Styrenix Performance Materials Limited (STYRENIX) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Styronix Performance Materials Limited conference call. We have with us today from the Management of Styronix Performance Materials Limited, Mr. Rahul Agrawal, Managing Director, Mr. Bhupesh B. Porwal, Chief Financial Officer, Mr. Chintan Doshi, Manager, Legal and Company Secretary, and SGA team. As a reminder, all participant lines will be in the 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. Further, on behalf of the management of the company, we would also like to remind the participants that this call is being conducted, subject to, and in line with the disclaimer mentioned in the investor presentation as is available on the stock exchanges. I now hand the conference over to Mr. Bhupesh P. Porwal. Thank you, and over to you, sir.

Thank you very much. Namaste, everyone, and a very warm welcome to our Q2 and H1 FY27 earnings call. Thank you for taking the time to be here with us today. I hope you all have had a chance to go through the financial results and the investor presentation available on our website and stock exchanges. The global operating environment remained volatile during the quarter with geopolitical developments continue to drive fluctuation in crude oil prices and contribute Due to broader macroeconomic uncertainties, in this evolving landscape, our focus remained on navigating input cost volatility, maintaining operational efficiency, and ensuring continuity of customer supply, while staying responsible to changing market dynamics and underlying demand trends. Further, our phase one of our expansion plan remains on track and is expected to come on stream during the current financial year. I will now take you through the financial and operational performance for the quarter before we open the floor for the questions. First on the standalone financial highlights, coming to quarterly financial highlights on year-on-year basis. Total income for Q2 FY27 stood at INR 781 crores, a growth of 26.5%. For our half-year financial highlights, Total income for H1 F527 student 1551 crores, a growth of 15.8%. EBITDA for H1 F527 student INR 286 crores, a growth of 70%. And EBITDA margin student 18.4%. Profit after tax for H1 F527 student INR 188.5 crores, a growth of 78.4%. And sales volume for H1 FY27 stood at 82.4 KT. Now coming to consulated financial highlights for the quarter. Total income of Q2 FY27 stood at INR 997 crores, EBITDA 27 stood at INR 75.6 crores and EBITDA margin stood at 7.6%. Profit after tax for Q2 FY27 student INR 23 crores. Consulated sales volume which includes both India and Thailand for Q2 stands at 55.1 kt. On our half-yearly financial highlights, total income for H1 F527 student INR2009.8 crores, EBITDA for H1 F527 student INR299.2 crores and EBITDA margin student 14.9 percent. Profit after tax for H1 F5 through debt INR 161.5 grows. Consolidated sales volume which includes both India and Thailand for H1 F5 27 through debt 106 KT. With this, I conclude the financial highlights and we may now proceed for question and answers. Thank you very much.

Thank you very much. We will now begin 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 assembles. First question comes from the line of Nirav H. Jemuria from Unwilled Wealth. Please go ahead.

Yeah, good afternoon, sir. A few questions from my side. So the first is with respect to the newer capacity, which we are expecting by the end of this financial year. So obviously, there would be focus on improving volumes and the benefits of operating leverage accruing too. But just wanted to understand your thoughts, like when we see the imports or map the imports coming to India, are there any grades or volumes which can be replaced through our capacities, which probably could be unique in terms of currently we may not be providing But those volumes may be coming to India, and we could take the benefits of that.

Any other questions? Do you want to ask other questions so that I can answer all of them together?

Yeah. And the second question is on the polystyrene side. So since we took over the management control of the company, we have seen the ramp-up of the volumes in the polystyrene side. But have we realized the full potential of the EBITDA improvements when we had taken over the management control? So I just wanted to understand it from the viewpoint of penetration into probably the application side of the customers, probably when earlier the management was not having, and now we have started getting penetration into. So I just wanted to understand whether there is a scope of improvement in the EBITDA per kilo from the polystyrene side. And lastly, sir, in terms of whatever we have done for H1, do we believe that is there any scope for improvement in the volumes in H2 vis-a-vis H1, given the kind of current environment we are facing today? Thank you so much.

Thank you, Neera, for your questions. So, with regards to, you know, the newer capacities which are going to come online in this financial year, say towards the end of the financial year, there are certain, so for most of the products which are imported into the country, we have the capabilities to produce them in India already. However, for specific grades, or very few grades, one of them is the refrigeration liner ABS grade. And that is a grade which, you know, historically, none of the local players in India have had the capability to produce. With, you have the ability to, in India, so recipes and, you know, manufacturing ability. There is, of course, also the question of positioning at times where we have certain customers which are of origin from Korea or Japan, which are present in India, which have historically preferred to buy products from outside of India from certain suppliers. So, you know, again, with Thailand being online and us having the capability to supply to them from that region, from a positioning perspective, also with the new capacity coming in, we'll have the ability to cater to that demand as well. So, one is, of course, the most straightforward technology aspect. The other is a more nuanced positioning aspect, both of which we would be able to address with new capacities coming in. Of course, you know, the imports still remain higher relative to our capacities that come online, at least as part of phase one, but we would be able to address some of that. With regards to polystyrene, you know, there are two aspects of the polystyrene business, that is GPPS and HIPS. The way we have seen the market, the HIPS business is where there is a, you know, OEM-driven demand for the company. This is something that we have been able to correct, and capacity of HIPS, which runs around 35 to 40,000 tons, more than 70 to 80 percent of that demand, of that capacity now is fulfilled by OEM demand. And this is what we have been able to see and we have been able to realize that value as well in terms of an EBITDA potential. Of course, in the first half of this year, there has been a lot of volatility, specifically if you look at supplies of styrene, how we perceive certain markets. The reason why I'm mentioning this is because when you look at again polystyrene and specifically HIPS, the The concerns are less because, again, it's an OEM business, formula-driven business, wherein, you know, volatilities in supply chain can be found. In the case of general purpose polystyrene, a very small percentage is actually OEM-driven. And consequently, we also have a very small percentage of OEM-driven demand. There is a limited, you know, opportunity to increase that because of the commoditized retire. You know, we have had some law participate in certain volumes, especially with regards to GPPS in the second quarter. And that is also reflected, while our volumes for ABS have gone up significantly in the second quarter, the volumes for GPPS are also down because we chose not to participate in some of the non-OEM demand for GPPS because it was highly speculative in nature when we were procuring styrene monomer in the first quarter of this year for the second quarter. So, this is a management call, and hence, you know, the volumes for polystyrene were lower. With the kind of uncertainty, which still remains across the board, we believe with ABS, still we will have an increase in volumes. Because the first quarter was exceptional, the volumes were lower. Purchase and disruptions continue, but we have developed alternate supplies. Because of that, at least we know that we can procure it, albeit, you know, higher cost given the current environment. But with that higher cost being ABS, again, HIPS will remain as usual, but GPPS, that uncertainty continues, and, you know, the management call always has been not to be very...

Just a little bit on the commentary what you have given. From the ABS side, do we map in terms of the unique grades, possibly where we are the only player and probably the competition won't be there in terms of market addressability? So, is there any percentages or is there any benchmark on the basis of which you can say that these are the unique grades and possibly this could be the percentage of our overall ABS volumes from where these unique grades would be coming from?

So we have some mapping. Of course, some of that information is confidential here, as you can very well imagine from a Veritas standpoint. And this information is not available from competition either. But, you know, what I can mention broadly speaking is when we look at the automotive space, and we have a larger share. When it comes to appliances as well, like I mentioned, we have the missing piece of the refrigeration.

Thank you. The next question comes from the line of Aditya Khaitan from SMIFS Institutional Equities. Please go ahead.

Thank you, sir, for the opportunity. Just a couple of questions. Sir, when we look at this quarter, we have seen inventory normalization largely happening. And this has also reflected well in jump in volumes on sequential basis in standalone. But on Thailand business, sir, when we look, the numbers still look onto the weak side only. Volumes had remained flat slightly onto the lower side. You had also alluded to the fact that there are some competitive pressures which are there or we have not got the right product market fit into this category, into EBS. And also, so broadly also looking at the numbers, how you see over the next two years numbers panning out because the cost is still not coming down. It's been almost two years since we have done the acquisition, and numbers still look weak. How would be the trajectory, just I am asking, for the next two years in terms of Thailand, and what could be the triggers wherein we could see volumes moving up? We had also said earlier that we are also looking to export to China. That has also not yet started. Any sort of commentaries are on to this side.

Yeah, thanks, Aditya. So, you know, with regards to Thailand, the product mix that we have is actually the right product mix. You know, in fact, our gross margins in Thailand, given the product mix that we have, are higher than India. The challenge lies, you know, if we compare Thailand to India, is essentially our cost structure. And this is something, you know, it's been about, you know, we took over actually management control in the end of January last year. And we are sitting, you know, at the end of the second quarter of this financial year. So it's been a little bit under seven quarters, speaking. But, you know, this is something that, you know, I had expected and we had taken into account. We do believe that, you know, this is going to take potentially another two years for how the trajectory. If I am going to comment, it would be wise to assume that kind of the performance in Thailand will remain consistent with what has been last year, you know, over the...

Well understood, sir, on that. But, sir, my second question is, when we look at the ABS, we, recently our competitors have also started ramping up its plant of ABS. Just comparing the grades which we have in common with the competitor, excluding the special grades, how you see the competitive intensity over there? Are customers shifting towards the competitor more or what sort of, you can say, onto the table discussions are happening with the customers on the volume side? How are the customers approaching towards this? And I miss, sir, your volume guidance number for 27 and 28, sir.

So, we don't give any forward-looking statements as far as volume guidance is concerned. But, you know, if you kind of remove the first quarter of this year from the equation, we are back to running relatively full in terms of whatever capacities we have in India today. The expansion coming online, as we have mentioned, you know, towards the end of this financial, we would be able to, with regards to Thailand going back, you know, the product rates that we have, even you mentioned China, you know, we have kind of maintained.

Just one last question. Sada reported standalone per kg numbers in this quarter. You foresee that these numbers can be sustainable?

The second quarter of this year, I think the mix that we have obviously has ABS in its...

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

Thank you. The next question comes from the line of Rahul Agrawal from ETTI Asset. Please go ahead.

Yes, sir. I would like to welcome to everyone on the call. Few questions. Rahul, not clear. Am I audible?

Yes, sir.

Oh, questions.

Can't hear you again, Rahul.

Participant lines seem to be disconnected. The next question comes from the line of Nirali Gopani from Unique PMS. Please go ahead.

Yeah, hi. Thanks for the opportunity. So, Rahul, again, my question is on a Thailand business. So I know after the acquisition, you had made it clear that you'll take at least two to three years to, you know, break even and then ramp up. My question is, why are we not seeing even the gradual ramp up? When you say that next full financial year will be similar to what we did in this financial year, is it because of the global demand supply? Do we see this getting further delayed? Is that one of the reasons also, along with the cost part?

Yeah, hi, Mirali. You want to ask all your other questions as well? And then I can address them together.

Yeah. So, other question is on the India part, you know, on the standalone business. So, last quarter, you had said that the non-OEM demand is a little impacted. So, how do you see things moving there? Secondly, on the phase two of ABS expansion, would you wait and watch, you know, how this capacity is ramped up or do we see impact on realization? And then you will decide for phase two, or you are confident that the realization will not be impacted. Yeah, so these are the two, three questions.

Thanks. Yeah, so Niravi, thanks for your question. With regards to Thailand, you know, with regards to the recovery or, you know, the time taken to, we had estimated it will take us a few years, B, in terms of positioning. The second question was...

Yeah, and the question was on the expansion, the phase two expansion of ABS in India. Just to follow up on the Thailand part, so I understand that cost cannot come down in a quarter or two, but my question was largely that, you know, this miss approval time, which is taking longer, is it because of there is this oversupply kind of situation or this demand supply situation not matching and hence that the capacity ramp up is taking time? There are no issues on that side, right?

Yeah, so essentially what has happened, there has been a little bit of rebalancing in our product portfolio in Thailand as well. Some approvals which have come in, there is some business again which has got rebalanced.

Perfect. And just one last question, are there any new products adjacent to ABS or polystyrene that we are working on that and we would like to commercialize, say, in the next few years?

Anything on that side that you would like to Yeah, so, you know, we launched two more grades. One is Acelac and the other is Taraloy. Acelac is an ASA. So, those have been launched.

Right. Thank you for answering my questions.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. The next question comes from the line of Ronak Chedda from Avriga Capital. Please go ahead.

Yeah, hi, I'll go ahead with all my questions. First is on the volumes. You mentioned that we are not participating in some part of the business on the PA side because of the volatility. Should this continue in the next half as well? Or do you see that polystyrene volumes can make a comeback in H2 of this year? That's question one. Second question is on the margins. Now that what we see, India gross margins have seen some contraction because of the volatility. Going forward, do you see that gross margins will revert back to that 25% range, which on an annualized basis we've been seeing company deliver for the last three years? And the last question is on the CAPEX, where you, is this a clarification? Did you mention that the CAPEX will go live by the end of the year or you mentioned in this financial year? Is this a clarification?

Yeah, hi, thanks, Thomas. So, you know, with regards to the polystyrene volatility, polystyrene, again, is composed of two parts, relatively equal parts. One is the general process polystyrene. On HYPS, I think our volumes will be in line with what historically we have done, and I think on an annualized basis, we should be able to still do the volumes that we do. GBPS, yes, you're right, there is an uncertainty which continues. The extent the uncertainty continues, you know, our management calls to speculate too much,

Just a follow-up on the TPEX timeline, Rahul. Let's say this comes in March. How much time would we need to kind of scale up the capacity? Will it take a quarter or even less than that?

So, effectively, you know, again, I don't have an exact month for you. Like I said, in the financial year, whether it's going to be January or March, I can't comment right now. We are very close to it. But, you know, sometimes at the end, when we are commissioning these plans, you know, it can take 15-20 days here and there. And it's data on getting that capacity online for prime production. So, that's what's relevant in terms of our ability to sell. I think once the capacities come online, and of course, we are expanding in all three plants, right? So there is Nandistari, which is our rubber plant, Katol, which is our sand plant, and Huxi, which is our compounding facility. All three, you know, we are trying to synchronize and have all capacities up and running. At a similar time, there could be a little lag of capacity. So as in when those capacities are all aligned, you know, and this is all essentially within an error of one quarter, if you will. The capacity is available for sale. We are relatively confident, as these capacities come online, that capacity would be, you know, utilized. Going forward to get it is something that we do plan.

Okay. Thank you so much for answering my questions.

Thank you. The next question comes from the line of Meet Parikh from Mihir Asia and Corporation. Please go ahead.

Hi, Rafa. My question, I have two questions. So, the first one is related to our market share. So, throughout the year, so far, have we been able to maintain the same for ABS and polystyrene? This is in context, a couple of competitors, they had mentioned that a lot of dumping has happened from China in the first two months of the quarter. So, any commentary on that? And how is the import substitution playing out? Something I just pointed out. What is the current domestic consumption, if you could help me with that? And my second question So, this quarter, we have had a cash loss of tankers, the difference between standalone and console. So, would this be indicative of, as you've mentioned, you know, that this is the lowest in terms of volumes that we can go in Thailand. And it will obviously take some time to stabilize, but is this like the base from where we go ahead? That's it.

Yeah, thanks. So, essentially, in terms of market share, you know, if you look at the ABS market share, you know, we have always maintained that, you know, whatever we can produce, we are able to sell in the current context. And for ABS as well, you know, while in the first quarter, you know, there were certain shocks to the system, in the second quarter, when things have normalized, we have been running full and being able to, you know, effectively sell out whatever we are able to produce. Market share per se has not changed because overall demand in India, I think, you know, at least in the first half of this year has not really grown because in the first muted demand from the North. P.S.

Thank you so much. All the best.

Comes from the line of Rahul Agrawal from Ikidai Asset. Please go ahead.

Yeah. Hi. Thank you. Am I audible now? Yes, sir. You are audible. Okay. Thank you so much. Just a few questions. Firstly, on, you know, how something on the global trends, right? I mean, given volatility, the demand supply across regions would have been, you know, very different. Any key takeaways you'd like to share on either developed markets or Southeast Asia, which are, you know, positive, negative for the ABS and PS industries in India? So that's question number one. Question two was on pricing. I mean, I understand. I just wanted to know, like, how is the pricing move from 2Q to spot right now on HIPS and ABS? Just some comments on that and versus what is sterile monomer procured at right now? Because it looks like what feedback we're getting is October. Again, we are seeing spike in sterile monomer pricing. So just a few comments on what's the selling price on HIPS and ABS? And how do you look at, you know, you already said that margins will be maintained similar to 2Q levels ahead. So, I understand that. And third is, just on the new ABS plant, the grades which we will manufacture, will those be even better than what we are doing right now, or those will be similar? You know, the question is essentially in the context of, can the margins further increase on ABS on a like-to-like basis, on a longer-term basis? I am not clearly comparing shorter-term here. So, just those three questions, please. Thank you.

Thanks, Raul. So, you know, with regards to global trends, you know, regionally, of course, there has been a lot of changes because, you know, in terms of availability of raw material itself, you know, it has been concentrated in certain regions, you know, like China and maybe Korea to some extent. However, all the regions have got affected as a result of NAFTA supplies. When that has happened, it has affected ability or then, say, concern. In terms of the new...

And just one clarification on the scale-up of the new plant, because it's a brownfield and it's pretty much similar locations of year one of operations, which is fiscal 28, this is like, it's going to be like, you know, I'm assuming that it takes a utilization. So, year one, we have seen, because we are doing ground fields and we are doing in the same plant, we should be looking at 50-60% utilization year one and then ramping up. Is that fair understanding?

So, Rahul, you know, I don't give forward-looking statements. And historically, when we took over management control, we were doing 60,000 tons. And, you know, very quickly, whatever we were able to produce in 10,000 tons of, you know, this happened. And I think…

Thank you so much, and festive greetings to all of you at Styronix. Thank you.

Thank you. The next question comes from the line of Dhawan Shah from Arfa Accurate Advisors, Private Limited. Please go ahead.

Yeah, thanks for the opportunity, sir. So, my question is, like, you mentioned that one of the products from Thailand wearing VMT technology for the refrigeration lining kind of, you know, the polystyrene technology. Is that being transferred to India? And have we received any approvals, you know, from the customers in India? And by when we can see, you know, the volume numbers for the standalone entity?

Yeah, so thanks, Davan. So, essentially, this is on ABS, not in polystyrene. So, you know, HIPS, also there are refrigeration line of grades. This is on the ABS side. And on the HIPS side, of course, on the ABS side, so far, there is effectively, you know, the validation follows the process of having your capacity in place before you can get validation. So, generally, you have to produce the product in the plant in India before and only after that can you get validation. So, what we've been able to do is we've been able to incorporate, you know, kind of parts of that technology into the additional capacity that we're building up. And that will allow us to make those grades, you know, when we have that new capacity available to supply those grades in India. Once we start up the plant and, you know, we effectively use that technology to make those grades, we would go in for the validation.

Understood. So it will take at least a year or so, you know, because the validation time will also be at least five, six months, right?

Yeah, so I mean, it depends. You know, there are, of course, different OEMs, different customers, different compulsions and requirements on part of companies. There is a great deal of interest, of course, in companies wanting to buy that product because currently this is something which, you know, we have been working on on the development side for several years, and we did just one part of it.

The imports are roughly 40-50,000 tons, which you mentioned, right, annually, or is it more?

30-50,000 tons, but, you know, it's in line with the refrigeration industry, right, and that's growing well, so we...

And that's when no other players are expanding in this line of product. Only we are adding the capacity from Thailand to India. And sorry, in the presentation, you mentioned that for Thailand, there is some overhang of the capacity. So I think we were not under that impression, you know, earlier. I think this time the tone is different for the Thailand business. So if you can, you know, help us to understand about the demand supply situation and by when do you foresee it will normalize? Because you are already undertaking many steps, you know, to revive the Thailand business, both in terms of the volume product mix and then the cost. So, ideally, by when we can...

Yes, sir. So, so, so, Ravan, there is a multi-pronged approach for Thailand. One, of course, even at current, having said that, you know, there is, of course, it will take, I guess, two years, we can easily achieve 60-70 percentage kind of utilization.

And then because the product mix is also good compared to India, and we are also doing the cost savings, so the EBITDA per ton would be largely more than 20,000. Is it a fair assumption? Because the India business is doing roughly 18.

I won't comment on numbers, exactly what the EBITDA Pattan would be. I can say that the idea is to structurally make the business...

The next question comes from the line of Vidisha from CR Putharian Sons. Please go ahead.

Sorry, I can't hear you.

Participant lines seem to be disconnected. The next question comes from the line of Ashwin Reti from Samatwa Investments. Please go ahead.

Yeah, hi. Thank you for the opportunity. First question is on the India bed. I wanted to understand, has there been any early trends of reduction in imports because of the higher freight cost, I mean, what you're seeing right now? Or has it been counterbalanced by your own freight cost including through raw materials and the commentary that remains the same?

Actually, I'm sorry to interrupt. Can you repeat your question? I'm sorry. Can you just repeat it?

Yeah, I'm trying to understand whether, has there been any reduction in competitive intensity from imports because of the higher freight costs, what we're seeing right now.

Do you have any other questions?

Second thing I wanted to know on the Thailand break, so what proportion of your end product sales, what we sell, the end product goes into China, and what is sold outside? Right. I'm trying to understand the weakness is because of the weakness within the Chinese market or because of the weakness in Chinese or other OEM exports to markets elsewhere beyond China.

Ashwin, in terms of India, you know, we have of course had a third player also coming into the market space. But I think in terms of competitive intensity, we have not had any major shift. I think historically we had more competition, the freight from Korea being higher, and the structural costs in Korea might be a little bit lower, but at the same time, because of lower capacity utilization from Taiwan and Thailand.

It's got a time-man follow-up, if I may. So, you talked about the rebalancing of the products initially, right? What was taken from the previous owner, what you've taken, and then some caught up, but some did not. Could you give more clarity on that as to how do, so, or some talks on your own efforts on getting new business? I mean, how is that panning out? But basically, what is going as the expectations, what is not going, or what did not pan out as the expectations? What am I trying to understand?

Yeah, so, I mean, in Thailand, you know, we, of course, have a kind of products which go into, you know, specialized appliances and largely remain unchanged, you know, increased areas, significant numbers.

Got it. Thank you so much.

Thank you. Ladies and gentlemen, due to time constraint, that was the last question for today. I now hand over to Mr. Chinzan Doshi for closing comments. Over to you, sir.

Thank you, everyone, for joining us on this funding call. We appreciate your time and showing interest in our company. In case of any queries, you can get in touch with us or SGA, our investor relations advisors, and we look forward to meeting all of you over the next call. Thank you.

Thank you. On behalf of Styronex Performance Materials Ltd. that concludes this conference, thank you for joining us and you may now disconnect your lines.