Varmora Granito (NSE:VARMORA) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Q1, Q2 and H1 FY 'twenty seven Conference Call hosted by Varmora Granito Limited. As a reminder, all participant lines will be in a listen only mode, and there'll be an opportunity for you to ask questions after the presentation concludes. We are pleased to have with us today the senior management team led by our Chairman and Managing Director, Mr. Bhavesh Varmora, who will share his perspective on the company's performance for the quarter and the key business developments during the period. He is joined by our chief strategy officer, mister Amit Doshi, and our chief financial officer, mister Bhavesh Ghosti. Before we begin, I would like to remind everyone that certain statements made during this call may be forward looking in nature.

0:48 These statements are not based on correct expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. I now hand the conference over to mister Bhavesh Varmora. Thank you, and over to you. Thank you. So welcome you all on first earning call as a listed company. So our listing was on 09/29/2026. So public shareholders, anchor investors, our long standing partner, Carly, VARMORA dealers, distributors, employees, architects, builders, contractors. Brand So,, I guess, was that smart?

1:38 So interest cost going forward almost zero. This call, ma'am, q one, q two, and first half. Because first, I mean, call has some company introduction. So my father and their two brothers have started the business in 1993 in the. I was joined in 1996. So product So company India digital technology launch launch.

2:45 Once I start excuse around those are MVO's or GVT focus. So is that GVT number is around 86% contribute GVT. So we are a GVT company,. 18 different sizes and 20 different surfaces. So product mix always focus PVT ceramics declined her business last year's percent revenue or last year, percent revenue So contribution or volume level same numbers, I think.

3:44 So, again, first half quarter one one was set because of nonavailability of fuel or discipline. May this. So second quarter recoveries quarter numbers already So quarter one revenue revenue growth, 15% versus margin growth.

4:31 I think EBITDA margin growth is... Gross margin is 8.88% improvement. EBITDA margins are 5% improve or h one versus h one. I'm talking audio... Y o Y numbers. All numbers are Y o Y. And that improved by 498%. So this is h one numbers. Now we can start q and a. Mister Varmora, can we start with the QA session? Yeah. Sure. Ladies and gentlemen, we will now begin the question and answer session.

5:20 Anyone who wishes to ask a question may press star and one on your touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants who wish to ask a question may press star and one on your touch tone telephone. We have the first question from the line of Nishita from Safia Capital. Please go ahead. Yes. Hello. Am I audible?

6:06 Yes. Yes. We can hear you. Yeah. So I had a few questions. To my first question question is on our EBITDA margin. So, like, our EBITDA margin in Q2 have... Has improved a lot, like... And even our PAT margins. So what has led this profitability growth in q two? Q o q and y o y both. Like, q o q, I understand that q one was bad, but even y o y margins and profitability have increased a lot. So what is the... What is the growth? Yeah. So product mix. Number 21% improvement on average realization.

6:54 This message, 13% improvement on product mix side. So you're starting to present and then operating efficiency. So EBITDA margin improve on q two. So, like, product mix, GBT,, PVT,, that is the product mix you're talking about? No. When I will say product mix, PVT can... Within GVT, it was maybe higher higher margin 18 different sizes and 20 different surfaces. So high value products improve margins price hike and 25 rupees is on product mix.

8:17 Okay. Okay. Understood. Sustainable 10% sustainable. Product mix within GVT. To normal GVT contribution around 72 to 75%. So 25%. Within GVT, there is a much scope of improvement. Okay. Okay. The margin improvement. Okay. Understood.

9:04 Mira, next question. I'm new to this company, so some way the question seems repetitive. But utilization So, Varmora, 50,600,000 square meter capacity or, Adi, 72% last year utilization is utilization for staff 76%. So initial immediate CapEx So peak utilization, 85% the course of that? Peak utilization, we can reach up to 92 to 9393%.

9:51 90 to 93% utilization. Okay. So next year, how many utilization five twenty eight? Yes. 76 will improve. Okay? Around 80, 85% cash plus utilization over. So utilization is going through Okay. Okay. Okay. Understood. Our revenue growth top line growth. It's in single digits only year one year. So is it due to the Middle East crisis? Yeah. But the... How much demand issues take right now?

10:39 So domestic revenue domestic revenue plus exports because of this container... Non availability of container and container freight. For domestic exports by 17% in revenue...

11:30 By 18% in revenue. So exports domestic GVT growth. Export revenue 18%. Yes. Seasonality. I said seasonality first half around 40, 42% or second half. So seasonality seasonality first half versus second half, there is a gap. Okay. Okay. And for full year, what sort of revenue growth can we expect if you can see it? So scenario here, you all know very well.

12:20 So exports then around 15% growth on value and 10% on volume side. So better than industry, 15% or 10 industry standard. We will do 2% better than Yes. Okay. Okay.. Understood. Yeah. That is it from my end. Thank you so much. Thank you. Thank you, Nishita. We have the next question on the line of Varmora Pani from Investec. Please go ahead.

13:11 Yeah. Hi. Thank you, sir, for the opportunity. Sir, question utilization. Q two utilization q... First half of 76%. Q two. Q two utilization? 76%. Yes, sir. Yeah. Q q two is... Sorry. Q two is 89%. Q one is 63%. And h one two is 89. Yes. 89%. Okay. Yeah. But, sir, similar revenue account? Marginal year. But we account Got it, sir.

14:17 Sir, Northeast expansion status So, Northeast plan last last quarter, 50% utilization is this month onwards, third quarter, 75% utilization or product launch orders are in hand. So we dispatch. Got it. Sir, our notice margins versus our comparable blended margins? So notice benefit that... Government benefit is there. So GST benefit is central go...

15:09 See GST and GST both or interest of the. So I think Sir, excluding incentives, sir? Excluding the... What they can get to us maybe could be one pay rate cut benefit. So more visas will be Northeast perimeter almost so this super will meter versus locally is $2.03 rupees. So better margins because of the plant start. Exact numbers numbers Got it, sir. Sir, exports or domestic value volume is at that? Q two or first half domestic or exports? Yeah. Yeah.

16:16 Mister Varmora, do you have any more questions? Yes. Sir, depreciation policy change rational So the decision WD method of charge straight line SLM So they can get to around 17 difference difference level pay. Sir, I got that. But reason depreciation policy change.

17:03 Depreciation policy change. Can you hear us? Hello? So when industry follows this SLM method, since last so many, if you see the peers and on organized sector of also. So after the SLAM method, follow. And since the machinery is also, like, the technology has not changed over. Revive for now, 80 plant multiple sizes. You have to incur new CapEx. So that's we have adopted the method for within for ten years. Sir, useful life change for a machine. Useful life change change for ten years. Yeah.

17:50 For straight... Adopting straight line method. Sir? Yeah. Ten years. Fifteen years. Fifteen years. But possible that you can make plant with different surface and different sizes. To produce similar size in one plant. Require. So it was taken in the follow-up. And if you see the Got it, sir. Method is adopted and followed by the industry. Got it. Got it. Sir, gas pricing region wise versus Northeast q one, q two, or spot prices?

18:40 Q one gas prices, I think. One average gas prices. So notice we are using call... Call this. So once the gas using So pay to up So q one, it was 84.73 Mobi. Mobi or q two 80.53. So average price drop. And Eastmead is all Got it. What's the existing prices? Pricing, 92 rupees. Got it. Sir, EBITDA margins are CapEx guidance FY '27.

19:40 So, Adi, product mix change. CapEx margin side already product mix change better margins because of product mix change or I had plus, you utilization improve. It will be a better margin. And in q three, you will see results. In line with. Yeah. Our industry industry, say, line with. Okay. Also, the gas prices will increase over 80 to 92, so approximately 12 rupees per SEM. Got it, sir. So price hike price hike?

20:55 Manager input cost per 100% versus have already 17%. So there is a leeway of 3% with us as of now. Got it, sir. Very much clear. Thank you so much. Thank you. Thank you. We have the next question from the line of Anuparek from Anandrati. Please go ahead. Yeah. Hi. Good afternoon, sir. Sir, first question is the export and domestic volume and margin difference for q two FY twenty seven and q two FY twenty six? So exports better margins of pay.

21:44 GBT is almost 98%. Or is domestic 82% GBT. So better margins So almost similar pricing level pay same. So SG and A cost whether I initially So exports and domestic difference So margin difference but volume is better Yes. Volume is better in domestic. Exports, maybe, 98%. So up blended level exports may margin.

22:34 80%, 20%, Sorry. 80% GVT or 20% PVD and ceramics. Blended level Sorry. 82... 18. So blended level margin. Okay. And the volume breakup for the quarter two of FY '27 and '26? So we have Andy with our h one number. So I think total volume was 17.63 out of 3.42 was exported last h one twenty six. And this year is 15... Total volume is 15.04, while export remains to 2.03.

23:26 Understand. Sir, also, can you help us with, like, what is the normal pricing difference for ties between Pajaria and Varmora? Pajaria gas sourcing cost North Region 20% versus So bio fuel mix and compete in North And Central Region. Gujarat gas is around 8,000 cubic... 8,300.

24:35 300 calorie value or propane So gas price calculate Hello? Yes. So... Yeah. So for the Assam plant, we are using coal. So stock pricing and capacity utilization expect for FY '27 '28. Number last last month 50% utilization quarter 75% utilization or the fourth quarter, it will be around 85 to 87% utilization.

25:28 So if our utilization Okay. And, sir, how is the... Like, what what was the for sharp improvement in our margins for q two FY twenty seven? And, also, how... Do you think that sustainable? Same question average realizes an improvement twenty one percent seventeen odd percentages on account of or average product mix product mix utilization, just MRR second half MRR, IT 9% utilization benefit.

26:33 So donor benefit sustainable is a better margin It's first half margin Q1 or Q2 is better. So Q2 margins are better margins we can expect on Q3 and Q4 as well. Okay, sir. Thank you so much. Thank you. We have the next from the line of... Sorry? We have the next question from the line of Jatin Manuja from Varmora. Please go ahead. Hi, sir. Good evening., question. First up, incentive structure or GST benefit So Assam may No. There are two policies in Assam because the region is identified as a backward region by the government... State government, central government. So both schemes have happened. One is floated by central government, and one is floated by central... State government. So there is an interest from from both the working capital and term loan. Working capital is given by state government and term loan from the central government. And there is a minimum capital subsidy from the state government and a GST GST benefit for Northeast Region.

28:01 Okay. Thank you. Second question, sir, outsource and how high can it go? 14% is outsourced. Oh, okay. So any plan how will you... How do you we have a ceramic mostly outsourced. So products, low value can outsource everything, and are producing house. So as per I need to Yeah. So, ideally, we are outsourcing where the margins are low and where we are putting a backup for the other sources.

28:53 Okay. Understood. Right. Last question, maybe it is a bit repetitive, can I? I want to understand the IST technology a bit better. Can you explain how is it different from what our competitor use and what are the benefits that come with it? So normal GVT product body print So IST is the 100% replica of. IST is a completely different technology, or we are first one to launch in India. So, technically, marble is a better product.

29:48 Marble price starts from 4,000 to 3,000 rupees a square feet. When you see a product and look, expect it, it seems to start currently. Or to the consumer, it will reach around 500 to 600 rupees, ma'am. Okay. That'll be Yeah. Okay. I think that was also my pretty informative. Thank you so much, sir, and all the best. Thank you. Thank you. Participants who wish to ask a question may press star and one on your touch tone telephone. We have the next question from the line of, an individual investor. Please go ahead. Hello, sir. Now audible? Yeah.

30:33 Yeah. Thank you. First of all, congratulations on the IPO. But in terms of your volume, can we quantify what is the split between rectified and ceramic? Yes. So for a... For h one twenty seven, the split of GVT, we have 80%... 82%. PVT is 9%, and ceramic is 8%. While in last year, h one twenty six was 75% was UBT, 14% was PBT, and ceramic was 11%, respectively. Okay. Okay. And with respect to our sales, how much of it is is the retail business, and how much is the project project? So six... 72% is retail, and 28% is project, domestic business card.

31:26 Okay. Okay. Thank you. And with with respect to our ad spends, what is our current ad spends, and how much are we targeting for this year? So 1.8% of... Sorry. 1.9%. H one is 1.9% of sales. H one. 1.9%. 1.9 for h one? Yeah. For h one. How much are we targeting for the full year? Full year will be the same. Same line. Same line. Okay. Same lines. Yeah.. And with respect to price hikes, have we taken any price hikes in, like, q one and q two? Like, how much or can you... Would you be able to quantify it as as we are seeing a lot of our input cost being increased because of gas issue? So how much price has has been taken in q one and q two?

32:14 So average q one around 14 percent. Teams are 18% in q two minutes. So average price hike of s two is 17%. Okay. And as we are seeing input input cost improved by 14%. Okay. Okay. So as mentioned, with respect to, I guess, more be the gap cost of again increased to 93 per STM. So are we planning another price or something? No. Average price price price price gas price price Correct. Correct. Correct. Got it. Arthur,, Adi, for our current year or in our near future, what are our k... CapEx plans?

33:49 Utilization is last year seventy two percent average around 76%. So CapEx plan maintenance Maintenance CapEx is very small. Around 9 to 10 crore rupees. No. Okay, sir. So costing time or how much the ad spend ad spend, yeah, h one and full year ad spend and marketing cost. 1.9% marketing spend. Correct. Correct. Same. Same. Yes. One last question will be, at present, vitrified and ceramic capacity of ceramic capacity 100%.

34:46 Okay. Okay. So... Okay. Done. Done. So, sir, sorry. One last question. So, approximately, we are losing out on revenue of around $520,000,000. So any plans how are we able to... Thinking to lower up this amount with respect to, you know, as we grow to Our strategy is be loss focus So East plan almost 6,400,000 additional capacity next year. Correct.

35:34 So immediate additional capacity. So we have no additional revenue increase because I guess at present 12... 12 or 13% year of total revenue. Right? Mhmm. No. I think that's Please, repeat my question. No. But the just a few of our are expecting more revenue from our Eastern Region? At present, I guess, approximately 13%, which is not the map not mentioned. Yeah. Sure. 13% East Northeast revenue, 10% heavy.

36:20 Or East plant specific product So Northeast Northeastern Region, North Bengal, Eastern UP, and Eastern Bihar. Those sizes are Eastern... Northeast plants are building it. Sizes. So revenue size product Okay. Okay. But, like, in overall, I'm not making it to Eastern Region approximately 14% contribute. Right? Yes. Not just Yes. To get up. Expect our Eastern Region revenue in total contribution would be increasing. Right?

37:10 Yes. Yes. Yes. Okay. Okay. Okay. Yeah. Sure, sir. Thank you. That's it from my side. All the best for your time, Varmora. Yeah. Thank you. Thank you. Thank you. We have the next question from the line of Kiran B from Asian Market Securities. Please go ahead. Hi, sir. Good afternoon. Am I audible? Yeah. Yes. We can hear you. Yeah. Sir, just wanted to understand more be may of the industry level capacity utilization and CapEx plan for next one to two year? Additional CapEx announced PVTO ceramics almost So net net, there's a new capacity addition.

37:56 We first half. Second half next year, So And, sir, big player is in in Morbi and outside Morbi, continuous press install. So units continuous press Mhmm. Right. Right. Right. And, sir, discussion But how do you plan to scale this up as a category?

39:13 So price price first half and 17% tiles to price hike in bath fittings and industry. Yeah. Industry almost 25% last month May around 17% So 2517%, this is compared to last year?

40:12 Yes. Compared to last year. Right. Right. Right. Right. So portfolio entire range vis a vis big players, or we are still building the portfolio out here? Right.

41:15 Right. Right. And last question from business as a business broker Right. Right. Thank you. Thank you, Varmora, for your answer. Thank you. Thank you. Thank you. We have the next question from the line of Smith Shah from... An individual investor. Please go ahead. Yeah. Thank you for the opportunity, sir. Sir, my question was also regarding Morbi. So how competitive is the pricing in Morbi Morbi right now? Competitive in the sense? Product delivery In terms of pricing and, like, how do we compare to the bigger listed company?

42:08 So product So average we are, I think, second highest in the industry in somewhere specific product Okay. Sir, two, as I mentioned, h two always first half first half forty forty two percent second half.

42:55 So utilization improve operating leverage or product mix improve. So from margin side, the number six. Okay. Thank you, sir. Thank you for taking my time. Thank you. Thank you. We have the next question from the line of David Meta in. Please go ahead. Hello, sir. I'm audible? Yeah. Okay, sir. So first of all, thank you so much for this opportunity. My first question is that the export has, fallen to 18% in the h one and twenty two percent in q two because of freight availability and cost.

43:41 Has the freight normalized? And when do you expect the export to recover? So, Abhi, freight, the last one comparison Example, US freight around 7,000 to 7,505 thousand 500. What's his availability problem was not only freight. Availability. Availability. Availability. Availability. Availability. Freight or availability Availability. Availability. Be better.

44:26 Okay, sir. Understood. My sec model? Yeah. Yes, sir. So my second question was on the margins. If you compare from, like, export and domestic sales, is the company continuously shifting away from exports? Something like that? HMRA HMRA, our last chart number, they can get to HMRA average 80% domestic or 20% exports, one or 2% plus or minus. But going forward largely focused... We are focused on domestic or exports maybe we are doing only branded business. So business So other more we are taking industry export will be around 40% versus taking it to 18%. It's purely because of we are doing branded business.

45:28 Okay, sir. Understood. Understood. That's it from my side. Thanks. Thank you. Thank you. The best for the future. Thank you. Thank you. Ladies and gentlemen, that was the last question. I now hand it over to the management for closing remarks. Remarks. So thank you. First call or future maybe after support or once again, thank you very much, everyone. Thank you. Thank you. Behalf of VARMORA Granito Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.