Jyoti Resins — Q3 FY25 earnings call

Call held 4 Feb 2025

Management summary

Jyoti Resins reported strong Q3 FY25 performance with robust volume and revenue growth, driven by strategic market penetration and effective pricing. The company is actively expanding its network and capacity, funded by internal accruals, while maintaining healthy margins. Management reiterated long-term growth targets and addressed investor concerns regarding market share and shareholder returns.

Highlights

  • Q3 FY25 Revenue stood at INR 71 crores.

  • Volume growth for Q3 FY25 was 18% year-on-year.

  • Adjusted revenue grew by 16.5% year-on-year in Q3 FY25.

  • Implied EBITDA margin for Q3 FY25 was approximately 29.5%.

  • Year-to-date gross margin was maintained at around 70%.

  • The company expanded its branch network from 32 to 42 in nine months.

  • Targeting INR 500 crores revenue by 2027 with 20% volume growth for next 3-5 years.

  • Plans for brownfield capacity expansion of 1,500 tonnes/month and greenfield expansion of up to 3,500 tonnes/month.

Key financials

  1. Revenue ₹71 Cr +16.5%YoY
  2. Volume Growth 18%
  3. Gross Margin 70%
  4. EBITDA Margin 29.5%

What they filed

Q1 FY27: revenue up 17.3%, net profit down 29.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue65 71 79 75 74 +14%72 +1%93 +18%88 +17%
EBITDA19 22 24 21 20 +5%19 −14%25 +4%13 −38%
Net profit16 19 20 17 17 +6%15 −21%20 +0%12 −29%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹40 Cr entirely through internal accruals
    • Brownfield capacity expansion at existing plant (1,500 tonnes/month)
    • Greenfield expansion for new facility near Ahmedabad (up to 3,500 tonnes/month) ₹40 Cr
    • Investment in existing plant to double capacity ₹5 Cr
    In terms of our capacity expansions and CapEx plans, we are looking to add another 1,500 tonnes per month over the next 1.5 years at our existing plant, while we are looking at doing greenfield expansions for a new facility on the outskirts of Ahmedabad to meet the initial needs of our storage of raw material, finished goods etc., along with the potential to go up to manufacturing of 3,500 tonnes per month in the near future. (Page 4) ... And the second plan is, as I mentioned, that Greenfield we are planning in the next three years. So maybe we'll require Rs. 40 crores to Rs. 45 crores for that. But it will be used by gradually, not in a single day. (Page 12) ... And if we'll go for the Rs. 5 crores, Rs. 10 crores rupees to invest into the existing plant we'll get the capacity of almost double from here. (Page 11) ... So, for the same do you plan to do any fundraise or the same will be done through internal accruals? Internal accruals only. (Page 13)
  • Liquidity Liquidity disclosed Company is 'sitting on the cash' and will utilize it for growth and shareholder returns.
    I think that will be continuous as it is for that because already, we are having this -- sitting on the cash, so we will utilize into the proper way and we will continue for that. (Page 19)

Guidance & targets

Volume

  • FY25 Volume Growth Volume · FY25 · Medium confidence 20%
    Because of flat volume in quarter two, we may fall short by 3% to 5% of our stipulated guidance of 20% volume growth for FY25.

    — Utkarsh J Patel

  • Long-term Volume Growth Volume · next 3 to 5 years · High confidence 20%
    We continue to target 20% volume growth for the next 3 to 5 years, led by our efforts on the marketing front.

    — Utkarsh J Patel

  • Volume Growth Volume · next 3 to 4 years · High confidence 20-25%
    Sure. So, we will continue to maintain an overall 20%, 25% kind of a volume growth over the next 3 to 4 years. That remains our vision.

    — Harsh Gupta (referencing management)

Revenue

  • Revenue Target Revenue · till 2027 · High confidence Rs. 500 crores
    So, as I already mentioned that the first, we want to achieve Rs. 500 crores of revenue till 2027.

    — Utkarsh J Patel

EBITDA Margin

  • FY25 EBITDA Margin EBITDA Margin · this year (FY25) · High confidence 29%
    So, I think this year we may land on 29% of EBITDA.

    — Utkarsh J Patel

  • Long-term EBITDA Margin EBITDA Margin · longer term · High confidence 25%
    And for the longer term we are giving the guidance always for the 25% of EBITDA.

    — Utkarsh J Patel

Market Share

  • Market Share Target Market Share · Medium confidence 30%
    Since 60 years the single dominant player are getting the good, more than 90% market shares. So, we want to achieve at least 30% market share first and that is our goal plan.

    — Utkarsh J Patel

OEM Revenue

  • OEM Revenue Contribution OEM Revenue · average year-wise · Medium confidence 10%
    So, we are aiming to at least reach 10% average year-wise, the first target is.

    — Utkarsh J Patel

ROE/ROCE

  • Return on Capital Employed/Equity ROE/ROCE · next two to three years · Medium confidence 40%
    I think that will be continuous as it is for that because already, we are having this -- sitting on the cash, so we will utilize into the proper way and we will continue for that. So that will be as same what it is right now. So almost 40% around.

    — Utkarsh J Patel

NSE Listing

  • NSE Listing NSE Listing · by March (FY25 end) and next year · High confidence Fulfil criteria by March, list next year
    There is a criteria of NSE listing. So, we will be going to fulfil these criteria in this March. So, we are going to go for the NSE next year.

    — Utkarsh J Patel

What to watch in Q4 FY25

FY25 Volume Growth Achievement

FY25 end (next quarter)
Current Expected 15-17% (3-5% short of 20% target)
Target 20%

Why it matters

Indicates ability to meet growth targets despite Q2 slowdown and validates market penetration strategies.

Because of flat volume in quarter two, we may fall short by 3% to 5% of our stipulated guidance of 20% volume growth for FY25.

Risks & concerns

  • Raw Material Price Volatility (VAM)

    medium

    VAM, an imported crude derivative, constitutes 95% of raw material. While historically stable, price fluctuations can impact margins, requiring a quarter to pass on price increases.

    Management acknowledged

  • Competition from Dominant Player (Pidilite)

    medium

    The market is dominated by a single player with over 90% share, making market penetration challenging. Jyoti Resins differentiates through pricing and loyalty programs.

    Management acknowledged

  • Demand Cyclicality (Monsoon/Building Materials)

    medium

    Q2 FY25 volume growth was flat due to monsoon and overall less demand in the building construction materials sector, impacting annual targets.

    Management acknowledged

  • Challenges in New Market Penetration

    medium

    Onboarding new dealers and carpenters in new territories is challenging and requires patience and consistent effort to build trust and prove product reliability.

    Management acknowledged

  • Real Estate Market Dependency

    medium

    Overall demand for products is linked to the real estate space and renovation cycles, making it susceptible to fluctuations in the construction sector.

    Management acknowledged

Q&A highlights

7 direct
Realization De-growth and Gross Margin Sustainability Direct
There are two-three reasons. One reason is we have focused on the OEM sales also. So, for the OEMs, the modular furniture makers, we have three product categories and that have the different prices... And the second thing is we have passed a few discounts to the -- discount in bill to some territories and some states to gain more volume growth. So, these are the reasons for that. ... Average steady state market, the gross margin should be depends upon the conditions of the raw material but average we can consider at 65% gross margin...

Clarifies the factors impacting realization and provides a long-term sustainable gross margin expectation, crucial for profitability analysis.

Asked by Madhu Rathi

EBITDA Margin Guidance vs. Increased Expenses Direct
So, I think this year we may land on 29% of EBITDA. And for the longer term we are giving the guidance always for the 25% of EBITDA. The reason is we have started as an example in quarter 3, we have good investments for the trade activities like carpenter meets, carpenter gatherings, then dealer meets.

Explains how the company plans to maintain its EBITDA margin guidance despite increased marketing and promotional expenses, linking it to strategic investments for growth.

Asked by Madhu Rathi

Accounting for Loyalty Points Redemption Direct
So, let me answer that question. Basically, as per accounting standards, there is deferment of revenue and proportionate expenditure. So, both whenever it gets redeemed, it moves to revenue as well as it moves to expenditure. It doesn't move in isolation.

Provides clarity on the accounting treatment of loyalty programs, assuring investors that it does not disproportionately impact margins.

Asked by Madhu Rathi

Flat EBITDA and Topline for 8 Quarters Partial
So as already I mentioned that quarter one, we have taken almost 20% of volume growth and quarter three also it is good that 18% volume growth is there. So, as we have given the guidance that we will grow by 20%. So, it is as per plan. But because of the as you know, that in building construction material, quarter two was very, very disturbed by all over demand and supply into the market.

Addresses a key investor concern about stagnant financial performance, attributing it to specific market conditions in Q2 and reiterating growth plans.

Asked by Keshav

NSE Listing and Institutional Investor Attraction Direct
There is a criteria of NSE listing. So, we will be going to fulfil these criteria in this March. So, we are going to go for the NSE next year. ... Second thing, recently Taparia Group is onboarded in our stock already last week. So, it's good news that they have invested in our stock for 3% of equity.

Outlines concrete steps to address investor concerns about liquidity and institutional participation, including a timeline for NSE listing and recent investor onboarding.

Asked by Keshav

Utilization of Free Cash Direct
So, there will be three parts of that. First, you already mentioned that dividends. So, dividend, we are giving the 15% of the profit to our investor last three, four years... But the second plan is, as I mentioned, that Greenfield we are planning in the next three years... And the third thing we most want to focus to develop our network into the PAN India.

Provides a clear capital allocation strategy for the company's cash reserves, covering shareholder returns, long-term capacity expansion, and market penetration.

Asked by Pranay

Credit Period and Write-offs Direct
Sir, it is averagely 118 days around. But if we talk about the old states where we are already mature and developed. So that is 75 to 80 days around. And for the newer market, it goes to the 100, 120 days. ... Percentage wise, if we see, it is all over 17 years history it is not more than 1%.

Offers insights into working capital management and credit risk, demonstrating a low historical write-off rate despite extended credit periods in newer markets.

Asked by Pranay

Branch Expansion vs. Revenue Growth Direct
So basically, what is the scenario, I am explaining to you. So, when it is open, that is a process. So basically, we have set the network to grow from here. The branch is the first thing because that is keeping the inventory over there. And you are appointing the consignee and sales agents for that.

Clarifies that branch expansion is a foundational step for future growth and network leverage, rather than an immediate revenue driver, addressing a perceived disconnect.

Asked by Keshav

2 min read 6 chapters

Detailed narrative

Q3 FY25 Performance and Volume Growth Drivers

Jyoti Resins reported a strong Q3 FY25 with 18% year-on-year volume growth and 16.5% adjusted revenue growth. The company achieved INR 71 crores in revenue for the quarter, with an implied EBITDA margin of approximately 29.5%. This growth was driven by strong efforts in ground-level work with carpenters and dealers, product portfolio showcases, and improved penetration in existing and new markets. Despite a flat Q2 due to monsoon and lower demand in building materials, the company is optimistic about Q4.

Gross Margin and Realization Strategy

The company maintained a year-to-date gross margin of around 70%, with a sustainable long-term target of 65%. While there was a 1.5% realization drop in Q3, this was attributed to a shift in product mix towards OEM sales and strategic discounts offered to gain volume in new territories. Management emphasized that softer raw material prices and increased volumes contributed to better spreads and operating leverage, offsetting the impact of discounts.

Capacity Expansion and Funding Plans

Jyoti Resins is undertaking significant capacity expansion. It plans to add 1,500 tonnes per month at its existing plant over the next 1.5 years, requiring an investment of INR 5-10 crores to double current capacity. Additionally, a greenfield expansion for a new facility on the outskirts of Ahmedabad is planned, with a potential to reach 3,500 tonnes per month, requiring INR 40-45 crores over the next three years. All these expansions are planned to be funded entirely through internal accruals.

Network and Brand Building Investments

The company has aggressively expanded its branch network, increasing from 32 to 42 branches in nine months, with a focus on new states like UP and Delhi. These branches serve as depots for inventory and support sales agents. Jyoti Resins is also investing in marketing and brand building, including carpenter and dealer meets, and onboarding key personnel like CMOs and Marketing Managers, to strengthen its brand and broaden its customer base across India.

Long-term Vision and Financial Targets

Jyoti Resins aims to achieve INR 500 crores in revenue by 2027, targeting a 20% volume growth for the next 3-5 years. The company expects to land at a 29% EBITDA margin for FY25, with a long-term guidance of 25%. It also targets achieving at least 30% market share in the white glue segment and increasing OEM revenue contribution to an average of 10% year-wise from the current 6%. The company expects to maintain its high ROE/ROCE, currently around 40%.

NSE Listing and Shareholder Engagement

To enhance visibility and attract institutional investors, Jyoti Resins plans to fulfill NSE listing criteria by March 2025 and aims for listing next year. The company also acknowledged investor feedback regarding its payout ratio, currently at 15% of profit, and stated that it would positively consider increasing it in the future, demonstrating a commitment to shareholder value.

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