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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Stock futures are not so liquid except few companies(HDFC, Reliance etc), mostly index futures are liquid.

The leverage for stock future is around 5x whereas MTF provides 2-3x and different calculation for other loans.

Ex:-

1 lot reliance future = 500 shares
Future price(Jan) = 1238

Total cash required 500 x 1238 = 619000
But margin required as per zerodha is 109935

Leverage = 5.6x

Basically, it depends upon one’s risk apetite. I am not comfortable with 5x. I have not used these leveraged product yet but will use with strict stoploss for sure.