# 1. Financial Performance ## A. Key Figures * Q2 EBITDA: ₹9.8 Cr (+22.5%) · Q2 PBT: ₹3.9 Cr (vs. ₹0.8 Cr prior) * H1 EBITDA: ₹15.4 Cr (+19%) · H1 PBT: ₹3.3 Cr (vs. ₹-1.2 Cr loss prior) * **Gross Margin (Q2):** **39%** (notable YoY improvement) * Net Debt: ₹3.6 Cr (comfortable level with strong cash balances) * **Working Capital Cycle:** **26 days** (7 days shorter than Sep '24) ## B. Revenue Growth * **Resilient Top-Line Performance:** Revenue grew **3%** YoY despite soft market conditions, supported by disciplined cost management and early signs of operating leverage. ## C. EBITDA & Profitability * **Profitability Recovery Underway:** Strong H1 PBT turnaround from prior-year loss, with Q2 EBITDA margin reaching **6%**, signaling effective cost control and operational stabilization. * **Positive Operating Leverage Emerging:** Management confirms **100 bps EBITDA margin expansion** from just **3% revenue growth**, indicating scalable upside on future top-line gains. * **Margin Gap vs. Peers Persists:** Despite recent improvements, EBITDA margins remain below historical and competitor levels due to structural cost pressures and limited operating leverage in prior periods. ## D. Balance Sheet & Liquidity * **Strengthening Financial Position:** Long-term debt repayment initiated, supported by robust cash flows and a healthy working capital cycle, reinforcing liquidity resilience. --- # 2. Volume & Pricing Trends ## A. Key Figures * **Export Volume Growth:** **+6%** YoY (12-month avg FY25) * **Export Revenue Growth (Morbi):** **+6%** YoY (first 5 months) ## B. ASP Movement * **Selective Pricing Discipline:** Implemented targeted price increases on 1–2 products while avoiding broad hikes; tightened project discounting amid limited competitor moves of 1%–5%. * **ASP Neutrality:** Average selling prices flat QoQ, with margin expansion driven entirely by **volume leverage and cost optimization**, not pricing power. * **Growth Driver Shift:** Management expects volume—not ASP—to be the primary engine of future financial performance, given market-driven pricing dynamics. ## C. Retail vs Project Mix * **Retail-Dominant Mix:** Project segment defined as orders >3,000 sqm; current sales mix is 20% projects, 80% retail, reflecting increased retail reliance versus prior year. ## D. Export Performance * **Export Recovery Underway:** Tiles exports and Morbi-origin revenues both up 6% YoY, signaling stabilization and demand improvement after prior-year decline. --- # 3. Manufacturing & Utilization ## A. Key Figures * **Capacity Utilization:** **68%** overall consolidated (↑ QoQ and YoY) * Manufacturing Cost Reduction: 3.7% like-for-like (adjusted for mix and energy) * **Gross Margin Expansion:** **+250 bps** YoY, driven by cost efficiencies ## B. Capacity Utilization * **Moderate Utilization with Upside:** Current consolidated capacity utilization at a moderate level, with clear improvement versus prior periods and room for further operating leverage. * **Plant-Level Divergence:** Sikandrabad plant showing strong performance, while South, Dora, and Hoskote facilities operate at **lower utilization**, indicating uneven ramp-up across the network. ## C. Plant Performance * **Sequential Improvement Confirmed:** Manufacturing footprint broadly improving in utilization both sequentially and year-on-year, supporting volume growth outlook. ## D. Cost Efficiency * **Margins Driven by Operational Gains:** Gross margin expansion primarily fueled by **7% like-for-like manufacturing cost savings**, achieved through internal efficiencies, not pricing. * **Sustainable Leverage Pathway:** Management sees continued margin upside via higher design and sales volumes, underpinned by ongoing cost discipline. --- # 4. Product & Segment Performance ## A. Key Figures * **Regional Sales Mix:** **~23%** Tier 1 · **~18%** Tier 2 · **~59%** Tier 3 (H1) ## B. Tile Business * **Store Strategy Shift:** Focus pivoted to enhancing customer experience in existing OBTBs, resulting in a slower pace of new center openings versus prior year. ## C. Adhesives Launch * **Early-Stage Expansion:** Adhesives business launched with one plant and currently generates revenue in the **few millions per month**, with full margin visibility expected by end of Q3. * **Product Quality & Development:** Adhesive performance matches or exceeds leading domestic brands; currently offering 3–4 variants, with **epoxy and grout** in pipeline for launch in coming months. * **Marketing Momentum:** Multi-channel campaign (TV, Instagram, regional languages) boosts retail salience in North and West; expanded to **2 additional states and 2 new languages** in Q3, driving positive sales response. ## D. Regional Sales Mix * **Broad-Based Growth Trajectory:** Despite concentration in Tier 3 cities (~59%), growth is emerging across all tiers, led by strong momentum in Tier 3 and urban centers like Bombay. --- # 5. Demand & Market Conditions ## A. Market Recovery Signals * **Green Shoots in Tiles:** Sector revival underway, supported by improving cement and steel demand, with positive spillover expected as construction shifts to finishing stages. * **Supply Discipline:** Absence of new capacity additions—particularly in Morbi—combined with permanent closures of high-cost units, is reducing domestic oversupply and tightening competition. * **Strategic Shifts Underway:** Informal checks indicate a significant number of units in Morbi have taken strategic capacity-related decisions, suggesting structural market consolidation. ## B. Pricing & Inventory Dynamics * **Pricing Pressure Persists:** Despite healthy underlying demand trends, **price declines** are anticipated due to ongoing dealer downstocking and intense price competition. * **Inventory Rationalization Continues:** Dealers are actively reducing inventory levels, a trend expected to persist near-term, weighing on near-term volume absorption. --- # 6. Risks & Input Costs ## A. Key Figures * Blended Gas Cost: **₹43.3 per SCM** (current quarter) · **₹44.5 per SCM** (prior quarter) ## B. Gas Price Volatility * **Input Cost Relief:** Blended gas costs declined meaningfully quarter-on-quarter, though **regional disparities** persisted with higher costs at Sikandrabad and Hoskote plants. * **Margin Stability Assumption:** Gross margins expected to stabilize **assuming no further gas price volatility**, despite mixed regional fuel economics. ## C. Margin Pressure * **Structural Margin Challenge:** Operating margins remain constrained at **6–8%**, well below peer levels of **15–20%**, raising concerns over **product commoditization** and lack of **premium positioning**. ## D. Macro Factors * **External Demand Drivers:** Government capex execution, geopolitical dynamics, and trade policies continue to be **critical swing factors** for sectoral demand. --- # 7. Guidance & Outlook ## A. H2 Recovery Expectation * **H2 Recovery in Sight:** Positive momentum in **cement and steel sectors** signals early-stage construction upcycle, supporting expectations of stronger H2 performance. * **No Formal Guidance:** Company maintains policy of not providing forward-looking guidance on H2 or FY27 financials, despite seasonal strength in second half. * **Constructive Outlook for FY27:** Management anticipates **significantly stronger performance in FY27** driven by improving volumes and revenues across key input sectors. ## B. Capex Plans * **Capex-Free Start to New Initiative:** New venture launched in **July** with no current capital expenditure plans; potential for capex or in-house manufacturing to be assessed next year. * **Localized Supply Strategy:** Initiative focused on a **cost-effective 300–350 km supply radius**, enabling scalable model evaluation based on early performance. ## C. Margin Trajectory * **Cautious Optimism on Margins:** Expecting sequential improvement in **Q3 and Q4** margins, aligned with historical seasonality and recent demand recovery trends.