HIL Q3 FY 25 results update

1. Current Performance Update (Overall & Segmental)

Overall Performance

• Revenue Growth: 3% YoY to INR 805 crore (Q3 FY25).

• PBT: Loss of INR 51 crore due to weak demand and pricing pressure.

• Volume Growth: Achieved in key segments despite market challenges.

Segmental Performance Summary

• Pipes & Fittings: 57% volume growth, 38% revenue growth (INR 122 crore), but margin pressure due to low PVC prices.

• Construction Chemicals: 17% revenue growth, strong customer additions (+40% YoY).

• Roofing Solutions: Market leadership maintained, but revenue declined 4% YoY due to pricing pressure.

• Building Solutions: 4% YoY revenue decline, but Boards & Panels saw 6-9% volume growth.

• Parador (Europe – Flooring): 5% revenue growth, 1.3% EBITDA margin (positive turnaround), despite 10% industry decline.

2. Reasons for Underperformance in Each Segment

Pipes & Fittings

• PVC Resin Price Crash (-17% from July to Nov) – Leading to severe margin compression.

• JJM (Jal Jeevan Mission) Spending Down by 70% – B2G revenue impact.

• Intense CPVC Competition – Pricing pressure from market leaders like Astral & Supreme.

Construction Chemicals

• Aggressive Competitive Pricing – Limited ability to pass on cost increases.

• Higher Marketing Spend – Investment in brand-building temporarily impacted margins.

Roofing Solutions

• Demand Shrinkage (~2% industry decline) – Rural sales remained weak.

• Price Erosion (~3-4%) – Impacted margins despite market leadership.

Building Solutions

• Weak Infrastructure Spending – Lower government project allocations.

• Competitive Pressure in Blocks Segment – Price compression & new capacities from competitors.

Parador (Europe – Flooring Solutions)

• European Market Decline (-10%) – Demand contraction led to slower-than-expected revenue growth.

• High Input Costs & Currency Fluctuations – Delayed cost benefits realization.

3. Management Interventions in Each Segment

Pipes & Fittings

• Expanding Retail & B2B Sales: Growing dealer network & institutional sales

• B2G Growth Strategy: Leveraging Crestia’s government business experience

• Cost Optimization Initiatives: Better procurement, logistics, and efficiency measures

• New Product Launches (CPVC, HDPE, Agri Pipes) to capture premium pricing.

Construction Chemicals

• Scaling Up Distribution & Brand Presence: 40% YoY increase in billed customers

• Product Innovation & Premium Offerings: Enhancing portfolio for better margins.

Roofing Solutions

• Value-Added Products Expansion (Ultracool, Aesthetic Roofs).

• Rural Demand Recovery Expected in Q4 & Q1 FY26 – Tied to monsoon & government initiatives.

• Pricing Discipline Maintained to protect premium positioning.

Building Solutions

• New Customer Acquisition & Geographic Expansion.

• Improved Cost Controls – 400 bps margin improvement in Blocks.

• More Value-Added Products in Boards & Panels to enhance pricing power.

Parador (Europe – Flooring Solutions)

• Geographic Expansion (Americas, Middle East, Asia).

• Increasing Premium Product Share (Engineered Wood, Modular ONE).

• Antidumping Duty on Chinese Flooring Imports could boost pricing & demand.

• Cost Rationalization Initiatives (Headcount & Procurement Efficiencies).

4. Management’s Commitment to Growth Aspirations (17-20% CAGR Target)

Long-Term Growth Commitment Reaffirmed: Despite short-term headwinds, management remains committed to achieving 17-20% CAGR over the next 3-4 years.

Key Growth Levers Identified:

• Pipes & Fittings (Largest growth driver, B2G revival).

• Construction Chemicals (Fastest-growing, premiumization focus).

• Parador (Global expansion, premium mix shift).

• Building Solutions (New geographies & cost efficiencies).

Financial Discipline & Profitability Targets:

• Debt management remains a priority (INR 720 crore debt, D/E ratio: 0.59).

• Cost controls across all segments to improve EBITDA margins.

• Q1 FY26 expected to be a breakout quarter with profitability improvement.

5. Key Metrics Analysts Should Track in Future Results

Pipes & Fittings:

• PVC price stabilization & impact on margins

• Narrowing of margin gap in this space vis a vis other competitors

• New product contributions (CPVC, HDPE, Agri Pipes).

Construction Chemicals:

• Continued revenue growth momentum (~17% YoY trend).

• EBITDA margin improvement as branding costs stabilize.

Roofing Solutions:

• Rural demand pick-up in Q4 & Q1 FY26 (monsoon & government projects).

• Pricing recovery post-seasonal weakness.

Building Solutions:

• Blocks segment profitability & margin expansion sustainability.

• Infrastructure spending uptick benefiting Boards & Panels.

Parador (Europe – Flooring Solutions):

• Revenue growth > 5% (indicating global expansion progress).

• EBITDA margin improvement from 1.3% to 4-5% (cost optimizations taking effect).

• Antidumping duty impact on pricing & demand for Engineered Wood products.

Overall watching Q1 FY 26 remains the key as management has hinted that Q1 FY 26 will be a breakout quarter