ORIENTBELL - Orient Bell Limited Share Price

Management Outlook:
Orient Bell's management remains cautiously optimistic about demand recovery in FY25, expecting green shoots from government/private projects entering tiling stages. Exports may improve as freight costs stabilize, potentially reducing domestic supply pressure from Morbi. The company aims to leverage its expanded GVT/vitrified capacity (58% mix) and premiumization (40% GVT salience) to drive growth. Marketing investments (4% of revenue) and dealer expansion (375 boutiques) are prioritized to strengthen brand visibility. Operational cost savings (4% YoY) and fuel optimization (INR33/SCM vs. INR38-39) supported gross margins (35.5%, +1% YoY). EBITDA margins improved 2% YoY, with potential upside from volume-led operational leverage.

Key Points:

1. Market Challenges: Retail sluggishness, Morbi's steep discounting, and volatile exports persist.
2. Strategic Focus: Premium products (GVT/slabs), digital tools (QuickLook), and South/West market expansion.
3. Operational Efficiency: Solar PPA reduced power costs; gas prices rising but manageable.
4. Capacity & Growth: Adequate capacity (~40M sqm/year) to scale beyond INR1,000cr revenue; targeting 8-10% EBITDA margins with volume recovery.
5. Balance Sheet: Low debt enables flexibility for strategic investments.
6. Risks: Morbi's pricing pressure, delayed project execution, and export market uncertainty.

Question 1:
Sir, earlier, we used to give volume numbers as well as realization numbers. So sir please can you give me the volume and realization for Q3 as well as 9 months and similarly for these two periods?

Answer Summary:
The company has stopped disclosing volume data to avoid revealing strategic insights, as volumes alone do not reflect their premiumization efforts (e.g., GVT growth). Volumes may be shared later in the annual report. Focus remains on revenue and product mix improvements.

Question 2:
Sir, second question was on the margin side. So we've constantly spoken about these cost saving initiatives that we have done as well as branding initiatives that we are doing. Sir so for what kind of margins do we expect like for the Q4 -- so from this 4.5%, 5% kind of margin, where do you see your margins going over the FY '26 and over the next 2 to 3 years?

Answer Summary:
EBITDA margin improvement hinges on volume-driven operational leverage. Current margins (~5%) could rise to 8"“10% with 20"“30% volume growth. Gross margins are stable due to cost optimization, but fixed costs (e.g., branding) limit near-term EBITDA expansion.

Question 3:
Sir, when the industry is not doing well, we are doing marketing and branding initiatives. Sir so at what point do we decide are we going in the right direction? Or what is the minimum return on our investment that we would expect for these initiatives in a market downturn that is going on?

Answer Summary:
Marketing investments aim to strengthen brand visibility for future demand recovery, particularly as projects enter tiling phases. ROI is evaluated through market responsiveness and consumer preference shifts. Spending is optimized quarterly but not halted to ensure competitiveness.

Question 4:
Sir, you mentioned about some marketing expenses that we have been taking. Can you please let us know what the marketing expense you have taken for this quarter as a percentage of the revenues?

Answer Summary:
Marketing spend is ~4% of 9M FY25 revenues, allocated to TV, digital campaigns, and in-shop branding. Future spending may adjust with market conditions but will remain aggressive to drive premium product adoption (e.g., GVT).

Question 5:
We are currently on around annual revenue run rate of around INR700 crores. Would it be fair to say that we have capacity to do almost around INR1,000 crores of revenue? And also with a lot of real estate projects coming up, and there's a lot of presales booking which are happening, how do you see us achieving that INR1,000 crores number?

Answer Summary:
Existing capacity (including JVs) supports INR1,000+ crore revenue. Growth will come from premium products (GVT, slabs), geographic expansion (South/West), and project-driven demand. No specific timeline due to cyclicality, but export recovery could reduce domestic supply pressure.

Question 6:
Earlier, we used to do around 8% to 10% EBITDA margin. So just wanted to get a sense that what has to happen that in coming going ahead, we would again do that 8% to 10% margin?

Answer Summary:
EBITDA margins (historically 8"“10%) require volume growth without steep discounting. Current ~5% margins reflect subdued volumes and branding costs. Operating leverage from higher volumes (20"“30% increase) is critical for margin normalization.

Question 7:
We have expanded our capacity in last quarters. I would like to know according to that, our GVT process, because our sales are constant, almost flat in the last 3 quarters, and our GVT lines and vitrified tiles, we got growth in that. So, is there a lot of degrowth in the ceramic segment, sir?

Answer Summary:
Ceramic volumes declined as GVT salience rose to 40% (from 27% YoY). Capacity expansion focused on GVT, but weak market delayed utilization. Ceramic lines may convert to GVT long-term, but no immediate plans due to sufficient current capacity.

Question 8:
How does the industry demand look and secondly the export market demand?

Answer Summary:
Domestic demand is sluggish due to Morbi's excess supply and discounting. Exports face freight volatility, but lower rates and global competitiveness offer hope. Morbi's potential production cuts (Feb 2025) may ease domestic pressure if exports rebound.

Question 9:
The South Western market is very weak in terms of distribution and our tiles presence in showrooms. What is the strategy for future?

Answer Summary:
Strengthening sales teams, demand generation (architects, masons), and branding in South/West regions. Market responsiveness remains low due to discounting and inventory cuts, but efforts continue to capture future project-driven demand.

Question 10:
In the ceramic capacity on the volumes we give up along with prices or prices are stable with volumes being "¦

Answer Summary:
Ceramic volume decline reflects weaker demand, not pricing. GVT growth offsets this via premiumization. Pricing stability in ceramics contrasts with aggressive discounting in lower-tier markets dominated by Morbi.

Question 11:
Should I think of [the tile industry] like the paints industry where the middlemen have a lot of power?

Answer Summary:
Tile industry is fragmented (top 5 players hold ~20% share vs. 80% in paints). Dealers influence sales, but branding (digital/TV) is increasing consumer awareness. Long-term growth will depend on premiumization and B2B engagement (architects).

Question 12:
Do [dealers] see them selling more of generally tiles overall and also our brand tiles?

Answer Summary:
Dealers using Orient Bell's proprietary tool (QuickLook) show higher sales correlation. Tech adoption remains a challenge for non-exclusive dealers. Efforts to simplify tools aim to expand active users (target: 1,200"“1,500 dealers).

Question 13:
In the coming Feb, the GVT lines at Morbi will be shutdown. Is it because of less demand?

Answer Summary:
Morbi's potential shutdown (Feb 2025) stems from low domestic demand and export challenges. ~300 inefficient units already closed. Production cuts may stabilize prices if implemented, but past shutdowns saw limited adherence.

Question 14:
Our sales from Orient Bell Tiles showrooms... why our share didn't generate [growth]?

Answer Summary:
Active displays grew to 375 (from 352), but weak markets and dealer inventory cuts limited sales. Initiatives (e.g., branding, product launches) continue, awaiting demand recovery from upcoming projects.

Question 15:
Do we have plans to enter tile adhesives (INR5,000cr market)?

Answer Summary:
Orient Bell is evaluating tile adhesives but has no current presence. A launch decision will be communicated later.

Question 16:
Can we quantify Morbi's steep discounts? Have they bottomed out?

Answer Summary:
YTD discounts increased 5"“8% YoY. Recent gas price hikes slowed but didn't halt discounting. Morbi's potential shutdowns may ease pressure, but recovery depends on export revival and domestic demand.