Mitsu Chem Plast Limited (540078) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Mitsu Chem Plast Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Thakur from Kirin Advisors. Thank you, and over to you, sir.

Thank you. On behalf of Kirin Advisors, I welcome you all to the conference call of Mitsu Chem Plast Limited. From the management team, we have Mr. Manish Dedhia, Managing Director and Chief Financial Officer; and Ms. Kashmira Dedhia, Vice President, Finance and Accounts. With that now, I hand over the call to Mr. Manish Dedhia for opening remarks. Over to you, sir.

Thank you. Good afternoon, everyone. It is a pleasure to welcome all investors, analysts and participants to the Mitsu Chem Plast Limited Q1 FY '27 Earnings Conference Call. We sincerely appreciate your continued support and interest in our company. Q1 FY '27 reflected continued progress for Mitsu Chem Plast Limited with focus on strengthening our manufacturing capabilities, improving operational efficiencies and supporting growth across our diversified product portfolio. During the quarter, the company continued to build on its capabilities across industrial packaging, health care, infrastructure and other value-added applications. We are also pleased to announce a proposed addition of 3,550 metric tonnes per annum to our existing manufacturing capacity of 32,450 metric tonne per annum overall. This expansion is aimed at strengthening our ability to cater to growing demand across key products segments and supporting the company's long-term growth plan. Our existing capacity utilization stood at 64% in FY '26, providing a strong base for further product and capacity expansion. Our diversified product portfolio continues to remain a key strength. We operate across blow molding, injection molding and custom molding applications, serving industries, including pharmaceuticals, chemicals, agrochemical, FMCG, food, health care and other industrial segments. The company currently operates four manufacturing facilities with 53 blow molding machines and 22 injection molding machines and installed capacity of more than 32,450 metric tons per annum. Healthcare furniture remains an important growth opportunity for the company through our Furnastra brand. Furnastra is focused on innovative and durable hospital furniture components with an emphasis on quality, ergonomic design and customer-centric solutions. We continue to see opportunity to strengthen this vertical and expand its market presence. Our packaging portfolio also remains an important area of focus with continued emphasis on products such as paint containers, jerry cans and specialized caps and closures. This initiative are aligned with our broader transformation strategy focused on operational excellence, data-driven marketing, scientific innovation and empowered teams. This company also continued to maintain a strong export presence across 17 countries, supported by a diversified customer base across pharmaceutical, health care, chemical, FMCG and other industries. Our in-house R&D design and value engineering capabilities further support our ability to develop customized and value-added solutions for customers. The company delivered a strong financial performance during Q1 FY 2027. Total income grew 11.62% year-on-year, while EBITDA increased by 209.50%, supported by improved operating efficiencies and a stronger product mix. Net profit increased by 566.23% year-on-year, reflecting a significant improvement in overall profitability. Going forward, our focus remains on expanding manufacturing capacity, strengthening our product portfolio, improving operational efficiencies and leveraging opportunities across industrial and packaging segments. We remain committed to building sustainable growth and creating long-term value for all our stakeholders. Before concluding, I would like to thank our employees, customers, business partners and shareholders for their continued trust and support. With this, I conclude my remarks and I now request Ms. Kashmira Dedhia to take you through the financial performance for the quarter ended June 30, 2026.

Thank you. Good afternoon, everyone. I will now take you through the financial highlights for quarter 1 FY '27. For the first quarter of financial year '27, Mitsu Chem Plast Limited reported strong improvement in profitability, supported by better operating efficiency and improved product mix. Total income for the quarter stood at INR 9,532.78 lakhs, registering a growth of 11.6% year-on-year compared to INR 8,540.39 lakhs in quarter 1 FY 2026. EBITDA increased significantly to INR 1,549.48 lakhs, registering a growth of 209.5% year-on-year. EBITDA margin improved to 16.29% compared to 5.87% in quarter 1 FY '26 representing an expansion of 1041 basis points. Net profit for quarter 1 FY '27 stood at INR 873.83 lakhs, registering a growth of 566.2% year-on-year compared to INR 131.16 lakhs in quarter 1 FY '26. Net profit margin improved to 9.18% compared to 1.54% in the corresponding quarter last year. Earnings per share for the quarter stood at INR 6.44 compared to INR 0.97 in quarter 1 FY '26. On a sequential basis, the company also continued to maintain strong profitability. EBITDA stood at INR 1,549.48 lakhs in quarter 1 FY '27 compared to INR 1,422.74 lakhs in quarter 4 FY '26, while net profit increased from INR 771.73 lakhs in quarter 4 FY '26 to INR 873.83 lakhs in quarter 1 FY '27. The strong improvement in EBITDA and net profit reflects the benefit of improved operating efficiency and a stronger product mix during the quarter. Looking ahead, our priority remains focused on capacity expansion, strengthening our diversified product portfolio and improving operational efficiency. The proposed addition of 3,550 metric tonne per annum to our existing capacity will provide additional manufacturing capabilities to support growth across key product verticals. We will continue to focus on higher value-added opportunities across packaging, health care furniture and other industrial applications. Our transformation agenda remains centered around Furnastra, enhanced packaging products, operational excellence, data-driven marketing, scientific innovation and empowered teams. The company continues to work towards its long-term objective of achieving INR 1,000 crores in annual revenue by FY '28. With that, I conclude my financial update. I will now request the moderator to open the floor for question and answers. Thank you.

[Operator Instructions] The first question is from the line of Vinod Shah from VS Ventures.

Yes. So I just have a couple of questions. So within the packaging portfolio, so which products are currently the strongest demand?

So currently, everything is in a demand, sir. And -- the product -- the containers also in a big demand. And we have 3 verticals, which is the containers, furniture part and others. So all verticals are doing very well.

Okay. And where do you see the highest like incremental opportunity within this?

Sorry, sir.

So where do you see the highest incremental opportunity?

Can I -- I'm not able to hear your voice. Sorry, sir.

Am I audible now?

Yes, yes. Now perfectly all right.

Yes. So I was saying where do you see the highest incremental opportunity in next 4, 5 years?

In both. So all verticals, we are looking at very higher demand as well as the profitability, also good in all the verticals.

Okay. And sir, you have like currently around 500 SKU. So are you looking to like rationalize low-volume SKU and focus production capacity on.

So we have, yes. So we have already done that, and this is -- you can find the result because, see, we have done rationalized things. Even -- see, we are doing a lot of product expansion and product reducing, like both the things we are doing together. So which product is not giving us a better margin, better turnover and a better throughput, then we are actually -- I mean, like giving away that product. And we are also introducing new products where we are very sure that we are getting some good improvement there.

Sir, you have around like 700 customers or something. So...

More than that.

So.

Can you speak a little louder because your voice sometimes going away?

Yes. Is it better now?

Yes, now it is better.

Yes. So I was saying you have like around 700-plus customers, as you mentioned. So are you approaching the next phase of customer acquisition? Or are you looking to deepen the penetration in the existing customers?

Sir, we are adding customers every quarter and quarter. This time also, we have added more than 30-plus customers in our kitty. So every quarter, we are also adding -- we are also managing the customer, the reason the better throughput, better profitability and better turnover. So we are always having addition of the new customer. The last year, we have total added around more than 100-plus customers we have added. More than 150 customers we have added, sir.

Okay. That's great, sir. And sir, just one last question. So you mentioned you see the growth like across the -- across your all verticals. So where do you see the revenue mix evolving in the next 12 to 18 months?

I mean, total revenue, this way, it stood -- maybe we can calculate this way. And also, we have -- you must have seen our expansion plans also. We just increased our expansion. So everything will come up. So whatever -- so this is in line with the announcement of INR 1,000 crores. So definitely, we are in line with that.

So we are expanding our capacity, yes.

[Operator Instructions] The next question is from the line of Nishita from Sapphire Capital.

Hello, am I audible?

Yes.

Yes.

So I just wanted to understand our margin improvement. So Y-o-Y, our margins have improved quite a lot from around 5%, 6% to 16%. So I wanted to understand what led to this margin improvement. And also because with the geopolitical situation, there must be a lot of pressure on our raw material price. So how are we able to maintain this margin at 16%? And is this margin sustainable?

Okay. Yes, good question. So I think your first question was how do you arrive this profit margin, right?

Yes, yes.

Yes. So I think in my speech, I said due to a lot of innovation and a lot of manufacturing efficiency and overall operating efficiency and product mix that gives us a good quarter. So you must be seeing from the Q3, there is some of the other improvement. So we are trying to get over a lot of things which was a bottleneck or something like that. So we are improving on an everyday basis. And I am like this is a result in -- with this is the result. About your second question, yes, there is a big geopolitical things going on. But I think we have stopped buying imports since many years. And as like locally material available in India, and hence, we are buying from local only. And I think local producers are -- we have a very, very good relations with them. And hence, I didn't find -- I mean we found a full support from them to run the industry. That's what I can say.

Okay. So like have we faced any raw material price increase then since we have such good support from our local producers?

Yes, yes. Customers are -- I mean, suppliers are increasing prices as per the geopolitical situation, the crude and everything based on that. And we are passing on the customers. Customers are also understanding that if this is a problem and then if they do not give a price increase, we will not be able to supply because not be able to supply in the loss. So I think this is a big thing for suppliers also for customer also. Everybody understands the situation. And hence, we are giving the price increase to suppliers and customers also giving us.

Right. So are we able to pass on the complete price increase to our customers? Like have we able to pass the complete price increase in raw material to our customers.

Yes. That's what I said in just last statement I said the customer also understood very well because the geopolitical situation, everybody knows what are the problems.

Okay. Understood. Understood. And my next question is on our CapEx. So you mentioned that we've proposed additional capacity of around 3,500 metric tonne per annum. So what will be the required CapEx for that? And how are we going to fund that CapEx?

I think we have already said that. So these are some of the good CapEx we will require. And most of the CapEx, it's a mixed one. Some CapEx -- I mean, like we are doing the mixed things, internal accruals and the debt we are doing.

And what is the amount of CapEx required?

Required for what we have done is done till now, yes.

Required for the 3,500 metric tonne additional capacity that you've proposed?

So it's approximately INR 2 crores.

Okay. Understood.

It depends on which kind of machinery from where you are getting, how you are getting, it's all depend on this.

Understood. And can we expect this additional capacity to be operational in FY '27 itself?

Yes, yes, it is already operational. So we have announced after everything successful run.

Okay. So the additional 3,500 metric tonne capacity is already online?

Yes, already online, already online.

Okay. Okay. Understood. And my last question is on revenue growth. So we've grown -- like our margins have improved quite a lot, and we are growing also extremely well. So if you can give some sort of guidance on where can we see the growth trajectory in FY '27?

Sorry, I am not able to understand your question that's very well.

I just wanted to understand like in FY '27, what sort of revenue growth can we see?

Yes. So I think going forward, we are looking for the same growth quarter-on-quarter. Almost same. I will not say 100% same, but almost same growth we are looking for the quarter-on-quarter. As I always mentioned in my con call till now since last 1 year, that we always -- now we are more focusing on bottom line rather than top line.

The next question is from the line of Rajesh Gupta, an individual investor.

Am I audible?

Yes, sir.

Yes. Okay. Could the management clarify the rationale for selecting Rikhav Securities Limited as the non-promoter allottee of 2 lakh warrants? Rikhav Securities have any existing investment, business advisory relationship with Mitsu Chem Plast? And is there investment made...

I think yes this is just as an investor, he has come. So it is a small amount. It is a very, very -- a small company is always a challenge to get the investor.

Okay. There's no existing investment they have in Mitsu or any business or advisory relationship with Mitsu.

Right.

Okay. One more question is the INR 1,000 crore target for '28 -- FY '28, the growth has to be much more than what has been in the preceding quarters. So I mean, we expect the quarterly revenue to move from INR 95 crores last quarter to INR 120 crores or INR 130 crores so that we are in line for the INR 1,000 crore revenue target by '28.

I agree, fully agree with you. You -- very well this thing. Yes, sir, I think this quarter being a very low quarter by revenue. As I always mentioned, I think you are also a follower of the investor con call. So we are more focusing on the bottom line rather than top line, number one. Number two, yes, the top line is also in our mind very well. We are trying our -- all the aspects, all the things very well. We have already launched -- I mean, we are coming up with the IBC project, which is coming up in maybe third quarter. So all these things is like in line of growth. So definitely, you'll find the revenue growth also very soon.

Okay. Great. Sir, one last question. We have been running the capacity at 64% approximately. So what is the rationale behind increasing the capacity further of about 3,000 is what I have been said. There's still huge scope for capacity utilization from 64% to 70% or 80% or 90% from a production increase of additional capacity is anything...

Sorry, sorry, go ahead, go ahead, sorry.

Yes. So this additional capacity, is it something for very specific machinery or something specialized thing? Or why additional capacity when the existing capacity is not being used fully?

Okay. So we have -- see, this is as per plan. Now in some quarter, there is a seasonality, you can go maximum to 85% capacity. Now there are some of the capacity in last year, Q1 and Q2, you must have seen that was a very, very low-capacity utilization. So overall, it was a 60%, 63%, 64% utilization every last year. Now coming back to your question, why you have increased if it is not utilized properly? Sir, we have to plan a little ahead because in the blow molding and injection molding industry, we have one challenge of getting the machinery on time, getting the machinery -- the one challenge after getting the machinery, the commercialized and everything, it takes a lot of time. So around 6 to 9 months, it takes to start to finish. So we have to be ready enough with all the infrastructure things. We have taken our unit -- one more unit in the month of, I think, January, February, I don't recollect exactly. We have announced that first quarter -- last quarter of '26. But now we are going for expansion because we have an infrastructure ready so we can go ahead for a capacity announcement.

The next question is from the line of Praveen Sharma, an individual investor.

Congratulations for the excellent set of numbers. I hope the momentum will continue. My only question is regarding the IBC project. Where do we stand? And when do we expect the commercial operation to start? And how big is the opportunity there?

Yes, definitely. As I just mentioned that most probably Q3, we will start the commercial production. And it's a good opportunity. It's a new product in the market. And as a management, we are seeing a good opportunity in this particular market. But once we come up with that and then you'll have to test the water.

So will we be doing additional CapEx for that or the existing capacity will suffice the machines which are there will suffice for that requirement?

Complete different machinery for the IBC, complete new machinery -- sorry.

So how much are we going to invest in that?

Sir, we will announce very soon on that because we haven't given all the details. Once we disclose everything, we'll come to know everything on the same.

But that will start commercial operation in Q3, that is expectation.

Sorry, sir?

Commercial operation will start in Q3.

Approximately, yes. Approximately, yes.

The next question is from the line of Saket Saurabh from Sagari Capital.

So just to be sure, sir, last quarter, you told that we have a cost-plus markup kind of an arrangement with our clients where the raw material is a pass-through. But our markup is percentage of raw material price, not say, EBITDA per tonne or something like that. Is that fair?