ACRYSIL LTD (ACRYSIL) Q3 FY23 Earnings Concall Transcript

ACRYSIL LTD (NSE:ACRYSIL) Q3 FY23 Earnings Concall dated Feb. 15, 2023.

Corporate Participants:

Chirag Parekh — Chairman and Managing Director

Anand H. Sharma — Chief Financial Officer

Analysts:

Jensen Jacob — Centra Advisors — Analyst

Udit Gajiwala — Yes Securities — Analyst

Aman Agrawal — Equirus Securities — Analyst

Nikhil Gada — Abakkus AMC — Analyst

Shrinjana Mittal — Ratnatraya capital — Analyst

Harsh Jhanwar — Centrum Portfolio Management Services — Analyst

Varun Arora — Safe Enterprises — Analyst

Nitin — KIFS Trade Capital — Analyst

CA Garvit Goyal — Invest Research — Analyst

Tushar — Kamakhya Wealth Management — Analyst

Ridhima Goyal — — Analyst

Rishabh Doshi — Nirmiti Investment Advisors — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Acrysil Limited Q3 FY ’23 Earnings Conference Call. [Operator Instructions]This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on-date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]. Please note that this conference is being recorded.

I now hand the conference over to Mr. Chirag Parekh. Chairman and Managing Director. Acrysil Limited. Thank you and over to you sir.

Chirag Parekh — Chairman and Managing Director

Good evening, everyone, and thank you for joining us on Acrysil Limited Quarter Three FY ’23 Earnings Conference Call. I hope everybody had a chance to review our financial results at investor presentation we have recently posted on the company’s website and stock exchanges. I am accompanied by our CFO, Mr. Anand Sharma and SGA, our Investor Relation Advisors on this call today.

Let me begin by giving an update on the global scenario. The world today is challenged by inflation resulting in a steep decline in global economic activities. Several factors such as the risks driving cost of living, challenging financial conditions, Russia’s invasion of Ukraine and presence of the COVID 19 are hurdles of economic progress. Despite the challenging global economic scenarios, India sails through the tough times shining through dark times, India emerges as the highest-growing economy in the world. Understanding the potential of the Indian economy and the growing demand for the [Technical Issues], we have built up sufficient production capacity to satisfy this steadily increasing demand in the domestic markets.

In our previous earning call, we informed you that our sales channels carried high inventory during COVID 19 period. We are receiving feedback from our major customers that the destocking happening is quite successful and gradually reaching towards the optimum levels. We have started to receive good orders for our quartz sinks in the U.S. and UK markets, etc. We foresee the macro demand of our quartz sink to [Technical Issues].

On quarter-on-quarter basis. While we witnessed the positive rebound in our U.S. and UK markets, Europe lagged due to rising costs and inflation. As a testimony to improving demand in U.K., our subsidiaries have exceled in delivering strong business performance. The ongoing inflation energy crisis and cost escalation in Europe presented as an opportunity to briefly supply gap, which will ultimately lead to an expansion of our customer-base across the growth. We are already in discussion with few of the customers for their future requirements.

While demand in global markets in its recovery phase, we are enhancing our focus on the growing demand in the domestic and the emerging markets around the world and gradually ramping up our distribution and dealer network. Our aim to grow our institutional sales in domestic market. We hired a new team to focus on this vertical. We have already started supplying to mega projects and its associate builders exploring the possibility of collaboration with them for upcoming projects as well.

Recently, we acquired 60,000 square meter of land near existing plants in Bhavnagar, Gujarat. The acquired land will play a critical role in our aggressive future expansion and new projects plan. Additionally, we have increased the capacity of our steel manufacturing, stainless steel sink manufacturing unit from 90,000 sink to 180,000 sink and commercial production is expected to begin from March 23. These steel sinks will be manufactured in the form of [Technical Issues]and fabricated and PVD sinks. We are currently exporting PVD sink to UK, France and Germany. Good demand for PVD sink from export customers, a positive indicator of future growth. The PVD technology has esthetic value by coating in different metallic colors like gold, rose gold. black, etc., for the steel sick, which were available until now in naturals steel color. The price of the PVD are higher than the prices of the handmade and the quartz sink [Technical Issues] free contributing to higher validation and revenue.

Now let me give an update on our built in appliance and faucets division. As we outlined earlier in our previous quarter, we have started execution of [Technical Issues] machines for setting up manufacturing/assembly line of building appliances. We are of the opinion that there is lot of scope for us to expand our supply domestic market and hence our manufactured appliances will give us us tremendous opportunity to increase the geographical reach across the country, as well as give a very competitive edge in terms of cost.

Our faucet assembly line of 100,000 faucets are starting on a pilot basis, will get full-fledged commercial products in quarter one FY 23 onwards. Within segment, we will stick to our core philosophy of innovation and delivering highest-quality products. Therefore we envisage the margins in building appliances business to be similar levels as our consolidated businesses, which will be the [Technical Issues] key driver growth in the years to come. Incorporation of a wholly-owned subsidiary in Dubai and UAE, we are proposing incorporate or wholly-owned subsidiary Dubai to cater the GCC market, focusing on the sale of the kitchen and bath products. We are planning to open an exclusive showroom and display of our products at a prominent plays across along with [Technical Issues]] Dubai. This is in connection with success what we had at the Big Five exhibition in Dubai few months back.

The [Technical Issues] Dubai, enhancing focus on the building appliances [Technical Issues], leverage of the brand character globally and [Technical Issues] is new and emerging market, especially the GCC market where Saudi Arabia is expected to be the next big potential market in the GCC. B, it is a positive entry product that will help us to improve our wallet share with existing customers and at the same time, help us to acquire new customers by providing a complete bouquet of kitchen solutions.

New product introduction exhibitions. We have introduced a super strength sink [Technical Issues], which has approximately 50% more strength than our regular quartz sinks available in the world. These are things that require minimal packaging and increase loading availability in container, which will result into cost-savings, impacting fright adding to improvement in margins. Further, we have also started manufacturing of green sinks and launched the same in all the key markets, recently in U.S. [Technical Issues]exhibition. The initial response from our customers have been overwhelming and encouraging with the confidence key to aim for ecofriendly and more sustainable growth in future. We also showcased a[Technical Issues]green PVD sink in [Technical Issues] Dubai and KBIS Las Vegas exhibition. It has been highly appreciated by our customers and visitors. We also successfully launched [Technical Issues] the product range in the kitchen and bath International Show in Las Vegas last month, and we have received a lot of appreciation of of its luxurious and esthetic value.

Overall, outlook Q4 FY23 looks positive. However, we will get more clarity after quarter four. Now, I would like to hand over the call to our CFO, Anand H. Sharma, to update you on the company’s financial performance. Thank you. Thank you sir. Good evening everyone. Let me take you through the consolidated financial performance of the company. Quarter 3 FY23 performance, consolidated total income stood at INR148 crores in quarter three FY23 as compared to INR128 crores in quarter two [Phonetic] FY23, a growth of 8%. EBITDA of the company stood at INR25 crores in quarter three FY23 as compared to corresponding last year quarter of INR31 crores, a de-growth of 19%. Profit-after-tax and minority interest for the quarter stood at INR100 crores in Q3 FY23 as compared to INR17 crores of quarter three FY22, de-growth of 30%. Nine months FY23 performance, consolidated total income stood at INR448 crores in nine months FY23 as compared to INR345 crore in nine-month FY22, a growth of 40%. EBITDA of the company stood at INR82 crores in line with FY23 as compared to INR84 crore of last year nine-months FY22. Marginal de-grown, of 2%. Profit after tax and minority interest stood at INR40 crore as compared to INR48 crores in last year nine-month FY22. Sales volume for quartz sink in nine-month FY23 stood at 4,01466 units as compared to 476,659 in last year nine-months FY22. I mean, this is by 16%. Stainless steel sink for this nine month FY2023 stood at 81,185 units as compared to 73,093 in last year nine month period, that is higher by 11%. Kitchen appliances in nine months FY23 stood 91957 units as compared to 15,112 in last year nine-month period that is higher by 45%. Thank you. Now I open the floor for questions and answers. Over to you operator.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions]. The first question is from the line of Jensen Jacob from Centra Advisors. Please go-ahead.

Jensen Jacob — Centra Advisors — Analyst

Thank you for taking my questions. The last call you had mentioned that in a plan to add 0.5 million capacity for things in addition to the one million capacity

Operator

Sorry to interrupt you, Mr. Job, the audio is muffle from you line. Please use the handset mode.

Jensen Jacob — Centra Advisors — Analyst

Am I audible now.

Chirag Parekh — Chairman and Managing Director

Yes.

Jensen Jacob — Centra Advisors — Analyst

In the last call you had mentioned that you have enough your plan to add up to 1.5 million capacity in quartz sinks. But in the recent land acquisition announcement, you disclosed that the existing capacity has been fully utilized. Can you please throw some light on this.

Chirag Parekh — Chairman and Managing Director

So. I think we have never said that we are doing 1.5 million capacity. So that’s number one. We also mentioned that we expand to 1.2 million capacity where one billion capacity was installed and further 200,000 units were going to be going to be expanded. In the last quarter, we had clarified that we because of this global recession, we going to use this 200,000 kitchen sink capacity into manufacturing [Indecipherable].

Jensen Jacob — Centra Advisors — Analyst

Okay. A follow-up to that, do you plan on utilizing the newly-acquired land for quartz sinks or other segments.

Chirag Parekh — Chairman and Managing Director

So the opportunities are exciting. We have some — we are exploring in which category, but there are, but it could be across the categories from faucet, hoods or to the ceramics to the kitchen surfaces. So we are based on what the, you know, we are able to make the deals with our potential customers, and based on that, we will be able to sort this out. And like we had always said that the UK acquisitions or any acquisitions that we do, we eventually will do a backward integration on it and try to substitute sourcing from the other countries to India. So yes, opportunities are there. We are just exploring at this point what we will do.

Jensen Jacob — Centra Advisors — Analyst

Understood. That’s all from my side. Thanks.

Operator

Thank you. The next question is from the line of Udit Gajiwala from Yes Securities. Please go ahead.

Udit Gajiwala — Yes Securities — Analyst

Sir, [Technical Issues].

Operator

Sorry to interrupt you, the audio is breaking from your line, sir, please check.

Udit Gajiwala — Yes Securities — Analyst

Yeah, am I audible now?

Operator

Yes, sir, thank you. Yes sir. Thank you.

Udit Gajiwala — Yes Securities — Analyst

Yeah, I just wanted your comments on the Q4 volume trajectory that you are looking at from the current order book that you might be having.

Chirag Parekh — Chairman and Managing Director

Yeah, so, like we have said, the outlook looks quite positive based on the latest exhibition, wat we have done, which I was not that confident in the last earnings call, which I said that the quarter three would be probably in line with the quarter two. I think this is what we achieved it also. Looking at the recent. my visits to the customers and what we are reading is that what we were expecting the U.S. to have a hard crash is probably not happening. We, the orders of the major markets like the UK and U.S., India, the order booking is quite healthy, ramping-up. So we definitely take that. Quarter-on-quarter the volumes will improve, but at the same time, we are still having this challenging situation to what they will improve we don’t know. But yes, there we expect that with what we are witnessing that there could be a volume growth on a quarter-on-quarter basis. That’s all I can say right now.

Udit Gajiwala — Yes Securities — Analyst

Okay sir, could you explain another pricing. Have we taken any price increases in our quartz sink industry because the realization for this quarter looks much higher [Technical Issues].

Chirag Parekh — Chairman and Managing Director

I’m not able to hear the call?

Anand H. Sharma — Chief Financial Officer

So your question is whether the price realization is better in this quarter, right.

Udit Gajiwala — Yes Securities — Analyst

[Technical Issues]

Anand H. Sharma — Chief Financial Officer

Yeah, so because we have introduced some more kind of SKUs, new models where we have a higher realization and also in the steel sink prices has gone up. Input costs have also gone up. Consequently, prices also gone up and some mix of the our price in quartz sink were higher. So, [Technical Issues].

Chirag Parekh — Chairman and Managing Director

Just to add, the export also started to happen where we have a better price realization.

Udit Gajiwala — Yes Securities — Analyst

Understood, sir. And, sir, on margin front, if you can throw some light. Sequentially, we have improved substantially by approximately 200 basis-points on the consolidated level. What should be the stable margin that we should work with on annual basis for next couple of years.

Chirag Parekh — Chairman and Managing Director

I think our margin profile is not changed. It’s only the volume which is going to drive the margins, our margin is same what we were getting in the earlier year. So margin profile remain intact. Once the volume growth will happen, margin will improve further.

Operator

Thank you, Mr. Gajiwala, may we request that you return to the question queue for follow-up questions. So we’ll take the next question from the line of Hemant Agarwal from Equirus Securities. Please go ahead. Yeah, thank you for the opportunity, sir. Sir, first question is regarding Carysil Surface, our subsidiary. So from the 3Q numbers, I feel that the company has reported good number. So just wanted to go and understand your view on the company’s operation. Is it the kind of growth we expect from that company and the kind of margins or margin improvement we see over there?

Chirag Parekh — Chairman and Managing Director

Which company? Carysil Surface [Speech Overlap] Sylmar, yeah, so I think the good thing has happened with [Technical Issues] but Sylmar, which is now Carysil Surfaces, which has now — we would able to target a lot of new customers in the UK. So we’ve been able to beat our forecast as far as the subsidies are concerned. There also we have seen margin improvement and we’ll see more of the margin improvement in Sylmar because during the COVID times, input costs have gone high and we’ve increased our prices. And now with the slowdown the prices of freight and input costs are coming back to the pre-pandemic level so there’ll be a margin improvement.

Aman Agrawal — Equirus Securities — Analyst

So. Just understanding more on that company. Is there any like we see for the Quartz sink and steel sink [Technical Issues] slow down, is there any impact on that company as well in terms of demand?

Chirag Parekh — Chairman and Managing Director

No, so. I think we have clarified in Investors Presentation. The sales have increased.

Anand H. Sharma — Chief Financial Officer

Mr. Parekh he is asking because the quartz slow down, is that infecting sufaces also?

Chirag Parekh — Chairman and Managing Director

Surfaces have not been effected. It was all the — there was no stocking happening from the services side, because 99% of the orders are based on the actual orders by the customers. [Technical Issues].

Aman Agrawal — Equirus Securities — Analyst

Super. Understood. And sir, secondly on the appliance side. We seem to be going big on the appliances business with our new subsidiary also coming in Dubai. So with existing market that is already competitive, how do we explain right to win in this segment?

Chirag Parekh — Chairman and Managing Director

So, I think which we have [Technical Issues] mentioned it ever [Technical Issues] our emphasis is going to be on the kitchen built-in appliances. Primarily, we will be focusing on the kitchen hoods and hobs. So we have higher the new engineers from a very reputed institutions like IIT and we are planning to do the complete new innovation kind of kitchen puts and hobs. which will give us a much better competitive edge in the market. So that’s number one.

Number two is, like I said, we never focused much on the built-in appliances and while you have seen the nine-month number have grown by 45% from 15,000 to 22,000 numbers. So we are recruiting the whole new team for India for the built-in appliances purposes. We’ve been able to track some very good people because people are eventually going to drive the built-in appliances. So we’ll be expanding our sales channels across and while we’ve were doing a lot of innovation. And like we said, we will be going to do in-house assembling and manufacturing, which will give us a much better competitive edge than the competitors. So we are very bullish on the kitchen hoods and hobs category.

Operator

Thank you, Mr Agarwal, may we request that you return to the question queue for follow-up questions. The next question is from the line of Nikhil Gada from Abakkus AMC. Please go-ahead.

Nikhil Gada — Abakkus AMC — Analyst

Yeah, hi sir, thanks for the opportunity and congrats on a decent set of numbers in such kind of difficult times. Sir my first question is, you know when I look at the domestic numbers, while you say that the focus remains there and we are trying to expand our channel and penetration level. In 3Q, we see that the growth has been sort of flattish and we are already on a lower base. So can you highlight, are we seeing some amount of demand slowdown in the domestic markets as well.

Chirag Parekh — Chairman and Managing Director

No, sir. I think If you to be fair exactly, there is a problem happened with lot of backlog and destocking happening at the domestic side also, where we had a huge backlog during the COVID level times. So there were destocking happening now which is good. As far as the demand is concerned, on the secondary sales side, it is not higher than we are having on the primary side. So which is a very good sign. You see that changing in quarter four.

Nikhil Gada — Abakkus AMC — Analyst

Yeah, because we are consistently adding new dealers and I am assuming that once.

Chirag Parekh — Chairman and Managing Director

Yeah, yeah, correct, probably there is more issue with the destocking with primary sales.

Anand H. Sharma — Chief Financial Officer

And just to add on this, Nikhil, because of this Diwali season all, those stock are built in the quarter two and that get clear in the quarter three. So that’s the main [Technical Issues].

Chirag Parekh — Chairman and Managing Director

You will be able to see quite a bigger [Technical Issues] in quarter-four.

Nikhil Gada — Abakkus AMC — Analyst

Just a follow-up to that. You mentioned in your opening commentary about this mega builders that you are targeting and I think this is sort of a new channel that you are also trying to sort of address too. So can you give some qualitative comments on what the target you are planning from the sort of a channel over the next one or two years?

Chirag Parekh — Chairman and Managing Director

Yeah, sure, so I can give you view. So, I think the first initiative that we want right now, our project sales are approximately 20% of our total sales. And with the incremental growth what we expect, we expect the Granite sink and steel sink in the next three years to double the quantity of that, which we feel that 50%, 40% to 50% of that can come from projects. So. I think it’s very important that we have a separate B2B team just for tapping the architectures and the builders, which we are doing it.

Nikhil Gada — Abakkus AMC — Analyst

Sir, when you say project sale is 20% of domestic sales, right.

Chirag Parekh — Chairman and Managing Director

Yes, 20% for domestic sales which we see a potential next three years to double this quantity and out of doubling this quantity to all the incremental growth, obvious substantial 40% to 50% should come from the builder degment.

Nikhil Gada — Abakkus AMC — Analyst

Sir, just, sorry just to further elaborate.

Operator

Sorry to interrupt, Mr. Gada, may we request that you return to the question queue.

Nikhil Gada — Abakkus AMC — Analyst

I just have a follow-up on the same thing, if it’s possible.

Chirag Parekh — Chairman and Managing Director

Yeah, yeah, go ahead.

Nikhil Gada — Abakkus AMC — Analyst

Sir, just on this project sales itself, you know what kind of pricing? Is the pricing going to be lower than what we would sell in the retail market, If so, by how much?

Chirag Parekh — Chairman and Managing Director

[Foreign Speech] 15% to 20% lower.

Nikhil Gada — Abakkus AMC — Analyst

Okay, and that is something we will target.

Chirag Parekh — Chairman and Managing Director

So again, but at the same time, we also have the cost-effective method to supply to the builders, offer different material and a different backing also. So we will be kind of almost offsetting that impact of cost.

Nikhil Gada — Abakkus AMC — Analyst

Got it sir, understood. I’ll come back in the queque.

Operator

Thank you. The next question is from the line of Shrinjana Mittal from Ratnatraya capital, please go-ahead.

Shrinjana Mittal — Ratnatraya capital — Analyst

Thank you for the opportunity, sir. First question is on the line of channel inventory sir. Right now, as of this quarter, what would be channel inventory that you have?

Chirag Parekh — Chairman and Managing Director

Sorry, can you repeat. You are not audible and clear.

Nikhil Gada — Abakkus AMC — Analyst

Sorry, sir. I was asking, what is what, what is the channel inventory right now? How many months of inventory do we have as of now?

Chirag Parekh — Chairman and Managing Director

Yes, so. I think like I said, destocking is almost over now. So the normal levels of two month inventory, which a distributor keeps, which is there now.

Shrinjana Mittal — Ratnatraya capital — Analyst

Okay, okay. So we have like we have reached the normal level of inventory.

Chirag Parekh — Chairman and Managing Director

Normalcy as far as the destocking is concerned in India.

Shrinjana Mittal — Ratnatraya capital — Analyst

Okay, also on export side, sir.

Chirag Parekh — Chairman and Managing Director

Yes, export side, major customers, yes, the major bookings.

Shrinjana Mittal — Ratnatraya capital — Analyst

Also one more question on the UK subsidiary. So the UK subsidiary. I just wanted to understand sir, do we — how many months of inventory does the U.K. subsidiary holds given that prime leaders sell in the UK market.

Chirag Parekh — Chairman and Managing Director

So as far as the currency part is concerned, which is our normal, mainly distribution of kitchen sink, approximately 45 days. And as far as the surfaces are concerned, it is completely made-to-order.

Shrinjana Mittal — Ratnatraya capital — Analyst

Okay, sir, you have made to oder.

Chirag Parekh — Chairman and Managing Director

Only the inventory could be on the walk-in process. If there are some challenging jobs, then that inventory can go may be more than 30 days, yeah.

Shrinjana Mittal — Ratnatraya capital — Analyst

Okay, understood sir, Thank you.

Operator

The next question is from the line of Harsh Jhanwar from Centrum Portfolio Management Services. Please go ahead.

Harsh Jhanwar — Centrum Portfolio Management Services — Analyst

Hi, sir, thanks for the opportunity. Sir, I want to check with you on any update on any new partnerships that we have signed or is in process of signing with the global retail clients.

Chirag Parekh — Chairman and Managing Director

Thank you for the question. I was waiting why nobody asked me that. Yeah, so I think I had mentioned last-time that there is a lot of opportunity for our company, which we are targeting at this point. Due to the higher manufacturing cost by our European competitors, especially Germany. And somebody also at our last-time now, the price different used to be our query. Now it’s about 35% and brings a lot of opportunity for us on the table. While I say that I would try to avoid any kind of futuristic things, but all I can say is that we have few advanced discussions happening with some of the very key players in the world. And we, it is just the idea and we just like hope that. I mean, we are quite positive that this could soon materialize.

Harsh Jhanwar — Centrum Portfolio Management Services — Analyst

And, sir, follow-up to that again, we have already signed with IKEA two years back and we have a great good relationship and good track record with them. So during this last quarter, where your competitors had increased — had increased cost of manufacturing, did we see higher offtake or higher wallet share with IKEA?

Chirag Parekh — Chairman and Managing Director

Yeah, so I mean, I think you are asking very key question. I think we have a last week visit from a global sales supply-chain team, especially their purchase team. Their global team had come to see our factory and so exactly our question that you have experienced the higher-cost with the other competitors and why are we not getting a larger wallet share. And to gain this major wallet share from us and that’s why, the team was here and to see that you know that our Carysil as a partner. I think they went with lot of positive feedback. That’s all I can tell you. We await final response from that side. But. I think they went with quite a bit of a positive feedback and we hope that we get the same feedback and be able to increase our wallet share with them.

Harsh Jhanwar — Centrum Portfolio Management Services — Analyst

Got it, got it. And sir, last question was, you know, our intention of evaluation of getting into ceramic industry. So sir, we are operating in a very niche segment, which is the business is quite profitable. So what is the rationale at look at ceramics where it’s generally very competitive and t may not be able to make similar kind of return profiles.

Chirag Parekh — Chairman and Managing Director

But. I think that’s — I think that’s depending upon the company’s strategy. You look about [Technical Issues]. So they are — ceramic prices are incredible. They ar selling probably five times higher than what the Indian manufacturers are. So it depends where you position your branded products. As far as we are concerned, we always work with premium segment because we feel that there is a lot of space here. And so, any new products in ceramic, which you are outsourcing currently, we have been positioned at premium level. So our per piece realization is even much more higher than the Quad’s products. Now to just, very quickly, we’ve been now targeting the mid segment of the market with the [Technical Issues] collection where we are getting overwhelming response. We’re adding three more ranges to it. And yeah, we will be able to see that is more of volume-based target segment. We are doing it. Mostly builders and also the customers. I think we should be able to now gain larger volume. But even while I say, it is still the per piece price is in comparison with our cost products system, nothing is lower than that. And even the margins are in comparison with the box products.

Harsh Jhanwar — Centrum Portfolio Management Services — Analyst

Thank you. Mr. Jhanwar, may we request that you return to the question queue for follow-up questions. We’ll take the next question from the line of Mr. Varun Arora from Safe Enterprises. Please go-ahead. Yeah, hi, thanks for the opportunity. Sir, my question is. I mean, if I look, you have quartz sink and steel sink contribution. It seems that this year we’ve seen a higher decline coming from quartz sink volumes. This is obviously after a very strong increase last year even the quartz sink. While our steel sink business seems to be stable this year, year-on-year, if you look at nine months. So if you can just give some color as to what you’re seeing across the two, why there is a higher decline in quartz sink this year.

Chirag Parekh — Chairman and Managing Director

Hello same thing, primarily is because of the destocking happening with our major export customers here there is 75% exports quartz sinks versus we have only 10% of exports happening in the stain steel sink. India being a more resilient market, there has not been much variation to it and where the exports have been more challenging times. So that’s the reason.

Varun Arora — Safe Enterprises — Analyst

Sure sir, but in terms of secondary demand, any color like our quartz sink, like what’s the growth like I mean is the didfference much lesser in the secondary side when we look at quarts sink and steel sink.

Chirag Parekh — Chairman and Managing Director

Different than pricing?

Varun Arora — Safe Enterprises — Analyst

Difference in demand, you know that you seeing seen this year, is it much lesser at the secondary leve?

Chirag Parekh — Chairman and Managing Director

. I’m just clarifying, I’ve said it before, the flavor for quartz sink is increasing on a quarter-on-quarter basis, I will say month-on month basis So. I think that’s not going down. We have seen a sharp increase in the demand of the quartz sink. Not only the retails, but also with the builder side. I met some few major builders and the only thing is that there is a price issue and most other builders turn away because of the timing of the products. So we are now trying to work out like I told one of my friends on the call that we are on a separate product material system and a packaging system which we can be able to offset that with a lower price to the builders. So mostly it has to do with the pricing. If we are able to give the products and steel sink. I think everybody is going to buy quarts sink, most of them will buy quarts sink. As for the retail side is concerned, I think we have been seeing on a quarter-on-quarter basis, the demand on the quad sinks versus steel sink are on a increase.

Operator

Thank you, Mr. Arora, may we request that you enter the question queue for follow-up questions. We’ll take the next question from the line of Nitin from KIFS Trade Capital, please go-ahead. Yeah, thanks for taking my question. This existing capacities, which we have so can you tell me what is the maximum revenue potential from each segment-wise.

Chirag Parekh — Chairman and Managing Director

So on the quartz sinks, we have a capacity of 1 million sinks, which result about INR600 crores, INR550 to INR600 crores. As far as stainless steel sinks are concerned, we are at 90,000, which we are soon expanding to 180,000. That is about 1000,000 units. We will do about INR45 crores to INR50 crores and at 180,000 units, we should be doing around INR80 crores to INR90 crores.

Nitin — KIFS Trade Capital — Analyst

Okay and the third-line, kitchen appliances..

Chirag Parekh — Chairman and Managing Director

Third is the is built-in appliances which will be the taps and the building appliances, which we have said [Technical Issues]. Assembly line of starting which we said of 10,000 taps to start with. [Technical Issues]. Appliances on 1000,000 units will give a turnover of approximately INR80 cores to INR90 crores. So that’s the first grade we are doing at 100,000, INR80 crores to INR90 crores. So, based these three segments, you would be reaching approach INR100 crores max [Technical Issues].

Anand H. Sharma — Chief Financial Officer

Yes, that’s the Indian sales we have for.

Chirag Parekh — Chairman and Managing Director

Yeah, that’s the total capacity here.

Nitin — KIFS Trade Capital — Analyst

Yeah, am I missing something.

Chirag Parekh — Chairman and Managing Director

No, you are okay.

Nitin — KIFS Trade Capital — Analyst

So, now your long-term is to have INR1000 crores. So, that’s the ambition, which spelt out. So now to that balance 200, you will need incur certain expenses, which you must be on your drawing board stage at this point of time.

Chirag Parekh — Chairman and Managing Director

Yes.

Nitin — KIFS Trade Capital — Analyst

So, what that kind of a capex will be needed.

Chirag Parekh — Chairman and Managing Director

You see, we are having this the AOP over budget meeting in March. So we are right now like I’ve said with one of my friends that we are exploring opportunities where we need to do that. So, I think you’ll have more clarity by end of March that we can share with you.

Nitin — KIFS Trade Capital — Analyst

Okay, but I presume you will be not — it has to be margin-accretive and lesser payback. That’s the internal target you must be keeping benchmark, right.

Chirag Parekh — Chairman and Managing Director

So I think needless to say that Carysil always focuses on the margins, which we see — I think you probably would have seen this quarter to be. Margin is our core focus. For a quarter or something, it maybe for a particular project or something or a one-time expense. But generally, yes, we always look at keeping our margins intact.

Nitin — KIFS Trade Capital — Analyst

So, no, because like we need to think little beyond two years horizon because whatever this potential of the existing capacities, that we will be definitely hitting two years or three years max. And anything to plan beyond that will need another six to eight quarters to scale it up. so. I think there is something which you need to throw. Am I right in thinking that should be something in six months you should be out for blueprint beyond three years.

Chirag Parekh — Chairman and Managing Director

Yeah, so like I said, the markets are volatile across the world. While we see definitely a positive outlook, the quarter-four by end-of-quarter four, we will be able to map out exactly what’s happening and we will give you a much clearer picture right then. So maybe in the next earnings call, you may have more clarity from us, are we going to do that.

Operator

Thank you, Mr. Nitin, may we request that you return to the question queue for follow-up questions.

Nitin — KIFS Trade Capital — Analyst

We’ll take the next question from the line of CA Garvit Goyal from Invest Research, please go-ahead.

Chirag Parekh — Chairman and Managing Director

Hello, good morning Chirag, sir. Thanks for the opportunity. Am I audible clearly. Yes, audible.

CA Garvit Goyal — Invest Research — Analyst

Okay. Sir, considering this energy crisis in Europe and the European manufacturers not able to operate thei plants there on at similar cost levels as earlier. You seem positive on the opportunity coming to you, but at the same time you are saying. European demand is not there due to energy crisis, which is reflected in our volume numbers as well, which are Q-on-Q down by approximately 18%. So my question is, number-one, whether we can expect volumes to recover in-quarter four to the levels of that in quarter one FY23 or these volume shall recover only once these energy crisis gets sorted. I am asking is because If the later is the case, then European competitors will also be able to operate their plant at their post after that energy crisis get sorted. So if demand recovers and supply will also be there, so I’m not understanding how we are going to be benefitted because you mentioned in the earlier call, demand is there in the European system [Technical Issues], which shall get resolved in quarter four, it seems logical that demand is there, but their domestic supplier is not able to make the cost-effective supply. So the demand shall come to us, but if the demand only is not there, then energy crisis they are facing whatever, then there is no question of shifting it from Europe to India. So kindly put some color on that, sir.

Chirag Parekh — Chairman and Managing Director

So I think. I would like to clarify that there is a [Technical Issues] the economic side. But we also need to understand that 70% of their sales are, or more than 50% of the sales are happening outside Europe for them even for our comparative German manufacturers. So where Europe has still struggled, but we may have opportunities in America and rest of the world. So. I think that’s number one, which like I said, there are opportunities on table. We are in advance discussion with few of the large companies across the world, which will be able to share with you soon hopefully. Number two Is this energy crisis. If you read very carefully what is happening in Europe at this point of time, it’s quite alarming. So most of the — maybe it’s not coming out too much loud in media and all — clear in and all, but there is a struggle right now for the energy. While they may get energy but the prices are off the rules. I have discussion [Technical Issues]. I would not name blame anybody, but some very prominent companies who are manufacturing in Germany and in Europe and they really [Technical Issues]. This situation of war, the situation of the energy crisis. Also there is a one more issue, which we do not address is employment. So the labor. So we are not able to get labor to work. So they need to pay relatively high salaries to get people, if they want to hire people there. So that’s another very big challenge in Europe, what hey are facing. I think we see opportunities if not soon in Europe or maybe later in Europe, but I think by that time I think, we would have been able to substantially take market-share of many of our major competetors. Okay, understood. And sir, how confident you are to hit the revenue level of iNR600 crores by the end of this financial year, sir. What I think I’m as confident as you are,

CA Garvit Goyal — Invest Research — Analyst

That was nice. So means we can expect the quarter-four Q-on-Q basis better side.

Chirag Parekh — Chairman and Managing Director

So you if I think you are positive and confident, it will happen.

Operator

Thank you. Mr. Goyal, may we request that you return to the question queue for follow-up questions. We’ll take the next question from the line of Tushar from Kamakhya Wealth Management.

Tushar — Kamakhya Wealth Management — Analyst

Yeah, good afternoon sir. Sir, I could see that we are increasing our total addressable market by entering into quartz, surface, faucets and further focusing on woods and cook tops. My question is if you have new land, we’ve got a new land, in terms of the wallet share I just want to get the quantum like how much in the percentage terns might increase. That is my first question, sir

Chirag Parekh — Chairman and Managing Director

[Technical Issues] wallet share increases because of what, by acquiring land?

Tushar — Kamakhya Wealth Management — Analyst

No, the plan you might have, the global partner. I just want to have the quantum for the same, what will the quantum from the current wallet share which we have.

Chirag Parekh — Chairman and Managing Director

Like I said, we still have to wait for we will be able to give more clarity after quarter-four.

Tushar — Kamakhya Wealth Management — Analyst

So for the next two to three years, like in terms of domestic sales, what sort of CAGR growth we are expecting in the revenue and what is the margin profile, sustainable margin.

Chirag Parekh — Chairman and Managing Director

Yeah, well. Our goal is, and I think two years back, our margins were mostly half and EBITDA margins of exports were more than 20%. Domestic was struggling at 10%. I think most [Technical Issues] I think we’ve been able to jump back on our domestic margin side. Mr. Sharma after my answer to you can throw more light on the margins. As far as the the growth side is concerned, we are approximately at around annual rate of about INR130 crores. So we — so we have aggressive growth plans and I think our plan is to grow anywhere between 30% to 50% year-on-year for the next three years time. So adding to that, about the margins,

Anand H. Sharma — Chief Financial Officer

Gross margins, same for domestic and export, while EBITDA margin is around 18%, primarily because of the A&P expenses what we normally spend. But with this, our reach increasing and the brand position. I think in years to come, we should have similar margin in export and domestic on the net level also.

Tushar — Kamakhya Wealth Management — Analyst

Okay. Si, my last question, looking at our current capacity, what is the peak revenue we can expect from the current capacity and what is the current utilization level four quartz and steel sinks.

Anand H. Sharma — Chief Financial Officer

So on the quartz sink side, I think we have already said that with million sink capacity we have reached to volume of INR550 crores to INR600 crores from the existing capacity what we have installed capacity. Our current utilized capacity around 65% as of now.

Tushar — Kamakhya Wealth Management — Analyst

Okay, sir in the steel sink.

Chirag Parekh — Chairman and Managing Director

We think we have increased the category from 90,000 to 118,000 sink and next year we’ll have the full capacity available for [Technical Issues], we should be able to utilize 75% to 80% capacity in the steel sink. Thank you. Mr. Tushar, may we request that you return to the question queue for follow-up questions. The next question is from the line of Ridhima Goyal [Indecipherable]. Please go ahead.

Tushar — Kamakhya Wealth Management — Analyst

Hi, thanks for the opportunity. Sure. I just wanted to ask like are we shifting our focus from quartz sinks to other products, because I just wanted to know like what is the domestic market product mix. The contribution from the quartz sink.

Chirag Parekh — Chairman and Managing Director

So I would say by the strategy is concerned, I am clarifying it that we want to have a one-stop solution to our customers, because we have such a huge reach across India, pan-India, we just cannot afford the overhead by selling quartz. People want some other stuff also. So, right now, if you see our revenue. bifurcation, about 60% of quartz sink and 30% on mix of and balance 40 mix off, 20% steel and 20% built-in appliances. And I think, it has grown very well.

Ridhima Goyal — — Analyst

This you are saying overall, right. I wanted to know, particularly for the domestic market.

Chirag Parekh — Chairman and Managing Director

I am talking about domestic only. We don’t sell appliances to foreign.

Ridhima Goyal — — Analyst

Yeah, that’s it from my side. Thank you.

Operator

Thank you. The next question is from the line of Rishabh Doshi from from Nirmiti Investment Advisors. Please go-ahead.

Rishabh Doshi — Nirmiti Investment Advisors — Analyst

Yes, hi, thanks for the opportunity. So. I just [Technical Issues] regarding on distributor [Technical Issues].

Operator

Mr. Doshi sorry to interrupt you sir. Audio is no audible. Please use the handset mode.

Rishabh Doshi — Nirmiti Investment Advisors — Analyst

Yeah, am I audible now?

Chirag Parekh — Chairman and Managing Director

Yes.

Rishabh Doshi — Nirmiti Investment Advisors — Analyst

Yeah, so I just had a doubt like in terms of our dealer and distributor network, earlier an increase in distributor network was in tandem with the dealer network. But now do think that distributor network is still at 82, but we’re kind of doubling our dealer networks. So, just wanted to understand like how is that working out.

Anand H. Sharma — Chief Financial Officer

So currently we are focusing more on increasing our sales point and dealer network, [Technical Issues] we have also plan to increase our distributor network.

Chirag Parekh — Chairman and Managing Director

No just coming back to your question, I think answer is very simple. That domestic piece of our business, we are expecting, like I said, 30% to 40% growth year-on-year next 3 year’s time. So, I think that can growth can only come by the way [Technical Issues] dealer network what we have planned and by our emphasis on B2B category.

Rishabh Doshi — Nirmiti Investment Advisors — Analyst

But like we are able to service all 3,000 which we’re planning dealers through the distributors or we are planning to increase the distributor network also by a significant amount.

Chirag Parekh — Chairman and Managing Director

Sir, even the distributor, the active distributor network right now is 50 plus, which would be go to 100 plus. And this 100 plus, we’ll have dealer sub distribution network, say about 400 to 500. So they would be sourcing into 3,000.

Rishabh Doshi — Nirmiti Investment Advisors — Analyst

Thank you. Add like in one of the previous questions, where the participant had asked the maximum revenue potential of the company, I guess there you didn’t mention for the revenue potential for Carysil surfaces.. So if you could just mention that.

Chirag Parekh — Chairman and Managing Director

Sorry, you were not clear.

Rishabh Doshi — Nirmiti Investment Advisors — Analyst

In the previous participant’s question where you had replied with maximum revenue potential of the company at the current capacity, it was around INR800 crores, INR600 crores was from quartz, INR97 crores was from steel and only INR80 crores to INR90 crores from kitchen and appliances. Could you just mention what is the potential from Carysil surfaces.

Anand H. Sharma — Chief Financial Officer

Surfaces INR800 crores what we discuss about the Indian business operation and there is UK subsidiary. Our Carysil Product category Limited, currently GBP10 million and [Technical Issues]

Chirag Parekh — Chairman and Managing Director

The Carysil products is about INR80 crores and then the surfaces is about INR140 crores.

Rishabh Doshi — Nirmiti Investment Advisors — Analyst

Yeah, that’s all from my side.

Anand H. Sharma — Chief Financial Officer

So, overall, from the, I mean the from the whole global piece, surface is already 15% of the business.

Rishabh Doshi — Nirmiti Investment Advisors — Analyst

Okay, so in short we have a revenue potential of around INR930 crores, INR950 crores. Yes.

Chirag Parekh — Chairman and Managing Director

I think our – you see our aim of touching INR1,000 crores, I think we are not changing that plan or we want derail from it. Like I said, even the last quarter. the things are being very positive and I think I feel very confident in the year ’24, we would be — we will be aiming to hit the INR1000 crores.

Rishabh Doshi — Nirmiti Investment Advisors — Analyst

And like in terms of gross margins, like now we are somewhere at 49, so in Q4 or next year, like what number for gross margins are we looking at.

Chirag Parekh — Chairman and Managing Director

So. I think we would not be able to give a statement of what is happening, the only thing what we can say that we– I think we expect the gross margins to be [Technical Issues].

Rishabh Doshi — Nirmiti Investment Advisors — Analyst

Okay, sure. thanks.

Operator

Thank you. Ladies and gentlemen due to time constraint, we will take that as the last question. I now hand the conference over to the management for closing comments.

Chirag Parekh — Chairman and Managing Director

Yes. As stated earlier, we believe that the challenges posted by current geopolitical and recessionary trend for our products SKU is phasing out on a medium-to-long term and on sustainable basis. We see great opportunities for us to increase our penetration in global and Indian markets who have grown business substantially. We have great product line and fundamentals of business remains stronger as ever. Thank you everyone for joining this call. We hope that we’ve been able to answer your questions satisfactorily. However, if you need any further clarification or want to know more about the company, please get in touch with our team of SGA, our Investment Relation Advisor. Thank you once again for taking the time to join us on the call. Have a great evening. [Operator Closing Remarks]