%. It is important to understand that this decline in EBIT on a quarter-on-quarter basis resulted f
6%
arter-on-quarter basis resulted from a steep increase in prices of key inputs namely brass around 6% to 8% from Q3 FY22 onwards and around 15% to 20% in fuel and power in Q1 FY2023 for our bathware
15%
eep increase in prices of key inputs namely brass around 6% to 8% from Q3 FY22 onwards and around 15% to 20% in fuel and power in Q1 FY2023 for our bathware products. This increase due to a stres
Guidance — 20 items
“Our Brownfield capacity Hindware Home Innovation Limited August 16, 2022 expansion project at Isnapur facility in Hyderabad is progressing according to the schedule.”
“Furthermore, our Greenfield project to install a new manufacturing facility in the north that is we have selected place Roorkee is on track.”
“In the coming festive season we anticipate the consumer demand will swing favorably.”
“In the upcoming quarters we anticipate reaping the benefits of our continued focus on product innovation.”
“We feel that there is a little hit will be there in the second quarter, but prices are going to get stabilized, that is what has been given to understand.”
“Our long-term guidance, which already we made last year, which we made in May 2021 that in three to four years will be crossing Rs.1,000 crore in this business, I think we are moving on a path to that direction.”
“We expect a few more price hikes to happen to normalize the overall cost impact.”
“So overall I do not see any reason for any brand to lower its prices in the upcoming festive season, but I see the prices would remain stabilized for the next quarter at least at the current level.”
“I remember this question was being asked how much of the depreciation of AGI Greenpac will get accounted for here and we also spoke that there will be a lease rental on the top of it, but lease rental gets accounted into depreciation and interest.”
“Having said that the penetration of cooker hoods or hobs in India is not even 1% so the chance of the market growth is humongous in a market like India, so I do not anticipate any competitive pressures with the introduction of some more competitive brands.”
Risks & concerns — 14 flagged
It is important to understand that this decline in EBIT on a quarter-on-quarter basis resulted from a steep increase in prices of key inputs namely brass around 6% to 8% from Q3 FY22 onwards and around 15% to 20% in fuel and power in Q1 FY2023 for our bathware products.
— Naveen Malik
We have undertaken calibrated price hikes to offset the impact of higher input prices in coming quarters.
— Naveen Malik
To counter this challenge, we are implementing reasonable price increases throughout our faucet and sanitary ware range, and these will take some time to fully reflect.
— Naveen Malik
Towards the end of the quarter we did notice a slowdown in the consumer demands, additionally higher product costs and ongoing inflationary pressures, which create a little impact on consumer purchase in the area.
— Rakesh Kaul
During the quarter we undertook prepared price hikes to help combat the impact of stubborn prices and this we believe will help lower pressure on our margins for the segment.
— Rakesh Kaul
Our retail business in Q1 also grew by 48%, despite the margin pressure the business remained positive for yet another quarter and reiterates our strategy of focusing on franchisee model much more strongly.
— Rakesh Kaul
You can easily drive the trajectory that despite the pressure on the margin on the selling prices, this remains the best ever first quarter sales number like Q4 we did Rs.200 crore of sales and in the Q1 we have done Rs.170 crore of sales.
— Sandeep Sikka
If you see, Rs.13 crore is something which is directly coming from the impact of listing on the EBITDA, which you can see incrementally the margins will build up.
— Sandeep Sikka
Sir I just wanted to understand you mentioned about this Rs.13 crore impact of the input cost right, so that effectively means that 2% manufacturing margin would have got added, if not for this higher input cost will that be a fair inference to me?
— Deepak Poddar
We will start seeing the impact of this incremental margin?
— Deepak Poddar
Okay, the entire decline that is there in this quarter?
— Rahul Picha
As far as your question was concerned that regarding the value and volume, volume as of today is very, very difficult because you do not know what is going to happen five years down the line, when the raw material prices keep on changing in PVC, but definitely anywhere around 1600 plus will be clear cut number five player.
— Rajesh Pajnoo
Now when we look at a nine- month number, because Q1 is already done then the growth comes out to be only 3% to 4% across building products as well as consumer products so is it more of a conservative sort of guidance or do you think that we are going to see some amount of slowdown in the coming quarters?
— Nikhil Gada
It is very difficult to justify anybody on the quarters and nobody can control the business on a quarter-to-quarter basis.
— Sandeep Sikka
Q&A — 13 exchanges
Q
Just wanted to understand on the pipes division can you quantify the EBITDA hit on account of inventory loss because of the polymer prices?
Sandeep Sikka
Your question if I can understand is that how much is the quantification on the EBITDA? Because of the inventory loss. In the Q1 FY 23, it is around Rs.7 crore which is due to the inventory thing, but in Q2 there will still be some carry because the entire inventory has not yet Hindware Home Innovation Limited August 16, 2022 been consumed, we feel that from Q3 onwards it will get into the normalized mode with an assumption that PVC prices now should stabilize ranging between Rs.90 to Rs.100 a kg. What is the kind of pricing that you are offering like we have taken a hit on the pricing as well
Q
My question was related to the segment wise price hike, which we have taken for all the segments and also is there any expected price hike in the next few quarters and the raw material outlook for the next few quarters how do we see that?
Sandeep Sikka
I will primarily talk here about sanitaryware and faucets, there has been incremental input price increases because the natural gas prices and other fuel prices have already increased substantially, although now they are getting stabilized. In Q1 FY 23 in the sanitaryware, we had taken around 5% to 7% price hike on various SKUs and similarly on the faucets because the input brass prices also have increased sequentially from Q3 to Q4 and then Q1. We expect a few more price hikes to happen to normalize the overall cost impact. In the pipe segment,` Mr. Rajesh Pajnoo has already explained that it
Q
My first question is please if you could help with the EBIT numbers for plastic price for the current quarter as well as the last year same quarter, please?
Sandeep Sikka
EBIT numbers you are asking? Yes, EBIT numbers for plastic prices and the same for sanitary ware and faucets. EBIT for the quarter is at 5.2% versus Q4 at 9.7% and last year at 7.6% Q1FY22. Understand, EBIT is 5.2% for plastic pipes versus 7.6% year-over-year, okay. Yes. For sanitaryware and faucets it is 13.3% for Q1 of this financial year versus 15.1% for Q4 and 7.3% on year-on-year basis in Q1. I do not know whether you have done this breakup, but how much would have been the addition in the margins because of this manufacturing now coming into the numbers for Q1 or if you can say ex of man
Q
Congratulations everyone for the great results. I have a specific question on bathware segment. I need some basic details in terms of the breakup of sanitary and faucets and the capacity utilization details from both the plants and the working capital how the inventory days and payable days so if you can throw some light on this please?
Sandeep Sikka
The overall sales are a bit low in the segmental reporting for the BPD of which Rs.170 crore of sales is related to pipes and the balance is towards the bath products. In terms of margins, we have already spoken extensively over the last few minutes. If we see the overall inventory working capital days, we have around 105 days of inventory in net working capital, which is there in the bathware product it has slightly increased we worked on it last year in reducing it, but with the acquisition of the building product manufacturing, the inventory which came along, has increased inventory slightl
Q
Sir I just wanted to understand you mentioned about this Rs.13 crore impact of the input cost right, so that effectively means that 2% manufacturing margin would have got added, if not for this higher input cost will that be a fair inference to me?
Sandeep Sikka
2% to 2.5% was our guidance. It is very important to understand the entire material which we are selling in bath products business, which is sanitaryware faucet is not sourced in-house we were doing a lot of trading business even before the acquisition from the third party other than AGI, although in case of pipes almost 95% is sourced in-house, the impact which was there. Basically, it is very simple to say that whatever we were leaving in the contract with the AGI Greenpac now is getting accumulated here, but you are right if you do the math it is around 2% or 2.5%. So that effectively means
Q
My question is on the consumer appliances division so you have guided a number of Rs.1300 crore to Rs.1200 crore in coming year so considering the current scenario are we confident enough to change that number and considering the competitors are also increasing the capacity and competition is there in that division are we confident enough to achieve those numbers, the guided number?
Sandeep Sikka
So these numbers were given by us in May 2021 and we said in the next four years we will do it. I think we are confident, we will hold on to that those numbers as of date. Fair enough. Sir, in this pipe division CPVC would be what percentage of the Hindware Home Innovation Limited August 16, 2022 total sales in the pipe? Percentage of total? Total sales in the pipe division. For Hindware building products, Rs.170 crore which is around 40%, CPVC component in the prices is that the question? Is it CPVC to total value? CPVC to total sales 44%. Sir, my next question would be in the sanitaryware an
Q
Sir, I just wanted to know the debt number as of end of Q1?
Sandeep Sikka
Total debt of arrange between around Rs.630 crore to Rs.640 crore on a consolidated basis. Hindware Home Innovation Limited August 16, 2022 So this is gross debt, right this is before cash? Yes. I also wanted to know the inventory receivables and payables number for the Q1 end? We have already disclosed, so you can see in the transcript just in the last to last question. I think we have given the payable days and inventory days, but I just wanted the absolute numbers if that is possible? Absolute numbers for? Inventory, receivables and payables. We can share it separately through our investor
Q
Couple of questions in the pipe segment slide #17 I think you have mentioned that we would like to be the fifth largest player in five years' time to achieve that what is the volume and value that we need to process and just wanting to understand the delta from where we are what is it that we need to cover in terms of ground to reach that fifth spot and the second question is on the retail side I think Evok contributes 2% of the topline what is the capital allocation strategy would the management want to grow this business or what will be the way forward in terms of three years from now?
Sandeep Sikka
On the Evok side, this business we had this good business of Rs.190 crore for sales three years back with good contribution margins ranging almost 45%, but we used to lose a lot of money actually in terms of rental, so during the COVID period May 2020 we changed the strategy and we shut down almost eight to nine of our stores and we just have two stores today and we have just moved on to the franchise model and this is now profitable. At an appropriate time, we have already said that we may look to dispose of this business. Now it is profitable, it has a good margin, we will have the online we
Q
I have two clarificatory questions. First one is if I compare Q1 of this financial year to Q4 of last financial year I see an increase in other expenses and employees is it safe to say a large part of that is attributable to the manufacturing setup, which is coming so if I were to compare truly like what is Hindware Home Innovation Limited August 16, 2022 actually the delta in the cost of operations the delta in overheads and the delta in employees is largely attributable to your manufacturing setup?
Sandeep Sikka
Yes, because similar figures will get decreased in the purchases. When we are buying from AGI Greenpac, we are buying finished products from them, the employee costs will be a part of the whole thing. Similarly, power, fuel, now since we are manufacturing it is an allocation between things and accordingly if you see on an apple-to-apple basis the purchase of stock gets adjusted. So it is basically matching whatever you are saving on the manufacturing is basically what we are getting the overhead plus the 2.5% loss in margins we have seen this quarter because of the raw material prices so rough
Q
My first question is regarding of the HSIL transition right now this company is AGI Greenpac So in the Q4 the Slump sale transition is Rs.700 crore and we settled down in Rs.109 crore, so right now the position is the impact, or the number is reduced?
Sandeep Sikka
Basically, the settlement procedures are right now going on with the registration of land and other buildings as required and few of them have been done, and few are under processes. We have to still pay them around Rs.90 crore once all the settlement procedures are done, which we feel it should be done in the next few weeks, one or two weeks or may be even more. The land Hindware Home Innovation Limited August 16, 2022 registration process, but we have taken control of all the plants as such, we are operating those plants and all the material movement and other thing settlement has been done.
Q
Thanks for the follow up. Just on the guidance for FY2023 where we have mentioned that we might grow by 18% to 20%. Now when we look at a nine- month number, because Q1 is already done then the growth comes out to be only 3% to 4% across building products as well as consumer products so is it more of a conservative sort of guidance or do you think that we are going to see some amount of slowdown in the coming quarters?
Sandeep Sikka
This guidance was given last quarter because we always say that don’t measure us on quarter-to-quarter basis. It is very difficult to justify anybody on the quarters and nobody can control the business on a quarter-to-quarter basis. But based on the last year whatever consolidated turnover we did, we had given guidance at 18% to 20% growth. Some of things do get impacted like, for pipes business, where the selling prices are coming down, despite the volume growth, we cannot talk conservatively. But, we can over achieve this and right now, we are holding on to that 18% to 20% growth momentum. F
Q
Thanks all for being there on the call and being so participative. it is always our initiative to disseminate the underlying information, which is there, which we have been doing for last so many years in the transcript. Again this quarter was full of a number of activities, we had manufacturing added, and we had input price fluctuations, both upward and downward on various products, we have been able to answer most of your questions in the right perspective. Thank you for joining us on the call. Thanks again.
Q
1. This transcript has been edited for readability and does not purport to be a verbatim record of the proceedings. 2. Figures have been rounded off for convenience and ease of reference. 3. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Hindware Home Innovation Limited Hindware Home Innovation Limited August 16, 2022
Opening remarks
Vinit Gala
Good afternoon everyone. At the outset I would like to thank the management for giving us the opportunity. On behalf of Monarch Networth Securities we welcome you all to the Q1 FY2023 results conference call of Hindware Home Innovation Limited. Now I hand over the call to Mr. Naveen Malik, CFO, HHIL. Thanks and over to you Sir.
Naveen Malik
Thank you. Good evening ladies and gentlemen and a very warm welcome to Hindware Home Innovation Limited Q1 FY2023 earnings call. Let me walk you through our financial performance post which the business CEOs will discuss the key highlights of their respective businesses. Figures we are discussing here are on consolidated basis and rounded up to the next level. I would like to remind all participants that some of the statements or comments made on today’s call may be forward-looking in nature. These may include but are not necessarily limited to financial projections or other statements of the company’s plans, objectives, expectations, or intentions. The company disclaims any obligation to update these forward-looking statements to reflect future events or developments. Kindly refer to slide #2 of the earnings presentation for a detailed disclaimer. Now coming to performance. We are pleased with our performance for the quarter considering the challenging macroeconomic environment amids
Rajesh Pajnoo
Thank you, Naveen. Good evening to everyone and thank you for joining us for Q1 FY2023 earnings call. During the quarter, our plastic pipes and fittings business reported sales of Rs.170 crore registering a growth of 96% on year-on-year basis. Since our brand is now well established and our products continues to deliver high quality, I am pleased to report that we are still as of today the fastest growing brands in India in pipes and fitting industry segment. In the review quarter, our polymer prices have decreased by 14% to 16% and also prices have gone up for our own fuel prices leading to a margin impact. We continue to diversify into newer geographies in line with our company’s accelerated growth strategy. Aligned to our strategic growth our expansion plan entails both Brownfield and Greenfield initiatives. Our Brownfield capacity Hindware Home Innovation Limited August 16, 2022 expansion project at Isnapur facility in Hyderabad is progressing according to the schedule. Furthermore
Rakesh Kaul
Thanks Mr. Pajnoo for handing over me this call. I want to say good evening to everyone and thank you for joining us for our Q1 FY2023 earnings call. During the quarter there was a significant growth in the consumer appliances business to the tune of 92% over the first quarter of 2021-2022. It was driven by strong performances in the cooling and the kitchen segment. In the category of kitchen appliances we continue to maintain our focus on superior technologically driven products like patented technologies like MaxX Silence, Maxx Auto-Clean and we have now become the largest range of silent chimneys in the country amongst all the brands and we received a tremendous response from the consumers for these products. Our cooling products gained an attraction and grew by more than 200% in this quarter on the back of a good summer season and our sustained dominance in the kitchen and cooling category and e-commerce platforms also help us register a robust growth. Towards the end of the quarte
Sandeep Sikka
Sudhanshu for some reason has not joined the call yet and Mr. Naveen Malik has already spoken about the building product business, so we will just open the Q&A session here for the participants. Thank you.