Concall Notes: Q2 FY2025 (Source Screener.in)
- Consolidated sales reached ₹759 crores, a 14% increase from Q2 FY’24.
- EBITDA for the quarter was ₹107 crores, up from ₹72 crores in the same quarter last year.
- Specialty sales grew by 12% YoY, contributing to increased volumes and better margins.
Specialty Sales:
- Specialty sales constituted 70% of total volume in Q2 FY’25, up from 64% in FY’24.
- Year-to-date (YTD) specialty sales are running 13% higher compared to the previous year.
BOPP Films Margin:
- Margin improved to ₹25 per kg in Q2 FY’25 from ₹19 per kg in June ’24 and ₹18 per kg in September ’23.
- Improved margins attributed to higher demand, particularly pre-Diwali.
### Outlook and Growth Initiatives:
Future Sales Expectations:
- Anticipating improved specialty sales and stable domestic BOPP films margins in FY’25.
- Renewable power rationalization at the Maharashtra plant expected to yield annual savings of ₹22-25 crores.
Specialty Chemicals Subsidiary:
- Multiple chemistries commercialized for adhesives, coatings, and masterbatches.
- Targeting high-teens EBITDA and over 30% return on capital employed for FY’25.
Packaging Initiatives:
- Launched rigid packaging vertical under the brand name Plastech in H2 FY’24.
- Expected to achieve profitability and over 90% capacity utilization by FY’26.
New Production Lines:
- CPP line expected to commence commercial production in Q3 or Q4 FY’25.
- BOPP line anticipated to start production in H1 FY’26, increasing production capacity by ~50%.
### Petcare Division – Zigly:
- Launched multiple private labels and enhanced vet care services to improve gross margins and reduce losses.
- Significant improvements in operations noted, with expectations for profitability in the near future.
### Capital Expenditure and Debt Management:
- Projecting ₹300-350 crores in capex for FY’25, mainly for BOPP lines and specialty sales enhancement.
- Net debt as of September ’24 is ₹698 crores, with a ratio of 2.2 times EBITDA and 0.5 times equity.
- Expecting to peak debt this year, with a gradual reduction anticipated from FY’26 onwards.
### Market Positioning and Competitive Advantages:
- Exporting to 80+ countries, with a significant portion of specialty products going to the US and Europe.
- Market leader in thermal lamination and among the top three players in coated films globally.
- Strong market share in India’s BOPP-based specialty products, exceeding two-thirds of the market.
### Challenges and Management Optimism:
- Management noted non-repetitive inventory loss due to raw material price drops impacting Q2 EBITDA.
- Despite short-term fluctuations in commodity prices, the focus on specialty products is expected to insulate the company from significant impacts.
- Management expresses confidence in future growth driven by specialty products and new market segments, with a robust order book for specialty items.
### New Developments:
- Introduction of sun control films, with plans to commercialize 80-100 SKUs.
- Launching paint protection films, with trials underway and commercial launch expected soon.
- Continuous product development and market education initiatives planned to enhance customer awareness and acceptance.
### Summary of Insights:
- The company is strategically de-commoditizing its business model, focusing on specialty products to improve margins and reduce dependence on commodity pricing.
- Management remains optimistic about growth prospects across various segments, including specialty chemicals, packaging, and pet care, despite facing some short-term operational challenges.
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