Hindware concall Q3 2024
1…Our business performance should be considered in light of a challenging macro environment whereas demand has been subdued coinciding with the period of interest rate hikes and high inflation leading to slow down in consumers discretionary spend. We have achieved decent growth in Pipe business but inventory losses impacted margins
2…Although our margins and profitability have been affected, our revenue performance remains healthy owing to our established brand and product acceptance
3…Joint venture
.Further, Hintastica Pvt Ltd, the joint venture entity formed between our
Company and Groupe Atlantic of France, has commenced manufacturing
heating appliances at its advanced facility in Jadcherla, Telangana.
=We are optimistic that the commencement of the new manufacturing plant will enable
us to strengthen our market share and further consolidate our position in the
water heater segment.
4…Distribution network
…As a part of our growth focus, we’ve been strengthening our distribution
network. In the year to date, we have added 123 new distributors and 29 in Q3 alone. We launched 186 new brand shops and 46 in Q3 alone, taking our total to nearly 425 operational brand stores for brand Hindware. We have expanded to many new Tier-4, Tier-5 towns basis our distribution expansion initiatives
and enhanced our brand awareness through focused advertising and
promotion, which I’m sure you witnessed during the quarter as well.
6…Bathware division
Our enhanced product mix and new product launches drove growth of our Bathware division. Higher input costs combined with an overall inflationary environment, however, saw growth lower than our expectations.
7…Our growth strategy is multipronged.
=First of these is consistently expanding our distribution reach, and we believe there is still a significant opportunity in Tier-2 and Tier-3 series. Nearly 70% of our sales comes from non-metro towns.
=Secondly, our focus is to continue to expand and strengthen our faucets
business and institutional business, while maintaining our position in the
sanitaryware business.
=Our third area of emphasis is on strengthening our
luxury brand ‘Queo’ through a vibrant media and promotional campaign.
= All these efforts are underlined by a strong influencer program, which also
includes the plumber and architect loyalty program, which plays a significant role in product decisions of the end consumers.
8…Import
We have taken strategic decisions to reduce imports and increase local
sourcing to better safeguard us from the vagaries of international freight,
foreign exchange, and international inflation.
=We believe this will help us to
increase our efficiency, which will start reflecting in the coming quarters’
performance.
9…Capex
=Although we do not have any significant capex plans over the
next year as we are not setting up any Greenfield manufacturing plant. The
capex we proposed to incur in the coming FY24 will be setting up more brand stores to drive market growth and also on efficiency capex to optimize our own manufacturing capacity to build higher ASP and higher margin products.
9…Pipe business
…I am glad to report that our pipes and fittings business continues to be the
fastest growing in the segment with revenue up by 41% in 9M FY23 and 27% in Q3 FY23, on a year-on-year basis. EBITDA stood at Rs. 2 crores in quarter 3 and in 9 months FY23, it came to Rs. 20 crores.
=Margin pressures persisted due to the decline in PVC raw material prices leading to huge inventory losses, which stood at around Rs. 17.5 crores this quarter.
=Our expansion strategy, including both Brownfield and Greenfield initiatives, aligns with our planned objectives. Our Hyderabad plant’s brownfield capacity expansion project commenced commercial production in January 2023 increasing our capacity to 48,000 MTPA. Additionally, our Greenfield project in Roorkee is progressing as planned with the new plant expected to commence
operations in mid-FY25.
=Considering the sale of around Rs. 200 crores, which we achieved in the past 2 quarter, we are hopeful of the growth construct for our pipes and fittings business. We, in fact, anticipate that the business may exceed the target of
achieving Rs. 1,000 crores in sales well before its stated FY25 target.
10…margin expansion in bathware seg
=the Bathware segment, of course, we’ve had the gains which are coming to us now because of the fact that we are now a remerged Company along with our manufacturing. So, that’s already a part of our financials right now. We’ve, of course, seen a further increase in our input costs, especially in the gas side.
And in Q3, we’ve taken a price increase of about 6% in sanitaryware, and about 3% to 4% in faucets, which came about in the middle of quarter 3
121…Capacity utilization
=100% utilization for sanitaryware,
=faucet was underutilized to an extent to about 42%.
13…capex
=On bathware, there can be some debottlenecking investments in sanitaryware as we are reaching full capacity.
=The idea is to outsource more. We also have in-house manufacturing of various high-value-added products in the factory.
=There should be some expenditure, which will be let’s say, around Rs. 20 crore to Rs. 30 crore in the next financial year.
=We’ll continue to invest in the
development of various stores, for which we may spend another around Rs. 20 crore.
=Apart from this, the pipes project will start in terms of setting up of the
capacity, which will be initially 12,500 MTPA in Roorkee, Uttarakhand, and
further expandable. I think Rs. 70 crore to Rs. 80 crore of capex should happen in terms of releasing the orders and doing other things relating to that project.
14…Brand store
=our brand stores which is the bathware products business. Our
Hindware Brand, we kind of display all the sanitaryware and faucets products under this brand in that store.
=Under this model, the Company doesn’t own the store, the dealer owns the store. The Company is a part of the capital investment, which is required to do up the store. And then the rest of the capital is actually brought in by the dealer themselves. So, there’s a stake in the whole game from the dealer side as wel
=So, generally, we try to get them exclusive, but a large number of dealers are multi-brand here, so we then may end up getting a part of the store
15…New water heater plant.
= The plant is capable of doing around 6 lakh pieces. I’m assuming that the average price realization, which we generate is around Rs. 4,000 to Rs. 5,000 per product from this. But this is a good initiative in the sense that the market potential for this business is good.
= And we see that in the next 2-3 years, this capacity should be fully utilized. Initially, the entire material may not be sold in India. We might be exporting to other countries nearby SAARC region (except
Pakistan)
Disc…invested and adding more
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