I turned out to be partially wrong. Not in terms of reasoning on both points, but in terms of underestimating extent of margin fall and something totally unexpected – fall in speciality volume. Whatever may be the reason, bottomline is – result is far below expectation on absolute basis.
However, I also did an across the industry comparison of topline and PBT – other income to isolate impact of other income and differential tax rates to understand how the companies performed relative to each other. Here is the table without comments.
| Q2FY23 | Q1FY23 | Q2FY22 | Change QoQ | Change YoY | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Listed Companies | Rev | PBT* | Rev | PBT* | Rev | PBT* | Rev | PBT* | Rev | PBT* |
| Cosmo First | 777.94 | 86.25 | 842.68 | 115.86 | 759.37 | 119.84 | -7.7% | -25.6% | 2.4% | -28.0% |
| Ulfex | 3767.76 | 160.93 | 4031.91 | 462.49 | 3027.31 | 206.40 | -6.6% | -65.2% | 24.5% | -22.0% |
| PolyPlex | 2089.29 | 161.98 | 2032.58 | 282.20 | 1547.58 | 188.77 | 2.8% | -42.6% | 35.0% | -14.2% |
| Jindal Poly | 1414.40 | -30.97 | 1592.21 | 313.02 | 1456.43 | 288.50 | -11.2% | -109.9% | -2.9% | -110.7% |
| SRF – PFB | 1331.02 | 101.44 | 1496.00 | 295.17 | 1071.74 | 179.51 | -11.0% | -65.6% | 24.2% | -43.5% |
Notes:
*PBT is taken as PBT Less Other Income to isolate impact of other income and differential tax rates
** In SRF – EBIT Instead of PBT, as it is in multiple business and hence, PBT for packing films not available
Going Forward, Q3 margins are still under pressure. So I feel Q2 may not be bottom, but Q3 could be. Given BOPET present bad shape, the new plant couldn’t have started at a worse time. Would be happy if it manages to breaks even at EBITDA level in Q3. In absense of knowing margin data from day to day, I can only work on management commentary. And so far they have tended to downplay the fall – so I am taking a rather pessimistic view of Q3. Some additional points:
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Q3 is slightly lower demand quarter due to seasonality.
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Plant shutdown for maint, is also typically done around Diwali.
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Incremental burden of BOPET plant Depreciation and Interest will be there.
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Q4 is generally a strong quarter demand wise
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They would possibly get some speciality products going in BOPET by Q4. Even at 10% of capacity it will make a positive difference.
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Some margin improvement possible in BOPP hopefully in Q4 as demand starts catching up.
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