Supreme Petrochem Limited (SPLPETRO) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your test on phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Purvangi Jain from Valorum Advisors. Thank you. Thank you.

Good evening, everyone, and a very warm welcome to you all. My name is Purvangi Jain from Valorum Advisors, and we represent the investor relations of Supreme Petrochem Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the second quarter and first half of the financial year, 2027. Before we begin, let me mention a quick cautionary statement. Some of the statements mentioned in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which would cause actual results to differ from those anticipated. Such statements are based on management belief as well as assumptions made by and information currently available to management. Audiences are therefore cautioned not to place undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial performance for the quarter under review. Now, let me introduce you to the management participating with us in today's earnings call. We have with us Mr. Rakesh Nayar, Executive Director and CFO, Mr. Dilip Deole, ABP of Finance and Accounts, and Mr. D. N. Mishra, the Company Secretary. Without any further delay, I request Mr. Nayar to start with his opening remarks. Thank you, and over to you, sir.

Thank you, Purwangi. Good evening, everyone. It's a pleasure to welcome you to the earnings conference call for the second quarter And first half of the financial year, 2027. Let me brief you on the financial performance of the quarter, followed by some of the key operational highlights. On a standalone basis, operating income for the company for the second quarter stood at Rs. 1,957 crores against Rs. 1,100 crores in the corresponding quarter last year. The EBITDA increased to Rs. 160 crores with a margin of 8.12%. Profit after tax almost doubled to Rs. 95 crores. Jumping turnover is partly due to increase in volumes and the balance is all due to increase in the selling prices consequent to increase in the raw material prices. For the first half of the financial year, 2027, operating income increased to Rs. 3,649 crores, with total EBITDA of Rs. 508 crores, profit after tax due to Rs. 331 crores, with a bad margin of 9.08%. On the operational front, during the first half of the financial year 2027, our business navigated a challenging operating environment marked by volatility in sterling prices, disturbed supply chain, elevated ocean freight rates, and subdued export volumes. Additionally, duty-free imports of PS and ABS from ASEAN countries and China intensified competitive pressure on the domestic selling prices during the first two months of the second quarter. Our total sales volume for Q2 FY27 stood at 95,242 empty, registering a 24% year-on-year and 35% quarter-on-quarter increase. However, H1FY27 sales volume declined 3% year-on-year to 1,66,085 primarily due to lower exports amid supply constraints, longer transit times, and higher freight costs. We continue to diversify our sourcing network for imported raw materials to address supply uncertainties from the Gulf region. On the growth front, our expansion plan remains on track, including the new wide-width insulation board line with a capacity of 1,50,000 cubic meters and the expansion of compounding capacity from 50,000 tons to 80,000 tons per annum. Company continues to remain debt-free with an investable surplus of Rs.886 crores as of September 2026. Our capital expenditure continues to be funded entirely through internal cash accrues, reflecting a strong financial position and disciplined capital allocation. The Board has also approved an interim dividend of 125%, translating to Rs.2.5 per equity Reaffirming the company's commitment to rewarding shareholders. With this, I conclude my operating remarks. We now open the floor to the question and answer session.

We will now begin the question and answer session, which is to ask a question, to use handsets while asking a question. Ladies and gentlemen, the first question comes from the line of Aditya Keitan with Smith's Institutional Equities. Please go ahead.

Thank you, sir, for the opportunity. Sir, just a couple of questions. Sir, first, a good point is in the quarter, what we see that volumes have rebounded on quarter-on-quarter basis. Now, sir, again, like comparing Q2 with current month seems like more of a distort, like current even styling prices are again moving higher. How you see the coming trajectory moving, like again, they could not absorb these higher prices. And how you see, sir, like, things moving ahead in terms of raw material procurement because we are not able to get supplies from Saudi? How these things will move up, sir, on to the volume speed and on to the raw material procurement?

We currently demand, at least after the close of the last quarter to till now, the demand, domestic demand is good. Good. Though it is a festival season, that could be also one of the reasons, but the demand so far is good. Now, as far as the sterile prices are concerned, very difficult to predict. Sterile prices are, landed price of sterile monomer today has crossed $1,600, and you are right that going forward, the non-OM sector may feel the pinch, but if they don't leave If the demand is strong and they are able to pass it on, the demand will remain. The American midterm elections, if the war cloud market is concerned, we are meeting the full requirement. And we hope that we should be able to continue to do that.

And for ABS, December 20th, I believe that's more than some years of timeline from today. So, what sort of utilization for phase 1 we are targeting both in? And secondly, sir, for polystyrene, do we see that sort of a demand growth in India because of the single new plastic banks and demand is hovering in low, mid, single business? How do you see that trajectory moving, guys, sir?

So as a polystyrene is concerned, India's appliance growth demand is good. India is also becoming a hub for export. All the major air conditioning and the appliance guys are setting up new units availing the benefits of PIL. We see that going forward by the, and it is not that the day one when we implement the project, the demand will be there, but then we have to be ready. The demand will be, we will be able to sell the material, demand will be there in the next three to four years. ABS is concerned as well as a phase one, our turn-cated capacity, we are utilizing almost 85% of that at the moment.

85% capacity utilization of ABS, you said that?

Of the turncated capacity of the ABS because of the equipment which got bad and that has still not been fully repaired and replaced. So we had announced that we will be operating at 65% of our rated capacity and of that 85% we are utilizing currently.

Sir, my next question is on to the volume side. Sir, now what sort of volume growth we are targeting for 27 or 28? And, sir, adding on to this, sir, is there any component of inventory loss because we see that sign-in prices were lower compared to Q1? So, there could be some carrying cost of inventory. So, just wanted to know, has you booked all the carrying inventory or there is still in the pipeline?

Book the inventory or carrying the inventory. We have all the SAP systems and automatically the valuations happen, keeps on happening on the moving average basis. Yes, as far as the market price is concerned compared to euro prices, the issues do come in. I wouldn't call that any inventory loss or something, but then that is all part of the big game because when the volatility is there, these things are always happening. So that all is accounted for. Volume growth, if everything is normal post-elections, mid-term elections in the U.S., everything falls in place, then yes, we would be doing better than last year. We will be doing better than last year.

Thanks for the opportunity. Two questions. The first is on the compound side, like we are already at 50,000 tons and another 30,000 tons is going to come up by September 27, plus the X-Mold. So, just wanted to understand from you, like, in terms of application-wise and not from the customer side, because there could be limited customers, but the application could be multifold. So, where are we currently in terms of the application-wise approvals from the customer, and what could be the scope of growth for us so far as those application bandwidth is concerned?

We are targeting all applications, including the auto components. We are already there in the battery segment. We are there in all the appliances also. So, not that we are only targeting any particular segment, we are targeting all the segment, all applications. And as far as the growth is concerned, yes, we are focusing right now more on the ABS side. To say that, yes, our acceptability of our compounded material for the ABS has been good so far. And we would continue to focus on that.

To the compounds and how much we intend to sell the mass ABS in the outside market also. When can we feel that this 80,000 tons of compounding facility could achieve the maximum utilization?

The 80,000 tons would be implemented by sometimes in the third quarter of FY28. Thank you.

Question from my side, considering the current geopolitical crisis where we are currently seeing on, do we sense any structural opportunity for us in terms of exports of our products into Asia as well as in Europe, given the kind of disruptions in terms of the capacities or closing downs of capacities, what we are currently witnessing there? If you can share your thoughts there.

The opportunities do arise off and on, but then the issue is that when you get the order and the time gap between the receipt of order and financial closures of the order to the shipment, and in that interim, what happens to the raw material price today and to the freight rates? The freight rates have shot, ocean freight rates have shot up so high, the order taken is three weeks back, and by the time you want to shift, the freight rates have gone up by $2,000 in the interim. It will linger unless we export on an FOP basis and the freight cost to the buyers have to be found up then. Opportunities are always there, but then considering the current volatile environment, the regular basis and cash, those

operations, what was our trading sales for the second quarter?

Around 22%.

Fine, sir. Thank you so much, and wish you all the best.

Thank you. Next question comes from the line of Silesh Raja with 361 Capital Market. Please go ahead.

Yeah, thanks for the opportunity, sir. Sir, as mentioned in our presentation, the net sale volume of P&H and board division, that volume we have given 11,700 to last year of 4,300 metric ton. In the first half, so based on my calculation, that calculation, the corresponding full year volume itself, last year it was only 11,000, run by this ABS-based compounding level, or we have seen a good growth in the XPS insulation board also.

Yes, insulation board, you see, during the lean months of the monsoons are always low. But then this growth has mainly come from our compounding businesses and for polystyrene and ABS. And you are right that if I add that 11,400 tons to our overall volumes, we have already surpassed the... If you look at the net sales to the market, the volumes are down by 2.8%, but considering these volumes which are used internally, the capacity utilization also goes up, and our volumes have actually been more than the last year.

Yeah, yeah. So, if the pass-through is better in compounds, raw material pass-through is much better?

Yeah, certainly, yes.

Our end market mix is roughly around 40% is consumer durable, 30% is packaging, and 30% is stationary related products. So as we ramp up phase 1 and phase 2 of ABS, so out of 1.4, how the mix will change? How much will be automotive and how much will be electronics like equipment products? How the mix will change?

See, right now we have only entered the auto components. I can't really predict that or how things will shape up, but we have entered the auto components, but then we are now targeting next stage supplying to the electric mobility of two wheels. We have got certain acceptance also from the two-wheeler segment, but then, that is the initial stages, we have to still work on that, and once we have the capacity available with us in the phase one, and that really will kick off. Going forward, once the 140,000 tons is in place, it will be the chances and autos.

So, could you provide the break-up, sir, between the raw material and finished good inventory break-up?

It's mainly the raw material because the raw material prices have almost doubled in the last year, what you are comparing with.

Fully consumes, no, sir, this month. That increased raw material that we have, that will be entirely consumed in October month, right, sir?

Because this also includes the material in transit. Okay. And then material which is on the high seas also is part of it. It's because it's a...

Reminder to all the participants, that you may press star and want to ask a question. Next question comes from the line of Rahul Agarwal with Ikigai Asit.

Yeah, hi sir. Very good evening. Sir, firstly, to start with on the spreads, right, how should we think about VIPS and HICS spreads? If you could just give some indication of how was it in 2Q, how do you look at, you know, third and fourth quarter, just approximate outlook.

Am I audible, sir? Yeah, between your voice is breaking. Can you repeat your question?

Sir, I was asking some comments on the spreads for polystyrene and EBS, GIPS, HIPs. Do you comment what did we experience in second quarter in terms of spreads for GIPS and HIPs?

It's around $200, $250, $200 more so after taking all the freight rate costs and everything. It's $200 upon the week and the day and the month for GPPS, and HIPs has been between $300 to $350.

Got it, sir. Secondly, sir, on the imports, you know, after you all just mentioned that once this entire duty benefit is now no more applicable, has the imports started coming down? Just for some comments on monthly run rates of imports for polystyrene and ABS right now?

You see, the monthly imports are coming, but then, you see, in the month of May, June, July, higher than the imports made last year, to the last year. Maybe the reason of imports coming down is the imports.

So my understanding is polystyrene India imports about 80,000 tons, and ABS is about, you know, let's say, somewhere between 130, 140, 1,30, 140,000 tons. Is that number going to be similar this year?

It could be lower, but as far as ABS is concerned, it will be almost similar. Maybe polystyrene, maybe a little less. In that period of May, June, July, substantial quantities have come. Maybe at the end of the year, when we see in totality, it could be a similar number.

Because, you know, there is some domestic capacity, like you are also selling mass ABS. There is another new capacity which is coming up from other competition. So, imports ideally should fall down, right, at least on the ABS side.

But then the demand is also growing, perhaps operational.

Got it, sir. And last question, sir, on polystyrene, like for fiscal 27-28, you know, what is the quantity of polystyrene we sell in India? Yeah, you know, and ABS, you mentioned, you are working with 85% or 65%, which basically implies that about 40,000 tons of ABS is what you should sell in the full year, if we just, you know, confirm that number.

So far, this is the number I have. 27, 28, you are saying polystyrene is concerned. Indian demand of polystyrene should be upwards of around 375,000 tons or so.

And how much do we sell, sir, on an annual basis, polystyrene in India, for the tracking days? Thank you so much for answering my questions. I'll get back in the queue and first of the greetings to you and the team. Thank you.

From the line of...

Am I audible, sir? So, sir, I wanted to ask you that in this quarter, we had very good profit. Compared to the last quarter, the profit was not... the profit was down, actually. But year on year, the profit was... the profit growth was great. So, you may have answered this, but I just want to call late. I just want to know that how do you see the quarters coming forward? Going forward, how do you see the EBITDA profits growth? Is it going to continue at the same time? Or depending on the availability of the raw material, the profit is going to normalize just like last year?

I don't have a crystal ball with me right now. In the changing global environment and these current geopolitical conditions, very difficult to project. I only said, I think before you joined, that the month of October is, so far the demand in October has been good, and that could be possible because of the festivities now, but demand is good. I get it, sir.

So, the thing is that in the first quarter, as you mentioned earlier, the government allowed import of raw material with much less or even no import duties. So, how do you see it going forward in terms of, you know, the domestic, having seen the availability of the raw material and also have seen the supplies from outside India? So, do you feel that it has affected the competitive position of the industry, the domestic industry in some way? Because the domestic buyers would have seen the taste of the material from outside, and the material that we got is in good supply, good quantity. So, there would be higher import compared to the previous years.

Got. At that part of time, the imported material was always coming into the country. It was nothing new. There is a competition, global competition. India is a big market. But the hike in imports during those two, three months was because of the duty exemption. And having the exemption withdrawn in the month of June, imports have fallen back to the normal levels or lower than the normal levels. As the numbers have come for August, the imports are less than the last year's imports. The material is nothing new for the Indian users. They have the opportunity available, which everybody wanted to go and...

Chimawat.

Yeah, sir. Congratulations on a great set of numbers and thank you for taking my question. Sir, in the previous call, in the Q1 call, you had mentioned that we had witnessed some impact on demand from the non-OEM segment. Can you just comment as to how that has been this quarter?

That's visible from the numbers, Ansh, because the first quarter, the non-OEM market was not there. And now as I see it, because the imports were big, coming duty-free imports were there. So, maybe they could have sourced it or imported the material. But in the second quarter, the non-OEM segment is back into the market. The demand is good from them also. So, it's OEM and non-OEM, both have been good in the second quarter.

And, sir, could you please bifurcate as to what kind of volume we do for OEM versus non-OEM?

They're almost same, 50-50.

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

Thank you. Next question comes from the line of Nia Jain, an individual.

So, the export volumes were impacted by the limited styrene monomer availability and also higher ocean freight rates. So, as the alternative sourcing arrangements are established, how quickly can we expect our exports to recover and what could this mean for our realization?

The order and the shipment of exports are something difficult to do. Everything is normal, back to normal. Restarting exports is not difficult for us because we continue to engage with our customers in all the markets at all the times, and they all appreciate the issues at the moment. Once the markets are normal, raw material supplies are back to normal, we would recommence the export.

Thanks for that. I have one batch question from my side. So, with supplies from the Gulf region being disrupted, the company is exploring alternative sources for importing these raw materials. So, how do the cost and availability of these supplies compare with our traditional sourcing, and what could be the impact on our margins?

The raw material prices in general, because of the absence of the material coming in from the West Asia, which has been the major source of supply of energy to all the other manufacturers also, the raw material prices have gone up. The raw material price, which used to be in the region of $900 to $1,000, is closer to $16 to $1,650 today. Now, as far as the margins These are all passed through. Okay, there could be a lag, time lag for passing on, but then it is all passed on.

Okay, got it. Thank you.

The line of opportunity.

So I would like to ask, as I have known that styrene prices have continued, I just want to know how has the styrene monomore to polyacetylene Q1FI27, and what are you seeing in terms of the current spread?

It's going to be around $200 to $250, or for HIP as around $300. So they remain there.

I said, like, with the new wide XPS insulation board line, and with the capacity of $1,500, what is the demand outlook for?

Production will start FY28, 27-28. The capacity would be ramped up over a period of time, and we expect that the full capacity of 150,000 cubic meters should be able to go to the market and absorb in the market in the next 24 to 30 months.

Thank you so much for that.

Sir, just wanted to understand, like, with all these problems of availability of raw material, higher energy costs, have we seen the plant closures in Europe where probably their costs have gone up due to rising gas costs on which they are currently relied on, plus the increased imports of the material from China, they have been facing troubles in terms of operating their plants. So, could structurally provide us an opportunity in terms of making inroads into European market, particularly from the EPS side, if you can just help?

I, very frankly, I have not heard of honey. We heard that some reorganization, restructuring is planned, but nothing has been seen so far. People have reduced their operating rates, but closure of honey plant, I have not heard.

Sir, from the EPS point of view today, we are now at 1,45,000 tons of capacity spread between both the locations. So, how have we seen the demand of EPS in India in this first six months? How we see the demand over next six months, if you can just share your views.

EPS demand is good so far in India. We look at it that in the current year, the total demand for EPS could be in the region of 1,65,000 to 1,70,000 tons in the country.

To assume that our market share would be above 70% for this?

No, I wouldn't say that. I wouldn't say that. It will be lower than that. More applications have come up on the EPS side, which probably would be driving the growth over next two, three years. No, not in the recent past.

It comes from the line of Rakesh, Naik, and Dujal.

Mr. Please, am I audible? Yes, sir. Congratulations on a good set of numbers. And I just wanted to ask, like, what has the X-mold's growth been like? And do you have any plans for any inorganic growth apart from X-mold?

At the moment, for inorganic growth, no, we are not looking at any other...

Sir, what has the Exmold's growth been like?

Exmold is doing good. Exmold's numbers, you must have seen, compared to the last quarter or the year-on-year quarters, their numbers have almost doubled. So, we have been able to streamline their operations. We have been able to more discipline. That has resulted in our better margins there. We have been able to change the product profile also. So the margins have improved there.

Thank you so much. And another question, like from the capital allocation plans, what would be the most capital intensive?

ABS is the most capital intensive.

ABS? Okay. Thank you so much. That's from my side.

Thank you. The next question comes from the line of...

Thank you, sir, for the follow-up. My first question is on to the EPS side. Is it possible to quantify the raw material price of EPS, which is pentane gas, currently, like, how has been the trend over the last three to four months?

Aditya, all raw material prices are big, no one has to pay. So, they have winched up, gone up, but then, yes, pentane is also available locally now. The fact of starin monomer is the maximum because 92% of the raw material of EPS is starin monomer.

Okay, okay, okay. And, sir, my second question is, like, you had already mentioned, like, on to the speciality side, like, we earlier used to state some 30-35% of the overall mix is from speciality. Now, with the expansion into speciality, polystyrene, and other species.

We have the expanded and the increased volumes. We are still at around 40%.

40%. Okay. Okay, sir. Got it. Thank you.

For the questions, we have reached the end of question on our session. And now I hand the conference over to the management.

Thank you all for participating in this earnings concourse. If you have any further questions or would like to know more about the company, please reach out to our investor relations manager at Velarum Advisors. Thank you.

Thank you. On behalf of Sufi joining us, you may now disconnect your lines.