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Key Conference Call Highlights

Industry Structural Positives

* The management highlighted that organised and branded players are expected to benefit from the current industry disruption, particularly as smaller Morbi-based manufacturers face operational and cost pressure

* Morbi players now on the same gas source (GSPC) — eliminates the historical cost advantage of LPG/propane users, levelling the playing field

* ~40 days of industry inventory wiped out — equivalent to a full year's growth gap which must be replenished

* Ensuring demand will return for tiles in the coming period considering limited substitute for flooring/wall application

Operational Performance

* Tile realisation per MSM improved by INR 6 in FY26; H2 strategic focus was clearing non-JV/outsource stock ahead of April price hike

* The company is operating at close to full effective utilisation across key plants, excluding certain low-value-added kilns which remain strategically shut

* Capacity utilisation remained largely stable at around 79% for FY26, while Q4 utilisation improved to nearly 82%

* Net dealer addition of 200, taking the total showroom count to ~3,100 across India. Dealer expansion continues to support deeper market penetration and stronger brand visibility across India

* Working capital improved by ~4 days; receivable days down to 40 days (standalone: 38 days)

* SOMC Max achieved EBITDA break even during Q4FY26, marking a significant turnaround from the loss reported in Q4FY25. New press installed to boost utilisation; management expects profit from FY28E

Gas Cost & Pricing Impact Key Risk

* Gas prices increased sharply due to geopolitical tension, materially affecting industry cost structure

* Morbi gas price is around INR 74/SCM + 6% GST (GSPC supply). North plants INR 3 to 4/SCM cheaper than Morbi. South plant at INR 78/SCM but a long-term contract from next month expected to reduce it materially

* Total cost inflation: INR 6.5–7/sq ft (gas INR 5.5–6 + other inputs INR 1–1.5)

* To offset rising cost, SOMC implemented price hike of 16–17% in tiles (retail: 100% pass-through; project segment 85–90%). While ~8% price hike for Bathware/sanitaryware in April 2026 (Bathware had an earlier 18% hike in Feb 2026)

* Gas price today are broadly back to the level of 2 years ago — tile pricing had already fallen 15–20% in the interim. So, the net impact on the consumer is limited

Morbi Situation

* Gas supply resumed from 1 May; ~60–65% of Morbi operational as of call date, expected to reach ~85% by month-end

* Major labour shortage in Morbi is the primary bottleneck now, not gas

* OEM partner plants, supplying organised players are expected to remain operational despite broader stress in the Morbi ecosystem

* Around 10–15% of Morbi capacity may remain permanently shut due to inefficient operations and higher gas cost, potentially aiding industry consolidation in the medium term

* Morbi raised prices ~30–35% vs ~16–17% for organised players — narrowing down the price gap and improving competitiveness of branded players

Guidance & Outlook FY27E

* Revenue growth could be 20–25% if current price level holds (high single-digit volume + ~15–16% price)

* Sanitaryware targeting aggressive double-digit growth; only 25% of dealers currently selling sanitaryware — large cross-sell runway

* EBITDA margin target: Will improve by 150bps from 9.3% of current base

* Capex guidance: INR 700–800 Mn for balancing equipment and plant upgrades. Investments are focused on improving profitability and utilisation at SOMC Max and Vintage plants rather than undertaking large greenfield expansions

* New industry-wide capacity additions unlikely in the next 18–24 months, given currency and geopolitical uncertainty — positive for incumbents

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