Duroply Indust. — Q3 FY25 earnings call

Call held 11 Feb 2025

Management summary

Duroply Industries reported a resilient Q3 FY25 despite seasonal headwinds and macroeconomic challenges, achieving a 12.5% YoY revenue growth to ₹89.82 crores. Profitability saw a significant boost with PBT increasing 127% YoY to ₹1.2 crores and EBITDA margin expanding to 4.9%. While gross margins faced pressure from rising timber costs, the company managed to improve EBITDA through operational efficiencies. The 'Tower' segment demonstrated strong growth, offsetting a QoQ decline in the premium 'Duro' segment.

Highlights

  • Revenue stood at ₹89.82 crores, marking a 12.5% increase YoY but a 1.1% decline QoQ.

  • Profit Before Tax (PBT) was ₹1.2 crores, significantly up by 127% YoY and 5% QoQ.

  • EBITDA reached ₹4.37 crores, growing 32% YoY and 6.3% QoQ.

  • EBITDA margin improved to 4.9% in Q3 FY25, compared to 4.1% in Q3 FY24 and 4.5% in Q2 FY25.

  • Gross margin was 34.2% in Q3 FY25, a decrease from 35.6% in Q2 FY25, primarily due to increased timber costs.

  • In-house manufacturing revenue was ₹54.4 crores (+16% YoY, -3% QoQ), while contract manufacturing was ₹35.5 crores (+7.5% YoY, +2.5% QoQ).

  • The premium 'Duro' segment grew 5% YoY but declined 7% QoQ, whereas the 'Tower' segment showed robust growth of 50% YoY and 30% QoQ.

Concerns

  • Raw material price inflation (timber)

Key financials

  1. Revenue ₹89.82 Cr +12.5%YoY
  2. Profit Before Tax ₹1.2 Cr +127%YoY
  3. EBITDA ₹4.37 Cr +32%YoY
  4. EBITDA Margin 4.9%
  5. Gross Margin 34.2%

What they filed

Q1 FY27: revenue up 6.5%, net profit down 60.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue91 90 106 94 104 +15%93 +4%112 +5%100 +6%
EBITDA4 4 5 5 6 +61%5 +23%5 −10%4 −15%
Net profit1 1 3 2 2 +382%1 +17%-2 −190%1 −61%
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.

Segment breakdown

SegmentYoY GrowthQoQ Growth
Inhouse Manufacturing16%-3%
Contract Manufacturing7.5%2.5%
Duro Segment5%-7%
Tower Segment50%30%

What to watch in Q4 FY25

Raw material (timber) price trajectory

next quarter / next 1-2 years
Current Up 8-10% in last 8-9 months, expected to remain challenging for 1-2 years
Target Stabilization or moderation of timber costs

Why it matters

Sustained raw material inflation directly impacts gross margins and overall profitability.

The timber cost this year we have seen a significant jump of about 8% to 10% on the raw material side in the last 8 to 9 months. Going forward, I do not see a slowdown in the inflationary pressure on the raw material coming anytime soon. ... I think for the next two more years or at least another year at the very minimum, there will be a lot of challenges on the raw material price perspective.

Risks & concerns

  • Raw material price inflation (timber)

    high

    Timber costs increased 8-10% in the last 8-9 months and are expected to remain challenging for the next 1-2 years due to demand-supply imbalance.

    Management acknowledged

  • Muted demand in premium segment

    medium

    The premium 'Duro' segment saw reduced growth and a QoQ decline, consistent with challenges faced in Q3 due to festivities and construction bans.

    Management acknowledged

  • Macroeconomic headwinds and liquidity restrictions

    medium

    Q3 FY25 experienced macroeconomic headwinds and liquidity restrictions in the market, impacting overall demand, particularly from the real estate sector.

    Management acknowledged

  • Seasonal slowdown and construction bans

    medium

    Q3 is typically a tough quarter due to festive seasons and construction bans in regions like NCR post-Diwali, affecting work disruptions.

    Management acknowledged

  • Challenging near-term outlook

    medium

    Management expects the next couple of quarters to be challenging before demand starts moving in the right direction, potentially in 5-6 months.

    Management acknowledged

Q&A highlights

3 direct
Raw material cost outlook, specifically timber Direct
The timber cost this year we have seen a significant jump of about 8% to 10% on the raw material side in the last 8 to 9 months. Going forward, I do not see a slowdown in the inflationary pressure on the raw material coming anytime soon. The capacity in India has increased substantially for production and the plantations have not kept in pace with the required demand for raw material in our country. So, I think for the next two more years or at least another year at the very minimum, there will be a lot of challenges on the raw material price perspective.

Provides critical insight into a key input cost, indicating sustained inflationary pressure for the next 1-2 years, which will impact future margins.

Asked by Sagnik Sarkar

Recap of Q3 FY25 financial performance Direct
We are a 12.5% top line growth for the quarter as compared to same period last year and profit before tax stood at about 1.2 crores, significantly up from Q3 last year and marginally improved from the second quarter this year. EBITDA margins stood at 4.9% for the quarter, which is significantly improved from 4.1% same period last year. Yeah. And it was about 4.5% to 4.4% for Q2 in the same financial year.

Reiterates the core financial metrics for the quarter, confirming the strong YoY growth in revenue and profitability despite QoQ challenges.

Asked by Vijay Suryavanshi

Outlook on real estate demand and its impact on the business Direct
See, if you see last 3-4 years the sizes of cities in India have substantially increased. So, there's a lot of construction activity that is going on. The muted demand has been because of challenges, not so much in the demand side, but I think there has been a restriction on the liquidity in the market, which is due to the demand. I think with the measures that the government is putting in place as soon as the liquidity improves, the demand should pick up, but our industry, especially the plywood and the wood panel industries, is a lacquered industry in the sense that any initiative that happens, it percolates down to our industry much later. So, I think another at least another five to six months and I think the demand should start moving in the right direction again. That would be my estimation. I think next couple of quarters, it is going to be a little challenging, but that's my take on this.

Explains the underlying factors affecting demand in a key end-user industry (real estate) and provides a timeline for potential recovery, highlighting near-term challenges.

Asked by Sagnik Sarkar

2 min read 5 chapters

Detailed narrative

Q3 FY25 Performance Overview

Duroply Industries reported a revenue of ₹89.82 crores in Q3 FY25, marking a 12.5% increase compared to the same period last year, though it saw a slight 1.1% decline from Q2 FY25. Profit Before Tax (PBT) significantly improved to ₹1.2 crores, a 127% increase YoY and a 5% increase QoQ. EBITDA for the quarter stood at ₹4.37 crores, up 32% YoY and 6.3% QoQ, with the EBITDA margin expanding to 4.9% from 4.1% in Q3 FY24 and 4.5% in Q2 FY25.

Segmental Performance

Revenue from in-house manufacturing reached ₹54.4 crores, growing 16% YoY but declining 3% QoQ. Contract manufacturing contributed ₹35.5 crores, showing a 7.5% YoY growth and a 2.5% QoQ increase. The premium 'Duro' segment experienced a 5% YoY growth but a 7% QoQ decline, while the economical 'Tower' segment demonstrated robust growth of 50% YoY and 30% QoQ, indicating a shift in product mix.

Margin Analysis

Gross margin for Q3 FY25 was 34.2%, a drop from 35.6% in Q2 FY25, primarily attributed to increased timber costs and changes in product mix. Despite this, the company managed to improve its EBITDA margin to 4.9% through operational efficiencies. Employee expenses were 11.3% of sales, reflecting aggressive hiring for sales and operations teams, while marketing spend was moderated to 3.7%.

Raw Material Cost Outlook

Management highlighted a significant 8-10% jump in timber costs over the last 8-9 months, with expectations of continued inflationary pressure for at least the next 1-2 years. This is due to increased production capacity in India not being matched by the pace of plantation growth, leading to a demand-supply imbalance for raw materials. The company has been able to pass on some, but not all, of these costs to customers.

Demand Environment and Outlook

Q3 is typically a challenging quarter due to festive seasons and macroeconomic headwinds, including construction bans in regions like NCR. While construction activity remains high, demand has been muted by liquidity restrictions in the market. Management anticipates that demand should start picking up in the next 5-6 months as liquidity improves, but expects the next couple of quarters to remain challenging for the industry.

This is an AI-generated summary of a publicly available earnings call transcript.
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