Good afternoon, ladies and gentlemen. It's my pleasure to welcome you on behalf of Somany Ceramics and SKP Securities to this financial results conference call.

We have with us Mr. Abhishek Somany, MD and CEO; Mr.

Shrivatsa Somany, Head - Bathware; Mr. Ameya Somany, DGM; and Mr.

Saibal [unclear] CFO. We'll have the opening remarks from Mr.

Somany followed by a Q&A session. Thank you, and over to you, Mr.

Somany.

Good afternoon, ladies and gentlemen. Welcome to the earnings call of FY 2026-27 Q1.

As you can see, our sales have grown moderately by about 3%, whereas the value is grown by 24%. The sales growing only at 3% is due to April we did not get a certain segment which we were generally buying from Morbi.

As you all know, that Morbi was shut for the entire month and a half, we missed a couple of percent of sales, but it will be made up this quarter very handsomely. As a result of capacity utilization, our EBITDA margins have gone up on operational efficiencies, both on capacity utilization in our plants and also on the JV performances.

EBITDA margins go up by 3.6% to 11.6% for the quarter. Capacity utilization in the JVs and very, very significantly in our own plants have gone up.

The gas price has been extremely volatile. I had mentioned that in the earnings call for the FY26, but the gas price since then has been extremely volatile.

Every month there's been a small increases in gas price. Fortunately, we've been able to pass on all the gas price increase until now.

The current price increase has been between 16% and 18%. Other than that, the demand of May and June has been pretty decent.

July also has been not bad considering that there's been rains in many parts of the country. Morbi operations have completely started.

They have resumed 100% production on very expensive gas, which is being supplied by GL, formerly known as GSPCL. The price is significantly higher and they have also priced it in as far as their pricing is concerned.

The only negative in the quarter has been from a Morbi perspective is exports has been down. Due to geopolitical reasons, the export is down a good 50-60% from the peak.

That's been a little bit of a downer for the quarter, and this would continue probably for this quarter until the freights start settling. We have been handily growing in our sanitaryware, bath fitting, and the building material division also.

Again, there's been a large expansion which you've taken place in the construction chemical space. We have added capacity in South and also we've added a very large capacity in the North, which has gone on-stream only last month.

Effects of that will be seen partly in this quarter and mostly in next quarter. Advertising spends are in line.

Receivables are in line. We've only bettered our receivables.

Stocks, we've been able to reduce our stock fairly significantly due to Morbi not being running. That's been a big booster for clearing out old stock and also reducing a large amount of inventory which we were carrying from the past.

Our debtor days, inventory days, creditor days are all healthy. Working capital days also have come down from 17 to 12 days.

Overall, we are extremely bullish of the future outlook. Because of that, we have announced setting up a 9 million square meter plant 9-plus million square meter plant in the South, which would be up and ready in the next 12 to 15 months.

This would give us a potential revenue of about ₹350 crores. Other than that, we are taking many more steps, which are all work-in-progress, to augment further capacity by about 4 to 5 million in our existing lines in Bahadurgarh, which is in Haryana, and in Gujarat and in Morbi and also in the South.

All put together, we will be adding another 4 to 5 million. This would be ready from mid quarter three and would be completely in place in quarter four.

This would add not only capacity, but also will add value-added mix. I have been maintaining that our JVs were not performing to our expectations last year.

This year, they have all started performing, and they will only perform better going forward. Again, one of the JVs, we've taken a significant value-add increase by balancing equipment.

It doesn't come at a large cost, but that will further add value-add our product. From a product point of view and volume point of view, we're looking good for the future, and we maintain that the EBITDA margins delivered in this quarter would be maintained, and we are trying to better our EBITDA margins which we have delivered in last quarter and on this quarter.

On EBITDA and on value, volume, things are looking very, very positive going forward. I would stop here and I would take any Q&As going forward.

Thank you so much.

Hi, team. Congratulations on great set of numbers.

Coming to margins itself, which is pretty surprising. We generally see a strong quarter-on-quarter drop when it comes to Q1.

This time we've seen strong improvement in margins. What's really leading to this change and how structural of a change it is in terms of these numbers remaining from Q2?

That's the first one.

Sneha, I think this is because of capacity utilization being much, much better than last quarter. If you see same time last quarter, which is Q1 last year, it was 72%.

We're at 83%. That's a 11% increase in sorry?

Standalone, yeah. On a standalone basis, from 72% capacity utilization to 83%, which is a major, major increase, and that has led to margins.

On the other front, I think our JVs, which gave us last year on the same quarter, which is Q1 last year, gave us a loss of ₹10 crores, this time is in a profit of ₹3 crores, and this will only get better going forward. Very, very confident of maintaining this margin and only bettering this.

Wow, that's a strong commentary. Secondly with respect to demand, while we understand I think April was slow for us, and May and June saw pick-up, how has July been for us if at all you could quantify some numbers here?

Also we keep hearing very mixed things about Morbi. At times it is shut, at times it is opening up.

What is the situation and how are even exports doing?

April was not slow. April was slow because there was no material available in Morbi.

There was only that much material available, and even our plants because there was a restriction of 60% and then 80%, some of our lines were also shut. A lot of the material had already gotten out in March.

Therefore, we were also at lower capacity utilization from that point of view, considering that we didn't have enough gas, which normalized in May. Morbi, there is no ambiguity there.

It is not shut or closed. It has been open since May.

Of course, it took 20 days to completely normalize because of labor unavailability. May end onwards, they've been absolutely at 100% capacity.

15% to 17% of Morbi which is not started is never going to start. That never started even in May and that's not started even today.

The situation as far as demand is concerned of July with the rains, obviously it is a tough month, but frankly, we've been able to push our sales.

Got that, sir. Thirdly, just wanted to understand the gas pricing.

What would be the pricing in Morbi versus your North and South plants?

Yeah. Our blended price comes in at about ₹68, and South we're still buying partly in spot.

South and Morbi are pretty much at the same level, which is close to mid 70s. In the North, it is slightly lower, which is around the ₹68, ₹69 level.

Understood, sir. That is pretty helpful.

Thanks a lot team.

This is for natural gas. This is the pricing for natural gas.

Is that your blended fuel cost? Because you also use biofuel.

We would like to get your blended fuel, which is a better [unclear] No,

no, what we have reported is the blended natural gas cost.

Could you help us with your blended cost for quarter one versus probably a quarter four blended cost?

I don't have that off the cuff because we do use a reasonable amount of biofuel. Please.

Sure. Thanks, sir.

All the best team. Thank you.

Thank you.

Hi. Thank you for this opportunity.

Sir, what kind of a price hike did we take in Q1?

You can take an average of about 16-17%.

Got it. How much of a premium do we have over the players in Morbi in terms of realizations?

Because of the higher raw input costs, I believe that Morbi also took price hikes, and our premiums to them narrowed over the previous quarters. How does it look like now?

I don't understand. When you mean higher input costs, what do you mean by that?

Higher gas prices.

We don't have higher gas prices. Our gas prices are same as what the other people in the country are getting.

No, what I'm saying is Morbi guys took a price hike, right, because of higher gas prices? Our premium [unclear].

Oh, that way. Okay.

Okay. Our price increase was about 16-17%.

Morbi was just double of that because they were selling that much cheaper than us. Obviously, when they've increased prices by more than double of what they were selling, the price gap between us and Morbi has reduced.

Plus, do not forget that Morbi was buying propane and LPG earlier and not natural gas, and they were buying that in various different ways which were not the cleanest of ways. Now that they're buying Gujarat Gas, then they have to rectify their books, so that also narrows our landed price into the dealer versus Morbi factor.

Got it. Our premium has basically narrowed despite the price hike.

That's right.

Okay. Currently in Q2, have we seen a fall in gas prices, our blended gas costs?

No. The prices of June and July, in fact July is a little higher, marginally higher, but a little higher than what it was in May and June.

Is August. August is again slightly more marginally higher.

Got it. How does the demand scenario look like for the rest of the year given that the prices are also higher, but still demand is holding up, I think it was 2% higher in this quarter?

How is the demand scenario, and what kind of

Demand's looking good. Let's not forget that in the last 30 months, prices had reduced also by 15-16%.

That's been the price increase. From that point of view, because of that scenario, it's been well-accepted in the market, and demand seems to be absolutely good.

Of course, there are these months of the rain, which is nothing to do with demand. It's more of a issue with the weather.

Other than that, the demand is perfectly fine.

Got it. If we look at the current cycle or maybe the last 5 years, how would you compare our prices currently?

Are they mid-cycle or are they high?

I don't understand your question.

You mentioned that prices earlier were higher and they were reduced, right? I want to understand if today with the higher prices, with the price hike, do we still

We're still lower than what we were 5 years ago. Okay.

Okay. Got it.

The cost of tiles 5 years ago was more than what it is today, inflation adjusted.

Got it. Sir, despite the business growing over the previous 5 years, our company has developed Hello?

Yeah.

Yeah. I'm saying, despite our business growing over the previous 5 years, our company currently is trading at a market cap of ₹2,100 crores and around an EV/EBITDA of 8 to 9, which is 50% lower than our own historical P/E as well as maybe half of the valuation of our peers.

Our stock price has given a negative 5% CAGR over the last 5 years despite Somany building a household brand. I would just request the management to seriously consider a share buyback because it would not only be EPS accretive

Thank you. Thank you for your suggestion.

Hi, thanks for the opportunity. Sir, we have seen the demand was slightly muted in March and April because of production shut and all, we were expecting the pent-up demand to hit by June last quarter.

We've seen where is it?

Sorry. I didn't get your question.

My question is, sir, in last call, you said March was slow, April has been slow because of supply issue. Possibly the expectation was once the supply issue will get normalized, we'll see a pent-up demand.

Have we seen that or where are we on that front? Because Morbi has been shut, still volume growth is low single-digit, when should we expect high single-digit volume growth?

No, we're getting high single-digit volume growth, in fact, now. We're getting not high single-digit, but we're getting mid single-digit volume growth, and this is looking good.

Beyond a point, the biggest positive is that the price has been pushed into the market and we're looking at very decent volume and value growth.

Got it. Got it.

Sir, it's pretty heartening to hear you saying the margin what you have shown in last two quarters will continue. Just playing a devil's advocate, what we have seen, Morbi was shut, there was a supply crunch in the market, which will get normalized now because Morbi has started operations, export is weak, possibly the price cut and all these things possibly can play out in upcoming months, which can put a pressure on our margin.

What are your thoughts on this?

My margins really have not gone up because of pricing. My margins have gone up because of operational efficiencies that we're producing 100% in our own plants and also our JV losses have come down.

Due to that, the margins have gone up and not so much of pricing. Pricing has only been a pass-through.

I'm not earning anything from the pricing. If it goes down, be it, as long as I'm producing 100% and my JVs are profitable, this margin will sustain.

That's why I'm so confident.

Got it. Fair enough, to you.

Last question from my side, what has been the Somany Max has been EBITDA positive this quarter? How is that JV?

Somany Max, last year same quarter we had a ₹7 crore minus and this time we have a 1.something crore minus, and going forward even this would be controlled. If you remember, I had said that Somany Max we will be in a situation which will be ₹10 crore loss or less, and we are very, very confident of achieving that, only bettering that.

Got it. Got it.

Understood.

Thank you.

Sir, my question was, sir, as you say that we see that EBITDA margin being maintained at this level, so, sir, as raw prices have increased and the price of Morbi has increased way higher, because if this difference between the two getting narrowed, that is why the margins are being maintained or why are you saying that the margin will be maintained going forward?

Because of operational efficiency. I just mentioned earlier, it's because of operational efficiencies.

Sir, the operational efficiency can come down once Suppose in future the prices of gas goes down and the Morbi again reduces the price of the products, in that case,

of course, the

risk of

If gas goes down, even we will reduce the prices of the products. Obviously, price be passed it through, we will pass on the benefits also, but that does not take away my operational efficiencies of my JVs, which I've worked so hard last year to make sure that they are efficient in terms of producing material and not.

The biggest part is that our own plants are producing at the fullest.

For this year, sir, what kind of volume growth you see?

Mid single-digit.

Mid single-digits. Sir, in the last quarter you told you have

Sure.

Hi. Thanks for the opportunity, and congratulations on good numbers in challenging environment.

Three questions. One is see, I understand for the quarter you had a low single-digit volume because supply side you were impacted because of Morbi.

At the same time, you had a channel which was completely the inventory for the channel was very lean, right? Now supply is back to normal for you.

If you were to give some color in terms of the channel inventory, is it back to normal now or any color you can give? Similarly on the corporate side, project side, how is the overall trend or any color you can give on that side?

What is the last question?

On the project side. I think earlier comments thoughts were that project itself will also be a lever for growth in addition to retail.

Understood. As far as the channel inventory is concerned, they had stocked up a lot in March considering that they knew that April there will be no production, but otherwise, since May, the channel inventory has come back to normal.

In fact, the channel inventory is again fairly lean because they're quite careful because of the volatility in the gas pricing. They are presuming that the gas price will come down overnight and then there may be a price reduction.

Channel people are not taking the inventory they should be taking. From that point of view, channel inventory is still not very lean like it was in April because there was no production, but they're not full to their brim.

The second question on project is that yes, project is going to go up. Our total project was about 7-8% in retail and about 10-11% in government.

This in totality will go up by about 3% to 4%.

Sir, then see, if you look at Q1 also, and say if we're doing a relative comparison in terms of volume growth, say the leader had a 6% volume growth, the other smaller players had a very high double-digit volume growth or high single-digit volume growth. Incrementally with supply coming normal for you and you also focusing on the project side, why the conservatism in terms of a mid-single volume growth guidance?

Just trying to understand the disconnect.

There is no disconnect. Industry leader had an advantage where they had higher in-house production.

There's a particular category which is polished vitrified tiles, which we are completely exposed to Morbi. They have a small production of their own.

Therefore, they were able to push that extra 2 to 2.5% growth. Other than that, the guidance for us is mid single-digit growth is what we think would be absolutely achievable.

Various people have promised, including us in the past, that we'll have high single-digit growth, low double-digit growth, but never has been delivered. We have been very, very cautious in what we're saying.

Something which we will deliver for sure is our EBITDA margins and also our single-digit growth. As far as the smaller players are concerned, the base is very small and I'm pretty sure it's not sustainable, and you will see that playing out from the next quarter onwards.

Got it. Any color you can give in terms of margin profile in the bathware and the construction equipment?

Obviously, it's a very low base right now. Any color in terms of profitability?

It's about a percent better than our normal tile margins. Earlier, it used to be better because tile was underperforming.

Now that tile is also performing with the capacity utilization going up, it's almost the same, but slightly better.

Got it. Thank you and good luck.

Thank you.

All questions were clear. Best of luck, team.

Thank you.

I'm sorry, I can't hear you. Hello?

All questions were clear. Best of luck, team.

Thank you.

Congratulations for good set of numbers. Sir, I just missed your initial commentary.

What will be the total capacity at the end of this year?

At the end of this year, you mean 2026-27?

Yeah.

2026-27, there is no increase in capacity. Whatever we're increasing, that 3-4 million square meters, which is due to some balancing equipments to increase productivity within our own concerns.

There's no new line which we're putting in.

Okay. Sir, any major capex plan?

Yes, the major capex plan is the 9-plus million square meter plant in the South, which is approximately ₹220 crore outlay, which is for next year.

When next year? Next year will be operational?

At the end of next year, like 2028 it's operational?

Yeah. End of quarter three, beginning quarter four of next year, it'll be operational.

Okay, 9 million and capex is ₹220 crore.

More or less, yeah.

Most of that will be funded by internal accruals, if I'm not wrong. Yes?

About 60% with internal accruals.

Okay. Perfect, sir.

Thank you. Thank you, sir.

Thank you.

Hi. Congratulations for a great set of numbers, sir.

My question is related to the Morbi. Morbi's export is down.

Is there any chance that they can dump domestically or the product categories different, they can't dump here?

No, Morbi's export is down is an independent situation over there. The bright side of that is there will be a pent-up demand when the export opens.

Okay.

They can't put a pressure over here in domestic market because they are not able to sell in export? No,

unfortunately, at these kind of gas prices, there's not much they can do.

Understood. You are then consistently showing a 11%-plus kind of margin back to back.

Is it sustainable or the guidance to 12%?

Yes, absolutely. That's the target that we achieve 12% and more, but currently we're very confident of showing the 11%-plus margin, which we showed last quarter and this quarter.

That is something which we are confident, and we do believe that we are doing everything possible to go beyond 12%.

Great. All the best.

Hi, sir. I hope I'm audible.

Thank you, sir, and congratulations on great set of numbers. Sir, first question I have is that I understand that the industry currently, in Q1 especially, faced more supply constraints than demand problems, demand was there.

Having said that, the outsourcing partners we had in Morbi, they were not able to supply to us, and that's the reason why despite growing the capacity of the volume in our own facilities at a very impressive rate, but because of de-growth in the outsourcing part, the overall volume growth came to be around 2% to 3%. I just wanted to understand from Q2 onwards, will we see the support coming from the outsourcing space as well, because Morbi has started to kind of start the production again?

With that, the capacity utilization will remain at the same level or do we see that the outsourcing supply coming in, that will be impacted? No,

our capacity utilization will be high, and I think we're not getting enough material today, but that's nothing to do with the supply side of Morbi. Geographically, we have plants in the South, North, and West, there's only so much we can buy from the West.

Therefore, in the North and in the South, we have more demand than what we can procure. Procuring from Morbi beyond a point becomes counterproductive because of freight.

From that point of view, we're looking very good as far as demand is concerned, and therefore, we are extremely confident of keeping our own production at 100% capacity utilization, which is a major, major kicker to the EBITDA, and therefore, we are extremely confident of the EBITDA. Last year, we had a loss of about ₹24-25 crores in our JVs.

This year, we will be in a net profit. The swing will be more than ₹30 crores from last year.

That's something which we are very confident on in terms of the volume, and I've already answered as to why we are seeing that we will not be in a position to reduce our capacity, which is our own capacity.

Understood, sir. This was helpful.

Sir, having said this, with the EBITDA margin sustaining at these levels, and I believe the guidance for FY27 was 100 to 150 basis point higher than FY26, are we in a position to increase the guidance on that front?

Yes, absolutely. It all depends on capacity utilization and product mix change.

The big kicker, like I said, was production capacity utilization. As long as that is happening, EBITDA margins are sustainable and only become better.

Like I said, our JVs are also coming to a situation where it's in a profit, but there's a lot more which we can do within the JVs to increase their profit, and that's exactly what I mentioned earlier in the call that we're doing some balancing equipment to increase capacity in the JVs and in our wholly owned subs to further augment capacity. When we augment that capacity, everything there goes to the bottom line.

Very confident of maintaining this EBITDA margin for now and then increasing it as and when the quarters unfold in three and four.

Understood. Sir, on this balancing equipment, the debottlenecking, that capacity will also come in in FY28 along with the 9 million square meter plant, or that will be reflecting in FY27?

No, 9 million square meters will only come in towards third quarter of next year. That is virtually a greenfield plant.

Everything needs to be made from the land, building, capital. Land we have, but the building and capitals, all that can happen only in 15 months.

The balancing equipment, the debottlenecking?

That is happening now, most of which will be concluded by end of quarter three.

Got it. Got it.

Because they are value-added, the margins will be higher than what we have today?

Correct. In quarter four, you will get the effect of all those efforts which we have taken, and you'll see demonstrate that.

Until then, we will hold this margin or maybe slightly better.

Understood. Sir, just lastly, what would be the capex, the absolute amount for FY27 and '28 with these plants that we have?

From now to '27 end, we have already looked at approximately a ₹275 crore outlay, which includes the ₹220 crore plant plus balancing equipment in various other plants and some more balancing equipment in the bathware sanitaryware plant. All put together, we are at about ₹275, and we will be funding about 65-70% of this through internal accruals.

Again, we're not putting pressure on the balance sheet at all. The small loan, which will be taken in the joint venture with no corporate guarantee from Somany side.

The joint venture is a 60-40, therefore, that's going to be in that joint venture.

Understood, sir. This was helpful.

Thank you for the answers.

Last quarter, standalone we had 83% capacity. Going forward, you see the capacity utilization further increasing, sir?

You mean capacity utilization?

Sir.

Yes, capacity utilization will further improve.

Sir, what level it can go max? See,

the first quarter in April, we had some lines which were shut. A couple of lines were in maintenance.

This quarter also, we had two lines under maintenance. It will improve slowly and steadily because we're doing a lot of balancing equipment to augment capacity, which is only going to lead to better EBITDA margins in the future.

I think the current scenario would be that we'll be slightly better in this quarter in capacity terms.

With current capacities we have, sir, and at current prices of going for tiles, what is the maximum revenue we can have with JV and our own capacity?

Approximately 300 3,700 crores, 2,000 Yeah, more or less, give or take ₹50 crores at today's

prices. Okay.

With the bottleneck we are doing, by year-end it will actually increase by 300 crores more?

Yes, partly yes.

Okay. Okay.

Thank you, sir.

We can close.

Sure.

Sir, I just had one further query. We see the industry leader is having margins close to 18-19%, and we are having close to 11% as of now.

What is the reason that we have such stark difference between the top and second player?

There's many, many areas of discussion, maybe it's best we take it offline.

Sir. Thank you, sir.

Thank you.

Thank you, ladies and gentlemen, for being patient and joining us for the Q1 earnings call for FY 2026-27. We remain positive for the entire year for both the single-digit margin single-digit volume growth and also a double-digit margin.

What the margin which we've given today will only better that going forward, and all efforts the company is doing to make sure that we increase even on the volume front. Look forward to meeting you all in the quarter quarter two earnings call.

Thank you so much.