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Earnings Call Analysis
Q1-2025 Analysis
Supreme Petrochem Ltd
In the first quarter of financial year 2025, Supreme Petrochem Limited reported impressive growth metrics. The operating income reached approximately INR 1,574 crores, reflecting a significant year-on-year growth of 28%. This positive momentum is further underlined by the EBITDA, which soared to INR 184 crores, marking a remarkable 73% increase compared to the previous year. Notably, the net profit after tax stood at INR 122 crores, up 76% year-on-year, indicating robust profitability.
The company's sales volumes of manufactured products also showcased a promising increase of 21%, totaling 93,323 metric tons. Specifically, domestic volumes demonstrated a robust growth of 38%, indicating strong demand within the local market. However, export volumes faced challenges due to heightened container freight rates and a shortage of shipping space, dropping to 7,990 metric tons compared to 11,370 metric tons in the same quarter of the previous year.
Operating efficiency remains high, with capacity utilization exceeding 83% during this quarter. The company maintains a debt-free status along with an investable surplus amounting to INR 1,040 crores, positioning it well for potential investments and growth opportunities.
Looking ahead, the management discussed expectations for volume growth. Initial projections indicated a target range of 8% to 9% growth for the fiscal year. However, considering the current run rate, they anticipate potential annualized growth rates could reach 14% to 15%. The second quarter typically presents slower demand due to seasonal factors, but the outlook remains optimistic post-monsoons.
Exciting developments are underway with the ongoing expansion of several product lines. The new ABS plant and expansions in the Haryana facility are expected to generate additional normalized revenue potential of INR 2,500 to 3,500 crores once fully operational. The anticipated timelines for these expansions suggest they will become operational as early as FY 2026-27.
In the broader market context, the demand for polystyrene and ABS is poised for growth, aligned with GDP growth rates. Currently, Supreme Petrochem holds an approximate 55% market share in the polystyrene segment. However, competition is likely to heat up with other players announcing capacity increases, particularly in ABS, further complicating market dynamics.
Raw material costs remain a critical factor, especially given heightened shipping and freight costs due to global supply chain issues. Container freight rates witnessed a considerable rise, impacting overall cost structures. The company is actively monitoring these costs as they could affect pricing strategies and margins moving forward.
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Ladies and gentlemen, good day, and welcome to Supreme Petrochem Limited Q1 FY '25. [Operator Instructions] Please note that this conference has been recorded. I now hand the conference over to Mr. [indiscernible] thank you, and over to you, sir.
Thank you. Good after, everyone. And very or welcome you all. My name is [indiscernible] We represent the Investor Relations of Supreme Petrochem Limited. On behalf of the company, I like thank you all for participating in the company's earnings call for the first quarter of financial year 2025. Before we begin, I'd like to mention a cautionary question set. Some of the statements made in today's earnings call may be forward-looking in nature.
Such forward-looking statements are subject to risks and uncertainties, which could cause actual results tell from those anticipated. Such statements are based on management's beliefs and assumptions made by and information currently available to management. Audiences are cautioned caution not to place any undue reliance on the forward-looking statements or making any investment decisions. The purpose of today's earnings conference call is only to educate and bring a ends of the company's fundamental business and financial court under review.
Now let me introduce the management participating with us in today's earnings call, and I'll hand it over to them for opening remarks. We also have with us Rakesh Nayyar, Executive Director and Chief Financial Officer; Mr. Dilip Ole, the Chief Executive of Finance and Accounts, Mr. Diyan Micha Company Secretary. Without any further questions or action. I have to start his opening remarks. Thank you, and all the sir.
Thank you, Amit. Good afternoon, everybody. It is a pleasure to welcome you to Earnings Conference Call for the first quarter of the financial year 2025. Let me give you some small brief on the financial performance of the quarter. The operating income for the first quarter was approximately INR 1,574 crores, which has grown by around 28% on a year-on-year basis. The operating EBITDA was reported at INR 161 crores, representing an increase of around 73% year-on-year.
Total EBITDA for the quarter is INR 184 crores for the first quarter. The net profit after tax is around INR 122 crores, which increased by 76% year-on-year. The company sales volumes of manufactured products in the first quarter of financial year '25 increased by 21% on a year-on-year basis. to 93,323 metric tons. Domestic volume showed a robust growth, rising by 38% on a year-on-year basis.
Export volumes decreased due to a substantial increase in the container freight rates caused by vestiture prices, leading to a shortage of shipping space. Exports during the first quarter of '25 at 7,990 metric tons compared to 11,370 metric tons during the quarter 1 of financial year '24. The price of [indiscernible] during the quarter ended June 2024 was stable. Company arranged debt free with an investable surplus of INR 1,040 crores at the end of June 2024. With this, now I open the floor for the question-and-answer session.
[Operator Instructions] Ladies and gentlemen, we will for a moment in a the line of Aditya Khetan from SMIFS.
Sir, my first question is on to the volume side. Sir, last quarter, you mentioned that for full fiscal, we are expecting around 8% to 9% volume growth, in Q1, we had made around 83,000 tonnes. So sir, like if we annualize this number also continuing a bit upward number in Q4 because of the stocking will happen. So we can clock at least around 14%, 15% volume growth with the current run rate. So are we -- so we can maintain these volumes or we'll see some dip in second and third quarter?
As I've been saying in the past also, second quarter when the monsoons are there is generally a weaker quarter in terms of the volume because the lifting by the OEMs are slow. Even in the non-OEM segment, the demand falls a bit third quarter due to the festival season for the short period picks up. And post the festival season, again, there is a lull. And only towards the end of the third quarter, the last month of the third quarter or other the last 4 months of the third quarter onwards, the market picks up again.
So from mid-December till June and early July, the season is generally good. And then the people the demand on the there is a or there is a slightly weakness in the market in terms of demand so we still maintain that we could be doing better. But then on a conservative basis, I would maintain that we would be -- I mean, the volume growth of around 8% to 10% on
Sir, on to the quite side of pontine and your time last for the last 2 to 3 months, we had witness on spot basis, the prices have gone up to almost $300 to $350 per tonne versus the normalized average of around $150 to $200 per ton. So sir, this price can it maintain for a very long period of time? And what is the reason for such highrise?
The normal is also not $150. You're talking about DBS or HIS are between $150 to $200. But because of the high freight rates of the imported car be already because of the shipping freight rates going up globally, some data has gone up, but not really to the extent what you were saying. The delta not increased to $300 or $350 for GDP.
Okay. So sir, so the data for as you go up?
Both GDP and [indiscernible] both have marginally gone up, but not to the extent you are saying. We haven't seen that.
Okay. Okay. Sir, on the expansion side, apart from ABS, which we are planning to start by Q4, the EPS expansion and the XPS expansion. So this expense when we are planning to commission?
EPS expansion also will be through by the end of this current calendar or the first quarter of -- sorry, the last quarter of this financial year. And XPS will happen sometimes early next financial year.
And so this places compound business?
That keeps on going on as and when the demand is there and we find some new avenues are coming up. So where and when they require the lines are added there because they're kind of a very modular thing that the just bring in and we installed the machines. It's not something like ABS or EPS. -- just one more question, sir, on to the Kalana plant expansion, where we are looking to invest around INR 300 crores apart from the existing announced expansion of 3D panels, any other new projects have been -- have been lined up -- we have said 3D panel, sheeting and also XPS there. That is a -- now we are seeking all the statutory approvals in terms of environment guarantees and other things.
That will take some time. And we always look out for new revenues and we find some other interesting project, we will implement there.
But the revenue potential could be around INR 2,500 crores from the 3 business. Based on the current capacities announced by us, which is where the revenue potential would be around INR 2,000 crores.
Next question is from the line of Sales Raja from B&K Securities.
3 years back when PS demand was -- we used one of the lines for producing MMA product last 2 years, we use the same line for the only because of good demand. Now with capacity availability, is there any plans to reenter in SMA product to fill the available capacity we had altered.
[indiscernible] I would say, like added some small equipment to our existing polystyrene for manometer, small quantities of SMA because we had surplus capacity of PSM. And now the PS market is growing -- has already grown and is still growing. So we have not looked at SMA at the moment, and we continue to focus on [indiscernible] as such was very small.
And so we are only considering doing maybe some use compounds, but not actually going big way into SMA.
Who is supplying that currently? And what is the market size?
The market size in India is very small, very, very tight because right now, whatever we have developed and as we stopped supplying people have again gone back to PC and others. And currently, in Indian, overly manufactures.
Okay. Okay. Okay. And my second question, given that our current power cost is approximately INR 2 for the existing product lines. With the more technology we are implementing. So what is our projected power cost activity for the ABS line for the 1.4 lakh ton capacity?
Sharish, I can't give you the number of hands because we are not still around production. And the numbers that we have are all given to us by our technology suppliers. So really, it will be not right for me to comment on that.
Okay. Okay. we have entered a JV for the generation of 1.5 megawatts of solar power. And also, we have installed 1 megawatt of rooftop solar over report mentioned that we can need 50% of our power repayment from the renewables. So does it include the force for the ABS side.
No, that is for the current power requirement. When the area comes in, then we will go in for additional solar power at maybe in the current JV itself or maybe some other. But currently, this will be only our existing power requirement of 50%.
Okay. last sustained. So on the 2 paces of ABS 1.4 lakh metric tonnes, it recurs roughly around 7,000 tonnes of master batch. So that is sort intercondition how you say what did you say?
The total ABS capacity is around 1.4 lakh. So that record roughly around 7,000 tons of master bach. So this is most entirely from our FP situation how it. No, whatever [indiscernible] it requires because our Natural colors of our areas the continues process consistent color in there. And [indiscernible] requirement of 7,000 tonnes which you have calculated as required to be already supplied by also our own SBC division.
Okay. So the effective capacity is 75,000, that we are targeting capacity. Over proposed expanded capacity over a period of time, what we have about where we are. And now as and when the demand is going up, we keep on adding the lines. 75,000 that is the provision we are doing. And they -- it's not like a continuous process for areas actually for adding lines and that we keep on adding lighten demand is there, and the market needs are there.
Our next question is from the line of Drew from FCC.
Is it possible to say how much -- in '26 container, how much of State imported, I mean in terms of quantity, how much can be imported? And what would be the year of freight rate currently? And how has it increased over the last 3 months from Southeast Asia. I believe that large part of destination for exports [indiscernible] So how is the change? I'm just trying to understand how meaningful the benefit can be for us.
The freight rates in the last couple of months have gone up by almost $150 a tonne. But then the demand -- I mean, capacity being available in the country now, the imports are reducing a lot. They will increase rates also people have stopped importing any way. Currently, earlier the imports used to be around 6,500, 7,000 tonnes a month. That has already come down to 3,500 tonnes in the last 1 or 2 months, what we have seen, 3,500 to 4,000 tonnes.
And going forward, it may further go down. And as far as the staffing in the container is concerned, it can vary the way the cutting is done, and it could be 17 tonnes and it can be 19 tonnes also. So it depends upon the foscarnet depends upon the kind of bag users 255 or in the double 17 to 19 -- 190-feet -- are we taking the sorting is done there, but that [indiscernible] 19 to 19 tons, anything can be done depending upon the various cost/
Got it. And the $10 per tonne is what you mentioned is the freight rate is your estimation of the freight rate from the South is our intention. But now I understand that this getting rationalized and the market expectations are that the freight rates will start going down on.
That's the information what we are getting today. So even if we reduced, so. Even if there are some small quantities of import, should on a port basis you still tend to capture some is probably the freight rate or it will not go that really. Because then if you do that, then the -- you have.
Long-standing customers here, you can take into advantage of your customers that is one. And two, by doing that, you are kind of killing the demand in the market also. So it has to be a balanced approach always.
Got it. And so for the raw material, it does not change materially because they are important, I believe, in tanks
Things have also gone up the omitted by the heat rates have also gone up, but not to the extent of the solid cargo, the liquid cargo total rates have gone up, but not very high substantially as indicator of the auditor.
Got it. That was only a question.
Our next question is from the line of Ramesh from Miguel Bank bites.
So if you were to look at the growth outlook for polystyrene and ABS, can you give us what is the expected CAGR in demand for [ polystyrene and attentive ] and what is your current market share in [indiscernible] what are the kind of markets you are expecting in ABS?
The expected market growth will be aligned with the GDP growth and on an overall national basis, that's our expectation. And as far as our market share of the police market is concerned, we are close to around 55% or so currency or 60% maybe. And ABS going forward, when we reach the decide when both the lines are operative and depending upon the market size then and imports also. But then we will always try to be they have a substantial share in the market, but then I can't really comment on what it will be at this stage.
So what is the current consumption of rent, there's around?
200,000 to 300,000 tonnes.
Okay. So in terms of the economics of the new project, for the ROCE, what you really counting in terms of your differentiated part more competitive technology? Is your capital cost lower, audit compete because it's a very mature possibly been a entering this value chain. So how do you see your project delivery shareholder value over the next 10 years?
Our technology is good. Our technology in the world from Parcels. So we see that our product quality will be best. The Mass ABS is order free, when you do it in besides of the automotive also then it is orphan there is 0 water consumption during production. So it is not only environment friendly, but it is a very efficient technology. So we think we'll -- our project finally once it gets established in the market will have anger dimensional ABS.
So if you look at the outlook for the current financial year, financial year, what about your expecting in terms of revenue should primarily come from [indiscernible] When do you expect the [ cremental ] realized revenues to start being booked in T&L?
So the next commercial financial year, we will be in the market, but then that will be the first year when the profit would be supply to the market. And by the time the market gets used to it and we start excepting the media will take some time. But starting 26, 27 financial year, yes, it will be fully accounted as well I have to the top line and the bottom line both.
So do you see any competition in terms of additional capacity in polystyrene and ABS from [indiscernible]
ABS, of course, the others -- I believe that some other current players of ABS have also announced increase in the capacities. And right now, almost 50% of the ABS consumption is getting imported into the country. So they will have enough -- everyone will have on us market to supply to.
Our next question comes from the line of Aditya Khetan.
Raw material, you mentioned generally lower as compared to the solid comp great, what are you saying? So my question was on to the imports of raw materials so they are generally packing liquid cargoes in tankers. So the freight cost is generally lower. And it is -- and for solid cargoes like what we export 1 that is in solid form.
So the readout is higher over there?
Yes, that's right. The bulk cargo liquid, they have their own freight rate economics. And so it cargo has their own freight rate economics. So freight rates were the liquid cargos have also gone up, but the freight rates was solid cargoes have seen increased hiring delist.
Okay. Sir, when we export to police generally like contracted on [indiscernible]
It depends upon buyer to buy. If they want to nominate their own ships, then it on FOB basis. If they want us to vote on a net of basis, we got on seat of basis.
Okay. Okay. So on to the parts when we compare to ABS, like [indiscernible] Martha Okay. Yes. So like any differentiation in terms of product quality or cost competitiveness, you can highlight as compared to.
I was on I said just now to the previous gentlemen, that we -- as far as the mass is concerned, there is a lot-to-lot consistency in that and because it's a continuous process, unlike the conventional immersion process [indiscernible] path process. [indiscernible] there is a natural [indiscernible] color in the superior natural based for the March ABS. Conventional emersion breeds have generally a gallon in turn, and you need high doses of pigments for that, which becomes expensive.
And it is order free, particularly for the automobile it applications, this is a bit of material. As well as paint capabilities are concerned like for 2 [indiscernible] bodies, you have to do the pending of the bodies and that the ABS is used there and Mark has got better finished on the [indiscernible]
These are the action the process, while manufacture of remarks, there is no process order is used or the variety of chemicals which are used for the [indiscernible] all that in reduced [indiscernible]
Okay. Okay. Okay. To follow on. is because of the rising ocean trade costs. Spreads are a 2-year high today. So even posting spreads also like they also address so the [indiscernible] will be sustained at this level or will we continue to fall in to [indiscernible]
Yes. You're voice is cracking. It is not clear.
On to the ADS water was asking what the specs currently, the prices are at a higher level. So that in policy so with the decline in the quarter or you still expect like this cash will remain on time?
We want to normalize even polystyrene as I told you earlier, for polystyrene, the spreads have not really increased substantially because in ABS, the imports are very high, almost 50% of the local demand is imported into the country. So there the increased rates have been a lot of defense in terms of the domestic pricing.
So going forward, when freight rates go down, all this will be also go down.
Our next question is from the line of Jatin [indiscernible] Berman Capital.
So if I look at the demand of the polishing the demand would be around 3 tons -- and if I area, capacity itself is [indiscernible] and we have completed that is increasing the capacity by 150% And then there is another competitor who's planned at case, they have shifted their plant to a location. So how do you think the be coming of the capacities of both these players will like the realization and the margins in Polysil?
Firstly, the operator, you said that who had some gas leak, they have shifted their plant for the location is not right because no shifting of line helped they have set up only a compounding facility in other locations. So it is not a full study. Now as far as the demand in the country is concerned, current demand is lower at 25% of the country. And we -- as I said earlier, that the demand will grow in line with the GDP growth.
And we have a capacity of 3 lakh tonnes, but then part of that is also exporting from by us. So the -- our new plant coming up at in the north of the 100,000 tonnes or even the expansion by the other players in the industry. I would finally get consumed in the country only over a period of time, the next 2 or 3 years, the demand will go up also so there is all capacity otherwise, when the demand does up immediately, the plants cannot be [indiscernible]
So there is always cushion in the capacity and the demand. And so this all will take going forward all capacities will get exhausted.
And sir, just a follow-up on policies, how much of sales comes through direct sales to customers and how much operates through distributor?
I would say around 30, 50/
Okay. And my last question is on APS since you mentioned that we'll be doing [indiscernible] will be a continuous process. So there is any customization that we can do for the customers our 2 competitors does post-contrast base with this on we have to find trades that there are all defined grades like you have in posterior other pipes, that is the objective of the continuous process.
Therefore, these specific applications there, the recipes are made and then those continuous gets produced and if somebody wants an I think specific customization or sort that can be done in our compounding lines and our SBC project.
Next question is from the line of [indiscernible]
Sir, just wanted to understand, what is the normalized revenue potential after the ABS plant and the Mariana area expansion takes place?
Both the lines of a both the [indiscernible] are on steam and our EPS and our Marians [indiscernible]. These new projects would have the potential to add close to almost INR 3,500 to 4,000 tonnes of the cores are ready.
Okay. Okay. So both ABS and Haryana facility combined on. Okay. Okay. And when can we expect this normalized capacity utilization for both ADS and [indiscernible] facilities?
Facility would be likely to start from the financial year basis from financial year 2018. So I'd suggest that I think 28, 29 would be the financial year, when both the capacities projects would be ready and fully operational.
Okay. And what is our current capacity utilization?
The capacity utilization for this quarter was over 83%
Yes. Our next question is from the line of [indiscernible]
Yes, so my first question was on -- Hello. Bank from [indiscernible]
Our next question is from the line of Par from Capital.
Yes. Sorry, what could be a revenue on trading for the quarter? Sorry, what did you say? What would be our revenue contribution from trading for this quarter? Around 20%. Okay. And so the capacity utilization, as you mentioned, 83%, that would be for CS or is that on a blended basis?
To on a blended basis.
Okay. Okay. But more or less all our segments would be on the similar utilization is? Or is there a difference?
Ladies and gentlemen, that was the last question for the day. I now hand the conference over to management for the closing comments.
Thank you, gentlemen, for joining us for this quarterly earnings con call. Thank you.
Thank you on behalf of Supreme Petrochem Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.