Punjab Chemicals & Crop Protection Limited (PUNJABCHEM) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Punjab Chemicals and Crop Protection Ltd. Q1 FY27 Earnings Call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Richu Dhalui from Antique Stockbroking Limited. Thank you, and over to you, sir.

Thank you, Athabha. A warm welcome to all the participants in today's call for undefined and question questions. From the management side, we have Mr. Farooz, Managing Director, Mr. Linos Bhutta, CEO, Mr. Devander Bhutta, CEO on the call. With a further delay, I would like to hand over the call to Mr. Bhutta for his opening remarks. And post week, you will open the floor for portion of management. Thank you, and over to yourself. Thanks, Riju, and good afternoon to everybody. And thanks for joining the call today to discuss our Q1 at 527. Thank you very much. As mentioned by Mr. Biju, we have Mr. Sahih Stock, our Managing Director, and Mr. Devinder Gupta, our CFO, and Mr. Vishen Ting and other team members on the call. I trust that you have had an opportunity to go to our financial reserve and the investor presentation, which has been uploaded on the stock exchanges, as well as on our website. As some of you may be aware that FY26 marks 50 years since the company was established. And it is a good moment to build on that milestone as we begin FY27. Our diversified product portfolio across agri-chemical, specialty chemical, pharmaceutical and industrial chemical has helped us stay resilient through various industry cycles and we carry the same approach into the new financial year. At a broader industry level, the Indian agrochemical space this year We are seeing a weak demand environment, mainly because of delayed sowing and weak monsoon, and the pricing pressure in India market is clearly visible. While the supply chain for India supplies was not materially disrupted, however, it remained fragile and sensitive to the cost with continuing volatility and raw material availability and logistics. At the same time, geopolitical tension in Middle East, which has increased the wheat stock, energy, and freight expenses, resulting into margin compression across various sectors. At the same time, dependence on China imports remain a key factor in influencing sourcing decision and pricing for API and other key intermediaries. The weather conditions in Europe, which is our significant market, this year it has been very adverse and long and hot with hot season in Europe. This is also delaying some of the buying decision. As far as the inventory levels are concerned, the inventory levels in the markets are largely normalized, and our order book for the year gives us a reasonable visibility on our existing businesses. For Q1, Q2, and for the part of Q3, we have a clear visibility of attaining volumes as per our original projections. Based on all these factors, I am happy to report that consolidated revenue from our operation for the quarter stood at 347.2 crores, a growth of 8.7% year-on-year, with a gross margin at 36.6% of 40.8%, reflecting a growth of 18.8% year-on-year, and an EBITDA margin of 11.8%. We expect our EBITDA margin to improve gradually as the year progresses. On our new product pipeline, one of the products where we had taken a shutdown in the last quarter to big bottleneck our capacity of one of the intermediates for agrochemical. That capacity increased the project has got streamlined and we have achieved the design capacity.

And this year we expect this product to add significant to our top line and bottom line.

Also, at the same time, we had timed three MOUs we had declared two quarters back. For these products, commercial lot supply has already been done for testing of the product in the market, and as and when we get approval, this will start scaling up in subsequent quarters. We are also working towards commercializing additional molecules for Latin America market, which we expect to start contributing from Q3 onwards. On Capacity Addition Front, The work on our new manufacturing block at our Lalru plant is progressing well, civil work has commenced, and now we will see more investment going into Q2 and Q3 for completion of the project in this financial year. Together with our existing site, we believe this expansion will support our incremental growth projections and also add capacity for the product that we are adding in our product pipeline. We also continue to evaluate a new manufacturing site to support our long-term growth across agro and specialty chemical, and we will share further details as it progresses. Our 3DMO business. Continues to have gained traction with our active customer base readily expanding year on year and a few more relationships are currently under discussion. On performance chemicals, we continue to work towards gradually improving our segment margin over the next two to three years, supported by improved product mix. We will focus on R&D and better engineering practices. We remain a key supplier of full-grade phosphoric asset to the leading global beverage companies in India, and we have added some more customers in the last two quarters, and we expect this business to scale up further as their capacity expansion progresses, opening up additional export opportunities over time. Taken together, we remain confident in our medium-term growth trajectory and continue to target healthy revenue growth for FY27 with an ambition to meaningfully steering up our business over next three years as these initiatives mature. With this, I hand over the call to our TFO, Mr. Devinder Gupta. He will give you the financial performance in greater details.

Thank you, Vinocci, and a warm welcome to all shareholders and investors present today on this call. For the quarter ended June 30, 2026, our consolidated revenue from operations stood at 347.2 crores as compared to 319.5 crores in the corresponding quarter of last financial year, representing a year-on-year growth of 8.7%. The export revenue witnessed a strong growth of 27.7%, while the domestic revenues saw a marginal decline of 3.1% during the quarter. Gross margin for the quarter stood at 36.6%, up by 355 basis points on a yearly basis. EBITDA for the quarter stood at 40.8 crores, a strong growth of 18.8% on a year-on-year basis, with EBITDA margin at 11.8%. Profit after tax for the quarter stood at 22.13R, reflecting a growth of 7% on a YOY basis with a bad margin of 6.4%. Our focus continues to be on balancing growth in revenue with an improvement in profitability. Rather than optimizing for any single metric, we continue to work towards steadily improving our margin. Over the next two to three years, needed by our new product addition, including those from upcoming manufacturing sites. Our overall guidance and the assumptions underlying it remain broadly unchanged from our previous updates. With this, we conclude our opening remarks and open the forum for question analysis. Thank you.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue asks. We have the first question from the line of Jainam Ghilani from Swan Investments. Please go ahead. Mr. Jainam, can you please unmute your line?

Hi, sir. Congratulations for a good set of numbers. Since we've achieved 9% revenue growth in this quarter, how much would be attributable to volume and how much would be to realization increase? I think if we break up the EBITDA margin expansion, I will put this year 50% to the growth and 50% of incremental is because of better realisation. So broadly, there is an equal split in the margin increase, in the two parts.

Sir, I am mainly talking in terms of revenue, not EBITDA.

So out of 9% revenue growth that we have seen, around 3 to 4% is on account of the price increase that we have had, and balance is coming from the volume side.

And, sir, could you give us the utilization and volumes at Derabhati and Lalru as we used to give in our previous presentations? So, roughly our utilization at Derabhati in quarter 1 has always been healthy, and this year also we are at about 85%. And Lalru quarter 1 utilization is around 71% to 72%, and we expect this utilization to be better in Q2 and Q3 at both locations. Okay. And, sir, since we mentioned that our order book is very strong from Q2 to Q4, how much would it be possible to break up between new products and our legacy products? We continue to maintain our guideline on the contribution of revenue from new products year on year, year on year increase. This year we are targeting contribution from new product coming to roughly anywhere between 15-18% of our revenue in this year. That's what is the target for this year. And though you mentioned about the grain field capex, but are we having any timelines within, like, do we want to opt for the grain field capex within FY27? Yes, I think we want to start the vehicle capets in FY27. That's a clear goal that we have taken.

Okay, sir. That's it from my side. Thank you.

Thank you. Thank you. The next question comes from the line of Disha Chamriya from Trinetra Asset Management. Please go ahead.

10 Thank you for the opportunity. My first question was regarding the working apparatus. As the working apparatus has improved from 60 to 71 days in FY26, what is the further target for FY27? And what is the improvement coming from? Would it be from receivable inventory or payable sites?

While there was improvement in the last financial year towards the working capital, currently the working capital cycle is a bit increasing going to certain market conditions, and we expect it will continue to be so during this financial year. It will again be back in the range in the last quarter of the financial year.

Okay, sir. And do you target some, like, do you target any number around the working capital? Would it go again to the 70s or 80s, right?

So, I think that business is a bit of a cyclical in the sense that some of the business in Q1, Q2, some products is high. So, during the year, we will see an increase in working capital days, but towards the year end, probably will be around the same level as last year. So, that is the cycle that we will have during the year, as these products are seasonal products, and accordingly, the working cycle will vary during the year. Overall, we see this is basically being managed as per the market conditions. And we are monitoring it closely.

Okay, and what is the R&A expenditure that is planned in the next few years? And because we have around 25 products in our pipeline, what is the expected cadence of commercialization? Like how many products per year do you target per year? And what's the realistic timeline before this? Guest products give the meaningful contribution to the top line.

I think our R&D facility, we have doubled in the size in the last two years. So number of people and number of, say, what is called a skew mode in the area that we have allotted to R&D has been going up continuously. We are taking up a revamp of a pilot plant in this year where we will increase the capacity of our pilot plant where we can do scale-up of multiple products at the same time. This we will target to complete somewhere in the month of September, October. And with the help of this, our product scale-up and number of products in R&D will increase. As far as this product pipeline is concerned, these products are at various stages of commercialization. As you know that these products are in either specialty chemical stages or in some products are in pharma, KSM. So they have a slightly longer growth cycle. So in a year, we are seeing commercialization of 4 to 5 products. Some of them are contributing to a revenue of say 8 to 10 crores, and some of them have potentials of adding 40 to 50 crores over a period of 3 to 4 years. So that's a complete basket of product which we have. But year on year, we are commercializing 4 to 5 products every year.

Hello. Hello.

It's sorry, sir. I was around here. So, my next question was, the new products that have been launched over the past few years have been contributing around 12% of the revenue. Is that contribution still growing, and is there any specific products that are driving it?

What we have said is, over a period of time, gradually, we will touch 20%. So if you see from last year and year there is an increase, and this year as I mentioned in the response to an earlier query, we will have a contribution from new products anywhere between 15 to 18% of our top line. And whatever we have demonstrated so far, whatever we have delivered in the first two or three initial first one month was stabilization process, we are very confident that we will hit this number easily this year. And next year probably we will be more than 20%.

You got it, sir. Just a last small question. What would be our top 5 to 10 customers would be contributing to the top line?

Top 5 customers will be contributing about 60 to 65 percent of our top line. And if I take top 10 customers, probably it will be about 75 percent.

Okay. Thank you so much, sir.

Thank you.

Thank you. The next question comes from the line of Neil from Valentez Advisors. Please go ahead.

Am I audible?

Hello?

Yes, sir.

Yeah. So my question is regarding the high employee cost. Is there a one-off or an exception item over there?

This, the highest cost is mainly on account of the long-term benefits and the appraisal that we had just uploaded this year. So, it was around long-term benefit, and this is, you can say, it's a one-time kind of a phenomenon where management decided to reward the people on the performance of last few years.

So, what would be the quantum? What is that additional number?

So that one-time number would be around four, four-and-a-half years.

Okay. Thank you. That's it for myself.

Thank you. The next question comes from the line of Parth Kotak from Plus91 Asset Management. Please go ahead.

Hi, sir. Thanks for taking my question. Congratulations for a good set. Most of my questions have been answered. Just one slight color on the new products. We've seen exports go up in this quarter along with the new products. Is it a fair understanding that the new products are targeted towards exports markets and would have a higher margin, which would probably have given us a better margin this quarter, and we are seeing better margins for the year to come?

The growth in exports

is mainly around the better planning basis. Some of our traditional products are seeing a consolidated demand during the first two quarters, and we had built certain inventories. In the Q4, and that we are able to ship out. So that's where you see growth in the export market with a slightly better margin. New products are mainly going for domestic market. And obviously the margins are better. But as you know that the product which are going off-pay-tank. We are also coming under pressure mainly from Chinese competitors very quickly, and that's where we continue to put effort to make sure that whatever product we develop, we continuously put efforts to be cost competitive and also be in the market as a first mover. So broadly the growth in exports is on the existing products only because of better planning. And the domestic growth is because of the new product where the volumes have increased in this quarter and then the next few quarters it is going to be in for the remote.

Noted, sir. Thank you. That's all from my side.

Thank you.

Thank you. Before we take the next question, a reminder to all the participants, to ask a question, please press star and 1. IDP, to ask a question, please press star and 1. The next question comes from the line of Nakhul Doshi from Sankhala Family Office. Please go ahead.

Thank you for the opportunity. My question was regarding the earlier management had reiterated its target of reaching 15% EBITDA margin over the next 2-3 years. And after the Q1, Dutch management continued to maintain this target, and which initiatives are likely to contribute the largest share of future margin expansion.

I think we continue to maintain that guidance over the next two to three years. Of course, the market conditions in the last quarter were not easy, where we saw a lot of fluctuations around wild fluctuations on the raw material spot prices, depending on the supply chain conditions and availability of solvents and various chemicals in the industry. So, we are taking both the initiatives. One, we are working further aggressively to improve our processes and... And at the same time, we edit some new products where we are adopting some novel technologies and novel processes to see that those add higher margins to our bottom line. So there is a dual approach to achieving that target.

Okay, and in terms of supply chain, are we seeing any, you know, any better improvements happening over there, easing of any pressure over there?

The situation is very dynamic, you know, and what's happening in the global market, every day there is a new announcement. All I can say is that we have been able to make sure that our plant remained operational during the quarter. There was no outage because of any raw material not being available, and similar forecasts that we have for the Q2 also where we have been able to take calls where our capacity utilization continues to be healthy, and we continue to supply the product to our customers. So far, we have been able to manage it, but I think overall in the market, I think probably all of us have to be very alert in terms of managing the situation. And that's where we put our heads together every day and see that our new product pipeline, our existing product volumes do not take advantage in the market.

And we continue to supply products to our customers on a consistent basis. Got it. And you mentioned about the initiatives which we had taken, and one of them being, you know, increasing the number of products under development. And we had mentioned around 25 plus products plus 3 exclusive MOUs, an increasing share of high-value intermediates, and we have continued the same messaging in our investor presentation as well. So, can you provide any update on that number of products which are currently under customer validation?

Okay, as we said, every year, four to five products, they get commercialized. So, at the moment, if you ask me specifically on the MOUs, Out of the three MOUs, for two MOUs, we have already supplied commercial lots, which generally is anywhere between two to five tons of material, which has gone to the market, and it is being tested by the customer and market under various applications. These are all spatially chemical products that is already under progress, and these products are under commercial production already, where the volumes are increasing. And again, during the year, at the moment, we are planning to, this year, we are planning to commercialize at least 52-4 products over the next 2-3 quarters, which will then scale up in the next.

Got it. And on the CDMO side, any color if you would like to share in the next couple of years, what would be the expected revenue contribution on the CDMO side?

We are actually expanding our customer base on CDMO side also, and we are in advanced stages of discussion with both Japanese and Grubin. Because of the dynamic market condition, at the moment, it's taking slightly longer than what we had anticipated, but we are confident to add at least 2-3-4 customers with multi-year contracts to be signed in the next 2-3 quarters.

Got it. And also since you mentioned about the two MOU products which are expected to run up from Q4 and domestic launches have planned for S2. Plus, new capacities are also getting permission. So, definitely we are expecting a much stronger H2 as compared to H1, is my understanding, right?

I'll say H2 to H2, our performance will be much better. For our industry, H1 is generally very high, mainly because the demand is concentrated in H1. But from H2 to H2, if we compare the overall, H2 will be much better.

Got it. Thank you so much. That's it from my side.

Thank you. Thank you. The next question comes from the line of Mohit Chug from Shug Lab Research. Please go ahead.

Hi, sir. Hope I am audible. Yeah, you are. Good. Sir, my first question is, in general, what percentage of companies that support revenues derived from Europe, if you can tell the ballpark percentage?

Thank you.

Sorry, can you repeat your question? Sir, what percentage of companies' export revenue is derived from Europe? What percentage of it? I think it's from Europe, it's about 70% is coming from Europe, and remaining is from U.S. and Latin America and Japan. Okay, sir. Okay. And sir, since now we are about one month into quarter two, how is demand from Europe shaping up? Are you seeing any improvement or change in distribution patterns due to weather? Like you told earlier, there was some problem due to weather conditions. The signals are on the price pressure, not on the volume side, looks like the . The market is expecting some drop in demand, but we don't see it to be, say, significantly lower, maybe 5 to 8% demand reduction, but we have taken steps to make sure that we maintain our market share and the volume. So we are already taking proactive steps to either sign up the contracts or engage the customer to make sure that there is a dynamic pricing is in place, so that we make sure that our capacity utilization and the volume is protected. Okay, sir. Good and good. Sir, I was sorry to point on this again. I was asking because I also attended the two other players who are major exporters of Interocam. They were saying that their export volumes have declined, but R has not. We have shown a growth in export volumes. So this was, I think, as I told you, it was because of the better planning, because we had planned some inventory to be carried in before. And because we wanted to capture maximum possible market share when the demand is at the peak, that's where we have seen increase in the, it is on account of better planning, which actually, if you see our inventory levels in the Q4 were higher, where the inventory levels have gone now. So that was, that was an all day which was taken in the month of January. And then, and that's it. No, no, very helpful, sir, very helpful. That were my questions, and good luck for the future. Thank you.

Thank you. The next question comes from the line of Suhani Singh from Ross Capital. Please go ahead.

Hi, sir. Good afternoon. Sir, I had a couple of questions. Last quarter, the management indicated confidence of achieving the upper end of 15 to 20% to 20%. So, is management still confident of achieving the upper end?

Yes, we are confident of nurturing between 50% to 20%. As I explained that Q1, Capacity utilization has always been healthy. So Q1 is slightly difficult. So it's always the best quarter, but it's always difficult to get an extra growth in Q1. So this year we have got a growth on account of the better planning, as I explained earlier. But we are basically planning to have a much better H2, which will give us a growth of at least 15 to 20%. That's the guideline guidance we have given, and we maintain that guideline even now.

Okay, that helps, sir. So, particularly, which business segment will drive the remaining growth during H2?

It will be a mix of products. So, we are making certain intermediates, both for agrochemical and pharmaceutical, and that's where we will see growth coming in H2.

So, can you give me a breakdown on how much of the Q1 gross margin improvement came from better pricing, better mix, and manufacturing efficiency, and which of these is sustainable?

It's a slightly difficult question because the overall numbers, because of the pricing. Thank you, everyone. That may not be sustainable because we have to adjust to the market conditions.

So, that's all.

I think I can say, Rajan, giving up for the breakup.

Okay, so thank you. That's all from my end. All the best stuff. Thank you.

Thank you. Thank you. A reminder to all the participants, to ask a question, please press star and one. I repeat, to ask a question, please press star and one. The next question comes from the line of Rajiv Jain from Arcane Investment. Please go ahead.

Hello. An auditor?

Yes.

So, thank you for the opportunity. I just have a couple of questions. So firstly, in the previous call, you had guided that all three MOU products would be commercialized during FY27. But now you have mentioned that commercial lots have been supplied for two products and volume ramp-up is expected only from Q2 FY27. So has the commercialization timeline shifted or what is the delay delaying the revenue ramp-up despite successful commercial lots?

I think I'll probably interpret it like this, that we expected a commercial loss to get supplied this year, and then after that, customer will take time to test this material, which is, because these are all very, in a highly specialized specialty chemical segment, where customer, commercial loss testing cycle is also between three to six months. So, when we indicated it was more around, seeing that from earlier we had given laboratory sample, then we gave pilot sample, all those were clear. In Q1, we have supplied the commercial law. So, that was the intent, and we have been able to achieve the quality

required by them and the cost that was indicated to them.

Once the approval happened, the ramp-up will take place gradually in coming quarters.

Understood, Sam. Understood.

Also, secondly, new products contributed almost about 14% of the revenue in Q1, while growing 40% year-on-year. So, compared to earlier expectation of significantly increasing debt contributions, can you quantify central annualized revenue from new products and target contribution over FI27 and FI28?

I think at a high level, we have in Mexico. We are targeting new products to contribute to anywhere between 15 to 18% of our top line, and we continue to maintain that top line, that guidance. As far as contribution is concerned, we will not like to give that breakup at the moment, let the things mature and over a period of time. I am very confident that the process and the technology that we have developed and further work that is going on is we are adding a long term sustainable product portfolio to product Understood, sir.

Understood. Also, just one more thing, if I have missed. So, whether the earlier guidance of 120 to 150 CR incremental revenue over 2-3 years remains unchanged or is there any change to it?

I mean, if you look at our revenue top line, last year was 1,030 crores, and this year, suppose we are looking at 15 to 18% growth, so we'll be at around 1,200 crores. I'm just doing some math with an open mind, and if we get a 15% on this, which is a lower number, it automatically translates to that number what you're saying.

Understood, understood. And just one last thing, as we have guided for herbicide intermediates during Q3, Q4, so could you elaborate on that? Maybe addressable market and customer profiles, expected commercialization timelines, and maybe the revenue potential for next two, three years visibility?

So, these are all basically, sorry, I think you are talking about from this point from our investor presentation, right? Okay. So, these two products, I think they have a potential at the peak once we reach, which is going to take two to three years to contribute anywhere 40 to 50 crores per annum. We are going to launch this year. This year, probably, each of them will contribute maybe around 10 to 20 CR. This is going to be the first year of launch, so we will be testing our markets. In the long run, probably, each of these products will contribute anywhere between quarter to the test.

Understood. Thank you for answering my question, and all the best for the future quarters.

Thank you. The next question comes from the line of Pahel Sharma from VG Capital. Please go ahead.

Hi, sir. Thanks for the opportunity. I just wanted to ask about like is management seeing any meaningful increase in customer requests like for China plus dual sourcing and also has this begun translating into long-term contracts rather than spot orders?

I think that interest has been there, and that's where we are having several interactions with customers mainly from Europe and Japan around sourcing from India. And also within India, there is an interest that If we can be competitive, a lot of people are also approaching us. If we can be competitive, then they want to source material within India itself. So there is an increased interest and that's where we are expanding our R&D efforts and the infrastructure so that we can cater to this demand. Now, typically these conversations especially if we deal with Japan takes a slightly longer time, because the Japanese companies are slightly conservative, but once they are on board, it is a multi-year contract that they sign. So, we are having several conversations with several partners of this.

And one more question I have with me is that with the increasing share of high-value intermediates, where do you see the optimal long-term business mix between CDMO, catalog products, industrial chemicals, or we can say agrochemicals?

So, I think between CDM and Katova product, we will continue to have a similar mix going forward. We are at about 50-50 now. So, we will continue to have similar projections. As what I say, our product portfolio is dominated by agrochemicals, which is around 65 to 70 percent, and that ratio will remain. So, even if the new products are getting added across all the categories, but agrochemicals will continue to dominate because that's the market we know very well, and that's where our new product pipeline is also very healthy.

Great, sir. Great, sir. I understand. Thank you so much, sir, and all the best, sir.

Thank you. Thank you. A reminder to all the participants, to ask a question, please press star and 1. I repeat, to ask a question, please press star and 1. As there are no further questions, I would now like to hand the concerns over to the management for closing comments. Thank you, and over to you.

I could not hear the last question. It was not audible.

No, I think it's a closing remarks from you.

Okay, so thank you so much. As you have seen that our Q1 was pretty robust. And we feel moving forward for Q2 as well as Q3. The order position is pretty strong, and whatever we have said, I hope we have, the management and myself have answered most of your questions, and thank you very much for your attention.

See you again during the Q2 call.

Thank you.

Thank you. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.