The revenue target is reduced by 5 percent after the housing market decelerated.
Dynasty Ceramic Public Company Limited, DCC, dumps 700 million baht to expand its branches to penetrate the housing market in the second half of the year and reduces the revenue target to 5 percent from the original target of 5-10 percent after the housing market decelerated.
Mr. Maruth Saengsastra, Chief Executive Officer of DCC, revealed that he admitted that sales in the second half of the year would not improve from the low season or the rainy season and harvest season. Normally, the proportion of sales in the first half of the year will be 60-70 percent and the second half of the year will be about 30-40 percent, but he still hopes that the profit in the second half of the year should improve by believing that gas prices which is the main factor of production costs should have passed the peak in the past and started to decline. As a result, the Company should benefit from the potential cost reduction. As for the sale price, it is admitted that the current price is already high making it more difficult to change the price because it may affect the purchasing power. In addition, entrepreneurs in Thailand have imported quite a lot of products to sell. As a result, the price for porcelain products cannot be changed higher than this, but the Company is preparing to release a new size of product about 60×120 cm to sell at a higher price.
The Chief Executive Officer of DCC further revealed that we think that the sale price cannot be increased. The cost could be better but sales become lower. Therefore, the results of the second half of this year are expected to be stable if compared to the previous year. If compared to the first half of the year, it is definitely not better.
However, the Company continues to invest more, especially in the opening of new branches. Currently, 5 branches are under construction consisting of Hat Yai branch, Surat Thani branch, Ratchaburi branch, Kanchanaburi branch, and Krabi branch by increasing the investment limit to 700 million baht originally at around 500 million baht. The said investment will include the renovation of the existing branches as well. It is expected to be completed and open for service in 2023.
“For the export market expansion, the Company is studying to expand the market in the Middle East and Dubai. Meanwhile, in the past, the Company joined in an architect event in Cambodia for the first time to launch porcelain tiles and find alliances, which is in the process of negotiating with merchants in Cambodia by looking for 2 types of merchants: merchants that support the project and retail stores similar to DCC, with a target of 5 percent growth in export revenue in the future from the present at 3 percent.
For the first half of this year’s overall operation, it will be similar to the same period last year, which has proceeds of the sale of 4,592.5 million baht. As a result, the overall revenue this year has the opportunity to grow by 5 percent from the previous year with total revenue of 8,480.62 million baht, which became lower than the previously expected total revenue to grow by 5-10 percent, resulting in the second half of this year to hasten the expansion of branches and launch new products quickly to boost sales.
However, the Company still has the policy to maintain profitability this year. It will maintain the gross profit margin at 45% and maintain a net profit margin at 22 percent by improving the efficiency of production machinery in the production factory and reducing production energy consumption. This year, the Company has continued to invest in installing solar rooftops on the factory roof to reduce the electricity costs. Initially, it is expected that electricity costs can be reduced by about 700,000 baht per month.
In addition, the research department assesses the overview for 2022 with a positive viewpoint on the demand for tiles that have recovered in line with the economic conditions, and the Covid-19 situation has been better, supporting the purchase of construction materials and construction activities smoother. As a result, sales are expected to grow 4 percent compared to the same period last year, even higher gas and raw material costs will be the forces. However, it is expected to increase the sale price with a full-year effect, and there is a chance to gradually raise the price again this year including a product mix of high-margin products such as large tiles 60×120 and 80×80 will allow the gross profit margin to be stable from the previous year. Consequently, it maintains a net profit estimation of 1.8 billion baht with an increase of 5 percent compared to the same period last year. The tendency for profit in the 1st quarter of 2022 is expected to remain at a good level from the high season of the construction material business and higher average sale price.