Dhabriya Polywood Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Rain-hit quarter, demand intact: Revenue grew just +6.2% YoY as an extended monsoon (1.5 months longer than usual) stalled construction activity in key markets. Management sees demand already recovering and expects to catch up on the backlog.
• Modular furniture is the breakout vertical: The segment surged +32.7% in Q2, supported by a strong order book and the start of exports to Europe. The company expects this pace to hold for the full year.
• Margins are climbing, but 20% EBITDA is not a near-term promise: EBITDA margin improved 190 bps in Q2, helped by stable PVC prices and a mix shift toward high-margin products like fluted panels. Management is targeting 15%+ for H2 and FY26, calling 20% "not that obvious."
• Soffit panels open a new domestic category: Dhabriya claims to be the first Indian manufacturer of single-layer soffit panels, a market it estimates at ~INR300 crore, with better initial margins expected due to lack of domestic competition.
• What to watch next quarter: Whether the Q3 demand rebound closes the H1 growth gap, the pace of fluted panel sales toward the INR45–50 crore target, and any margin lift from the new soffit panel line.

Demand & Seasonality

• The rain overhang: An extended rainy season lasting until end-September (vs. the normal mid-July finish) suppressed activity at construction sites and street-level work across Rajasthan and Delhi NCR. The impact was most visible in exterior-facing products: PVC profiles grew only 6.1% in H1 and UPVC windows grew 11.5%, both below the company average.
• No structural demand problem: Management stressed that underlying demand remained strong and that no division declined. The company is confident it can catch up on the INR12–15 crore solid backlog, with Q4 typically the strongest quarter.
• Normal seasonal rhythm: Q1 is always good, Q2 sees a downside, Q3 is better than Q1, and Q4 is the best of all four quarters. This pattern held true in FY25, just with a deeper Q2 trough from the weather.
• Q3 recovery underway: Demand is already coming up in a speedy manner, and Q3 will "definitely be better" than Q2.

Hitesh Agarwal: "We are sticking to the growth plan, what we have earlier shared of 25% year-on-year growth for the next four years."

Modular Furniture: The Growth Engine

• 32.7% Q2 growth, full-year momentum expected: The modular furniture vertical was the standout performer, driven by a strong order book. Management expects the same growth rate to continue for the entire year.
• Exports to Europe have begun: The company has started exporting modular furniture to Europe, a channel it believes will provide a gross margin edge over time. Focus on exports in this segment is increasing.
• Margin profile still developing: Modular furniture currently carries slightly lower gross margins (within a 5–7% deviation band from the company average), but management expects this to improve. At 18% of revenue, the segment is not yet large enough to materially drag overall margins.

New Products: Soffit Panels & Fluted Panels

Soffit Panels

• First domestic manufacturer: Dhabriya began manufacturing single-layer soffit panels (used for balcony ceilings, parking spaces, and wall paneling) at its Bangalore facility last month. Management claims it is the first company in India to produce these domestically; all other brands currently import.
• Market size and margin expectation: The company estimates the Indian soffit panel market at ~INR300 crore and hopes to capture a good percentage. Initial margins are expected to be better than the existing portfolio (~16% EBITDA) due to lack of competition, with the market currently controlled by only 2–3 large importers.
• Product pipeline: Two designs have been launched, with five more fall-ceiling designs coming soon. An outdoor UV-resistant soffit panel for building facades is in development, targeted for launch in the next six months.

Digvijay Dhabriya: "I am proud to say that Polywood is the first company who has started manufacturing in India. We have all other brands which are in the market, they are importing right now and we hope that this product is going to gain a very big market."

Fluted Panels

• Revenue target raised: FY25 sales guidance for fluted panels has been revised upward to INR45–50 crores, from an earlier projection of ~INR40 crores. H1 already achieved INR90 crores in overall revenue, and the company is "strict to earlier goals."
• Competitive moat vs. imports: Domestic manufacturing gives Dhabriya clear advantages over imported fluted and soffit panels: custom lengths with zero waste, 2,000 color options (vs. 2–3 from importers), 10-year guarantees, and a wide distribution network across India. Imported products come in standard lengths only.
• Pricing vs. Chinese imports: On like-for-like products (same weight and ingredients), Dhabriya's pricing is 5–10% higher than Chinese imports. Where price gaps appear larger, it is because the imported product is lighter or lower quality.

Hitesh Agarwal: "We are offering 2,000 colors. That is our USP. Our guarantee is for the 10 years... If you need 5 feet, we give the 5 feet. If you need 10 feet, we give the 10 feet. But all the products imported are of standard length. So we are giving a zero waste."

Margin Walk

• Q2 margin improvement: EBITDA margin rose 190 bps in Q2 and 200 bps in H1; PAT margin improved 60 bps in Q2 and 120 bps in H1. The lift came from two sources: stable PVC raw material prices in Q2 (vs. a 1.5-month fluctuation period in May–June Q1) and a growing contribution from high-margin products like fluted panels and modular furniture.
• Gross margin target: The company aims to maintain at least 35%+ gross margin and prices products accordingly across all verticals. Management quantified the Q2 gross margin improvement at roughly 2–2.5%, split between stable raw material pricing and high-value product mix, though it declined to quantify the exact split.
• PVC volatility is normal: PVC price fluctuations occur 2–3 times a year as an industry norm. In the current year so far, only one instance occurred (May–June, due to logistics issues). No major price fluctuations are expected unless an unexpected global event occurs.
• H2 and FY26 margin commitment: Management is confident of maintaining 15%+ EBITDA margin for H2 FY25 and FY26, with further improvement expected as top line increases in H2 vs. H1.

Hitesh Agarwal: "20% is not that obvious. But the improvement is always in our mind."

Distribution & Market Access

• Dealer network backbone: PVC profiles, which contribute 55–60% of the top line, are distributed through a wide dealer network. The company has a large sales team spread across India that regularly visits architects and interior designers, participates in exhibitions, and supports dealer-distributors in generating revenue.
• Mumbai depot opened: A new company-owned depot (warehouse) was opened in Bhiwandi, Mumbai, supplementing the existing showroom and display gallery in Andheri. The move is aimed at catering to increased demand from dealers and distributors in Maharashtra.
• Government business push: The company has started enlisting its new products, particularly fluted profiles, for government projects. While it has done government work before, this marks the start of a more regular focus. Revenue contribution may come going forward, though no timeline was given.

Guidance & Commitments

Key Metrics