Mitsu Chem Plast Limited (MITSU.BO) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '26 Results Conference Call of Mitsu Chem Plast Limited hosted by Kirin Advisors Private Limited. [Operator Instructions] Please note this conference is being recorded. I now hand the conference over to Sir Ganesh. 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 Limited. From the management team, we have Mr. Manish Dedhia, Managing Director and CFO; Ms. Kashmira Dedhia, Vice President, Finance and Accounts. With that, now I hand over the call to Mr. Manish Dedhia. Over to you, sir.

Thank you, Mr. Ganesh. Good evening, everyone. It's a pleasure to welcome you, all our investors, analysts and participants to the Mitsu Chem Plast Limited Q2 and H1 FY '26 Earnings Conference Call. We sincerely appreciate your continued support and interest in our company. The first half of FY '26 has been a period of steady progress for Mitsu Chem Plast. We have continued to strengthen our operational foundation, diversify our product portfolio and deepen our operational foundation, diversify our product portfolio and deepen our relationship across domestic and global markets. Despite a challenging environment for polymer-based industries, we delivered consistent growth in both revenue and profitability, reflecting the strength of our business model and disciplined execution over the years. Mitsu Chem Plast has evolved into comprehensive blow and injection molding solution provider, catering to multiple sectors, including industrial packaging, infrastructure, health care and emergency handling equipment. Our 3 manufacturing facilities in Maharashtra equipped with over 51 blow molding machines and 18 injection molding machines, delivered an annual capacity exceeding to 28,000 metric tons. This scale, combined with our in-house R&D and testing capabilities enable us to innovate rapidly, maintain superior quality and respond swiftly to evolving customer needs. A key growth driver for us continues to be the health care furniture part segment under our dedicated brand Furnastra. The brand reflects our commitment to designing durable ergonomic and high-quality hospital furniture and components that enhance patient comfort and operational safety. The growing recognition of Furnastra in India and overseas supported by our participation in prominent exhibitions such as Arab Health in Dubai, MEDICA in Germany and WXH in Miami has further strengthened our international visibility and customer base. Our export business continues to expand steadily as we strengthen our presence across new markets. Mitsu today export to more than 17 countries and our participation in major global trade fair has enabled stronger brand recall and deeper engagement with OEM clients across pharmaceutical, health care, chemicals and FMCG sector. This momentum demonstrates the growing trust in Mitsu as a reliable long-term partner known for precision, quality and service reliability. We also initiated capacity expansion at our manufacturing facility to cater to the rising demand from both domestic and export customers. While the expansion did not impact the reported quarter, it strategically positions us to capture the next wave of growth. The new capacity will enhance operational flexibility, improve turnaround time and enable faster scaling of new product lines across industries. Sustainability and responsible manufacturing remain integral to our operations. We continue to focus on energy optimization, waste recycling and water conservation initiatives while setting measurable goals to reduce carbon and energy intensity over time. Our efforts were recognized with the Envirocare Green Awards 2024 and the Sustainability Leader of the Year award by FICCI, reaffirming our leadership in ESG-driven manufacturing. Beyond business performance, we continue to invest in social impact through the Mitsu Foundation, which supports initiatives in health care, sports and community welfare, including eye care programs, cancer, cancer relief, para athletics sponsorship and women's sports development. These efforts reflect our belief that true progress lies in creating long-term value for all stakeholders. As we look ahead, our strategic focus remains clear to drive sustainable and profitable growth through innovation. Operational excellence and diversification guided by our 4 transformation pillars, health care, furniture, which is Furnastra, packaging products, operational excellence and data-driven marketing, we are steadily advancing towards our long-term goal of achieving INR 1,000 crores in annual revenue by FY 2028. Before I conclude, I would like to express my sincere gratitude to our employees, customers, business partners, shareholders for their trust and continued support. Your confidence inspired us to innovate, expand and deliver enduring value year after year. With this, I conclude my remarks, and now I request Ms. Kashmira Dedhia to take your take you through the financial performance for the quarter and half year ended September 30, 2025. Ms. Kashmira?

Thank you. Thank you, and good evening, everyone. I will now take you through the financial highlights for Q2 and H1 FY '26. For the second quarter of FY '26, Mitsu Chem Plast Limited delivered strong year-on-year growth. Total income stood at INR 92.56 crores, up by 13.63% year-on-year driven by broad-based demand across our key segments. EBITDA for the quarter stood at INR 5.88 crores, registering a growth of 24.13% with an EBITDA margin of 6.37%, reflecting an improvement of 53 basis points. Net profit for Q2 FY '26 came in at INR 1.8 crores, up by 65.72% year-on-year with a net profit margin of 2.04% and EPS INR 1.39, higher by 65.48% compared to same period of the last year. Moving to first half of FY '26, we reported a total income of lNR 177.96 crores, up by 9.95% year-on-year. EBITDA increased by 14.03% to INR 10.89 crores with margin expanding to 6.13%, a growth of 21 basis points year-on-year. Net profit for H1 '26 stood at INR 3.20 crores reflecting a 43.65% growth year-on-year with an EPS of INR 2.35, up 40.72% compared to the previous year. This results reflects the company's ability to sustain growth momentum, optimize costs and improve operational efficiency even in a competitive environment. We continue to focus on strengthening our product mix, enhancing export and scaling the Furnastra brand to drive profitability going forward. That concludes my update on the financial performance. I would now request to open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Madhur Rathi Counter Cyclical Investments.

Sir, I'm trying to understand why our operating margin halved in the past 2, 3 years from 13% to less than 7%?

Sir, sorry. What did you said?

Sir, our operating profit margin has halved from 13% in FY '21 to less than 7% last year and 6% in the last quarter. So what is the reason for this?

So I think in the -- see 2021, which you are referring to COVID period, which was actually different period for many of the companies. And I think yes, we are trying to get over the EBITDA margin and we are trying also for the same. But there is no specific reason why it has come down. But definitely, there are a lot of polymer prices pressure and everything. So our EBITDA margin is a little lesser.

No, even if we compare ourselves to Time Technoplast, which is in the same commodity business as we are, they are doing double the margin that we are doing. They are doing 15% operating margin. So how is it that they are also making the same barrels that we are making? So how is it that margin -- our margin is less than half of there's?

I will not be able to comment on any competitor this thing right now because many people or many competitors are also having many other business also. And we are only making the packaging items and this blow molding and injection molding process only. So we really don't know the exact details of the other companies.

No. What I'm trying to understand that to the best of my knowledge in among all the injection molding, blow molding and custom molding companies that are listed, somehow this company has the lowest margin. So I mean, I'm just trying to understand that what is the reason for that. I don't want you to comment on your competitors' business. So please comment on your own business, why our margin is so low.

Yes. I mean that's what I say. So definitely, we are also trying to get the raw material at a cheaper rate, which other companies may be getting at that very lucrative prices. And being in Maharashtra, we have always some disadvantage that the power factor also a little higher than the other competitors. So because most of the competitors are either in Daman, Silvassa or Gujarat. So obviously, that is also makes a lot of difference. So other expenses, if you compare to other states, always we are on a little higher side. So considering all the expenses and everything, yes, our margins are a little low.

So now we are doing something like INR 350 crores revenue on trailing 12-month basis. So how realistic is the INR 1,000 crore revenue target over the next 1.5 years?

So we have some plans which we are working on that. And definitely, we will come out very soon that what are our plans. And I think that we will also announce how we will achieve those INR 1,000 crores projections.

Okay. So is it -- I mean, is it organic target or it is contingent upon some M&A activity?

So I think I would be -- I mean, we will announce very soon what are the plans and everything because yet, we haven't declared anything yet. So let us wait for some time.

Right. And what was the volume during H1 and during Q2 of this financial year?

Yes.

H1 FY '26?

Yes.

So the capacity utilization is around 70%, 71%, sir.

Okay. And for this financial year, what is the total sales volume that we are targeting? Like last year, we did 20,800 tonnes. So for this financial year, what is the target that you are working with?

So I think last time, as I mentioned, at least this year, we are targeting at least 15% to 20% growth. We have more capacity is also unutilized that also we are trying to utilize the same.

So basically, 15%, 20% volume growth year-on-year?

Yes, yes.

And in the first half, what kind of volume growth have we done versus last year same period?

Same period. Yes, 6 months.

Sir, around 9%, sir.

Okay. So then in H1, we did 9%, but in full year, our target is to do 20%. So then in H2, what kind of volume growth will we have to do?

So a little more we have to do for sure because I think -- and we are also adding many customers. We have added a quite good number of customers in the last 2 months. And we are hoping to get more business from them.

Sir, but 30% kind of volume growth is possible in H2?

Yes, because we are at around 70% of our growth right now. And also, you must have seen we have just added 2 new machines in last week. And we are adding some of the machines also. So that way also, we are in the progress of installing some new machines also.

Now if I see our segment breakdown, then our -- the whole growth in the past 4 years, 3 years has come from container segment. Our furniture segment has actually remained stagnant from INR 36 crores in FY '22 to INR 38 crores last year, whereas our other segment has actually declined from INR 21 crores in FY '23 to INR 8 crores last year. So to the best of my understanding, the lowest value-add segment, which is the proper pure commodity segment, that seems to be showing the maximum growth. And the high value-added segment seem to be either declining or stagnant.

So exactly, it's not like that. So I'll tell you. So what happens is like we have added some more capacity also in containers with the value addition and with the new product in the packaging container item. So it looks like we are growing in that. But definitely, we are growing in the furniture part as well. And we -- as I said in my con call speech that we are adding customers. We are already now exporting to around 17 countries. So maybe you will find a good results because I think this is a starting. So we have just started export. So these are all the infrastructure product. It takes some time to give the fruits. But once it will start, it will have a good impact on the overall business.

So I would like to add, sir, to be very specific, if we compare this half year to the last half year, in the niche product of furniture part, we have grown by 32% if we compare the value. And if we compare the last 2 financial year '23-'24 and '24-'25, the growth in value was 28% in the niche product of hospital furniture.

Okay. So if you could just make us understand that out of the blow molding, custom molding and injection molding, which segment is what like blow molding is for containers, that much is clear. For our furniture parts, basically hospital furniture parts, it is injection molding?

It's a mix of both, blow molding and injection molding. Every process are both mix blow molding and injection molded.

Okay. So basically, is our capacity interchangeable between all 3 segments?

No, you can't say that way. Yes, yes. So my blow molding, yes, -- like that, yes.

It is flexible in product verticals, sir, in container and hospital furniture. The capacity is flexible in both the...

We have to do a very minor changes.

Okay. So -- and also recently, there has been some antidumping duty on blow molding. So are we impacted by that?

Sir, as far as my knowledge, I do not have this particular knowledge yet.

Right. Sir, so now what percentage of our business is B2C or 100% is B2B business?

I think we are almost B2B only.

Okay. So this Furnastra thing, it is also B2B.

Yes, yes B2B.

No even B2B business can be branded. I mean if institutional hospitals are buying our plastic beds, so are we selling under our own name or are we doing white label?

Both. So we have launched our Furnastra brand. So in that, the furniture brand -- the furniture parts brand is Furnastra. So we are also supplying into Furnastra brand also.

Sir, what is the EBITDA per kg and realization per kg across our container, hospital beds and the custom molding segment?

So it's like you're talking about the generic, right?

Yes, generic realization per kg, if you can just give me...

So generally, container gives around 3% to 8% in that mainly. And the furniture and other niche items gives around 15% plus.

Okay. Sir, in our investor presentation, we have given one slide where we have showcased the HIV test all these products are being manufactured. So are we -- have we been able to get any pharma company or some kind of customers in this segment? Or is it just that we can manufacture, but we haven't been able to get a customer yet.

Out of around 900 customers around 30% are pharmaceutical clients. 25% to 30% are pharmaceutical clients. So all these are most of our client. So pharma and chemical altogether is around 35% to 40%.

Sir, then why are our margins so low? Because sir, if I compare with similar players in the industry, even they supply to these customers and their margins are 12%, 13% just in the container segment.

Yes, I'll not be able to comment on the others margin. But yes, we are -- I can say and I can agree with some of the things that, yes, we are lower in the margin. So we are trying to get over that thing, still the progress is on. You will see the better results very soon.

For doing 20% volume growth this year, we'll have to do 14,000 tonnes in H2. So you think with the new clients you are onboarding, that looks possible?

Look possible, because see, we are increasing our capacity, and we are -- Q3, Q4, we are -- as I said, we have added some customers. So we are planning -- I mean, we are also trying to get our capacity utilization more. So hope for the best. I think this is what we are assuming. And definitely, the economic market should also support us, then we can achieve those targets.

Sir, and what is the pricing arrangement that we have with our customers? Is it a monthly, quarterly, yearly fixed price contract? Or is it a formula-based pricing wherein the raw material is passed through? What exactly is the arrangement?

So it's generally monthly prices. Most of the customers having monthly. Only some of the customers are having quarterly prices. So the prices change and we have to either pass on or have to -- we have to take that price additionally.

Okay. And what is the trend in raw material prices?

So you are talking about the past or you talking about the future?

No, no. I'm talking about last quarter and present.

Yes, it was stable. Prices was stable. So there are a lot of import prices, import material also coming and some traders are selling at a lesser cost. So there are disruption in the market for sure to -- I mean, yes, so you can say a little volatility, not too much.

Okay. And what are our main raw materials?

HDPE.

HDPE?

Yes.

And what percentage of our total raw material is HDPE?

Around -- so total in the production you're talking about?

Yes. Out of the total raw material consumption, HDPE would account for roughly how much?

I think 90% like...

Okay. 90% is HDPE. So is it a possibility that our raw material procurement itself is higher than the industry, and that is why our margins are low because to the best of my knowledge, our competitors are buying directly from the petrochem plants.

We are also buying from the petrochem plant. Some of the buyers having more buying power such as quantity-wise and petrochemicals always gives more discounts to the higher volume and so on. And like somebody uses a different type of material also, adding mixing material or something like that. So as a company, we have to be very safer side because we are supplying to too many chemical and pharmaceutical companies. So we have to adhere to some of the norms also. So we restricted to use only prime materials. So these are also one of the reasons.

That in our hospital furniture high value-added business, sir, what is the constraint? I mean, is there no demand or are we not qualified from a majority of the institutional hospitals? Sir, why are we not able to ramp up this side of the business? We can reduce the utilization in the commodity segment, container segment and increase the revenue in the high value-added segment. So why is it not happening? What is the constraint over there?

So sir, I mean you -- if you have studied my results, we see we are -- every year, we are growing that segment. And it is a highly technical product. And this is an infrastructure product. So once hospital built up, my demand will come up. But once the hospital built up and the bed is installed, then there will be no demand further. So recurring business will not be there in that particular segment. So definitely, in India and in abroad. So compared to abroad, India will have a more market than abroad. Still, we are also exporting to 17 countries. And I think this kind of products, we are slowly, slowly will come up. And we are definitely focusing on that. Sorry to interrupt. We said we have developed our own brand, which is Furnastra and we are the largest one who has a complete maximum design compared to our competitor worldwide. Please go ahead.

Sir, lastly, sir, I just wanted to say that, sir, I hope you have heard of Shaily Engineering Plastics. They are also in the same business basically, sir, but they are making medical instruments of a far higher value added. So can we in future, do we have the capability to make the products that they are making? Or do you hope to reach there in future?

So again, I will not be able to comment on any competitor's business because every business has a different, different set of thought process and different set of business completely. But yes, see, we are into this furniture parts segment, which is the hospital furniture parts, and we are doing -- I think you can see more of the progress in that. And also, we are adding many, many more new products, many more new products. I think in last 6 months also, we have added around 25-plus products. And in coming year also, we are adding. So our new development is in full force, and we are coming up with many new products.

The next question is from the line of [ Aditi Roy ], an individual investor.

Sir, I just want to understand how are you managing cost and avail for materials?

Can you repeat your question? I'm -- and can you speak a little louder, please?

Yes, sir. Am I audible now?

Yes. But if you can just come near to the mic, please?

Yes, sir. I just want to understand how are you managing cost and availability for key materials?

Okay. So most of the polymer cost has been defined worldwide and the price has been already defined worldwide with the demand supply gap and crude oil and dollar prices. And definitely, with this, also, there are many other area where the prices goes up and goes down. But we are at least trying to get our material from the main suppliers. So the availability, we have at least MOUs with some of the suppliers. So we get that the preference.

Okay, sir. And sir, how do you protect margins? So what is your approach to pricing discipline in tenders and long-term contracts?

We are not working too much on contracts. But yes, so some of the contracts -- so it is always whenever the price change monthly, it is on a formula basis.

And sir, I just want to know what is the current revenue share of value-added or customized products? And what is the target over the next year?

What is the target of?

Sir, just tell me what is your current revenue share for value-added customized products? And what is your target for it?

So right now, we are at around 84% of our commodity business like containers and around 15% furniture and other infrastructure products. And our target is around 20% for this year. So furniture parts and other, we have a target of around 20%. Value-added item is 20% right now.

Okay, sir. And sir, any product or certifications or audits are scheduled in the next year that will help or give you an increase the topline?

So I think audit from the customers is always line up in our company because as I said, we are supplying to many of our pharma and chemical companies. So I think audit is an ongoing practice for Mitsu. But there is no such specific certification as of today. But yes, if any legal requirement for any certification, we are always go ahead with that thing.

And sir, what progress have you made on PCR-enabled products? And how are customers responding on specification and pricing?

Great. I think a good question because I think today's burning issue is sustainability. And yes, I think Mitsu was the first company who was giving PCR product since I think 1.5 years that we are ready with all our PCR facility from 100 ml to 250 liter. But the customers are also very cautious because some of the customers are -- see, I supply to pharma, I supply to food. And PCR is not allowed in food and pharma. So -- but yes, chemical companies -- many companies have started this. And further also, we are ready, and we are already doing a lot of value engineering where we can use more PCR.

[Operator Instructions] The next question is from the line of [ Pritam Shah ], an individual investor.

Am I audible?

Yes, you're audible.

So I have a couple of questions, so I'll start with the first one. So I just wanted to know how will you expand your distribution footprint to reduce lead times in the underpenetrated region?

Can you just repeat your question once?

Okay. So I wanted to know how will you expand your distribution footprint to reduce lead times in underpenetrated region?

Okay. Great. So I think what I understood, I'll reply. So in hospital furniture, yes, see, we have, I think, one of the distributors in North side. So he also -- he has our stock ready with them. So any time we supply just in time, we have our own godown in Hyderabad. So there also, we have enough stock where customer comes and picks up or maybe we delivered in very just in time like that. So we are -- and also we dispatch directly because we also have a lot of quantity. Generally, this is an infrastructure product. And so most of the things are very planned. So they always give a proper date. So we supply that particular date. About commodity business, yes, it is mostly 300 kilometer radius. So that we supply from our factory only.

So specifically, if we talk about the exports, so do we have any currency exposure? And if yes, so how are we managing and hedging the pricing?

Yes. As of today, the export volume is very low. We are hedging some of the amount where it is very confirmed. So most of the amount is in advance. So I don't -- we don't have to take in a hedge fund -- hedging of that money.

So any talent or incentive sales to support execution of sales or operations or any product development? So do we have any incentive regarding...

No. Sorry, sir, can you repeat the question? I'm sorry.

Any incentive or any changes in monetary terms, you can say, to support execution of sales operation and product development?

Sir, we do a lot of exhibitions worldwide. So I think the world's largest exhibition is coming up in Germany in MEDICA. It's called MEDICA, which is in November third week. So we are taking part in that. Arab last, I think in U.S., Latin America. So we are taking part in all the exhibitions. And definitely, the leads are generating from there. Generally, from lead to the business, it takes around 1 year time because these are many technical products, we have to make new shapes and design. So it takes around 1 year time to convert the customer.

So niche segment like chemical, agro, pharma, [indiscernible] which end market are the most supporting you can say or the capacity aligned to them?

Yes, yes. So for that, we are participating in exhibition in near -- it is happening in Mumbai, Chemtech Expo. So we take a part that. And definitely, we have a huge sales team. So they approach directly because you required a one-on-one interaction for that.

So considering this, do you have any customer concentration risk or like what are we doing to manage if you scale up. So do we have any guardrails regarding...

Sorry, sir, I'm not able to understand. And your voice is getting -- I'm not able to hear your complete voice.

Am I audible?

You are not in the range actually. Yes. It is coming sometimes good voice, but sometimes it is completely vanished.

Okay. So my question is, do we have any customer concentration risk? And do we have any guardrails to manage that as we scale up?

So your first question is, sir, customer concentration risk. So the customer base is such that not more than 2% to 3% or 5% we are serving to any one particular customer. So I -- as a finance head don't find major customer concentration risk. And what was the second question, sir?

So if we have let's say, we do not have the customer concentration risk that's okay. So if you scale up, so do we have any guardrails or any protection to manage that concentration?

Yes, sir. So the protection to manage the customer concentration risk. So you mean to say how we manage the customer concentration risk if it persists?

Yes.

So if you say the history of the Mitsu Chem, sir, we serve to the many different industries, chemical, pharma, FMCG. So we don't find the fall in all the industry at the same time. So that way, the risk is managed. Yes. And the totally different segment of hospital bed furniture part.

The next question is from the line of [ Chandra Singh ] as an individual investor.

So sir, my question is what cash conversion and free cash flow do you target for this financial year?

Cash flow? [indiscernible]

No. I was asking what cash conversion and free cash flow do you target for this financial year?

Sir, I'm sorry, we are not able to understand your exact questions. You are trying to say the profitability and the exactly cash flow or what exactly you want to know?

Sir, just tell me about the cash flow. So what free cash flow do you target for this financial year?

So sir, our is majorly a debt-based company. So I'm still not understanding the free cash flow, sir. Do you mean to say how much is getting added to the internal accruals of the company this year?

Tell me what CapEx has been approved for the next 12 to 18 months? And what are the commissioning time lines?

So we haven't declared any of the projects yet. And as I said in my last one of the questions, we are working on to achieve that INR 1,000 crores target. And the plans are under this thing. So once we are very through, we will definitely inform the Board and then maybe we will come out with the things.

The next question is from the line of [ Vrushali Shah ] as an individual investor.

So my question is, what contribution do you expect from closures and caps? And how does the margin profile compare with the base packages?

Yes. So definitely, I mean, we are very bullish on cap and closure. And I think we are trying to acquire many more customers in that as we are going for a very new development on the same. The margin -- operating margins are good enough. I think 10% plus, you get good EBITDA margin there. And also you get a good quantum. So we are also hopefully to get more business in that.

Okay. My next question will be, how will the health care components portfolio scale over the next year? And what margin profile are you targeting?

Okay. So I can say -- see, we -- right now, we are at around 15% -- 14%, 15%. And we have a target of 20% to 25% over the period. So this year, we have kept a target of around 20%. We will achieve nearby not exactly the target. But yes, the next year, we have kept it at least 20% to 25% target.

Okay. So my -- I have one more question. What is the approval pipeline for new health care SKUs? And what are typical conversion time lines from trials to repeat orders?

No. So we have many orders are already we have supplied. As I said, we are supplying already to 17 countries. So many companies have approved and some of the under approval. So I hope to get many more repeat orders from those countries.

As there are no further questions from the participants, I now hand the conference over to Ganesh from Kirin Advisors Private Limited for closing comments. Over to you, sir.

Thank you, everyone, for joining the conference call of Mitsu Chem Plast Limited. If you have any further queries, you can write to us at [email protected]. Once again, thank you, everyone, for joining the conference.

Thank you. Thank you very much.

Thank you, everyone.

On behalf of Kirin Advisors Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.