Meghmani Organics Limited (MOL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Meghmani Organics Limited Q1 FY '27 Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. [ Rashmi Goel ] from Arihant Capital Markets. Thank you, and over to you, ma'am.

Hello?

Your voice is not audible, ma'am?

[Technical Difficulty] On behalf of Arihant Capital Markets Limited, I, Rashmi Goel, thank you all for joining...

Sorry to interrupt Ms. Rashmi. Your voice is not audible.

Am I audible?

Yes, ma'am. Please go ahead.

Hello, and good morning to everyone. On behalf of Arihant Capital Markets Limited, I, Rashmi Goel, thank you all for joining in to the Q1 FY '27 Earnings Conference Call of Meghmani Organics Limited. Today, from the management, we have Mr. Ankit Patel [Technical Difficulty]

Sorry, ma'am. You're not audible. So can the management speak. So now I hand the conference over to the management. Thank you, and over to you, sir.

Thank you, Rashmiji. Good evening, everyone, and thank you for joining us on our quarter 1 FY '27 earnings call. I believe you have got a chance to go through the financial results and investor presentation uploaded on the stock exchanges and the website. During the quarter, we operated in a challenging business environment, where we saw softer demand across key export markets and domestic market as well. Hello?

Yes, sir, please go ahead.

Customers buying behavior remained cautious due to continued macroeconomic uncertainties, resulting in a subdued offtake in both the segments. This in turn affected our capacity utilization and overall revenue performance during the quarter. While the demand environment remained soft, we remain focused on optimizing our product mix, executing disciplined pricing strategies and driving operational efficiencies across our manufacturing facilities. Pursuing this disciplined approach, we were able to achieve and deliver a healthy improvement in profitability. On a stand-alone basis, in quarter 1 FY '27, revenue stood at nearly INR 523 crores, which is down by 12% Y-o-Y. Net profit for the quarter grew by 42% Y-o-Y to nearly INR 58 crores, and our EBITDA grew by 16% on Y-o-Y basis to INR 94 crores approximately. If we talk about the revenue mix in quarter 1 FY '27, Crop Protection segment constitutes about 75% of the total revenue, while the balance 25% was from the Pigment segment. Now let us look at the segment-wise performance. In Crop Protection segment, the production stood at about 8,880 metric tons and the capacity utilization for this segment stood at nearly 63%. Revenue and EBITDA stood at INR 391 crores and INR 77.8 crores, respectively. EBITDA margin for the segment was 19.9%. For Pigment segment, production stood at 3,233 metric tons and the capacity utilization for the segment stood at 39%. The segment reported revenue of -- revenue and EBITDA of INR 131 crores and INR 15.9 crores, respectively. EBITDA margin for the segment was nearly 12.1%. Moving to our Crop Nutrition segment. The segment delivered a positive contribution to both revenue and profitability during the quarter. We have further strengthened our product -- our offering with the newly introduced Nano fertilizer products like Nano DAP, Nano NPK and Nano Zinc. This product complements our existing product portfolio and position as well as to participate in the growing adoption of next-generation Crop Nutrition solutions. We remain optimistic about the long-term growth prospects of this business and expect the positive momentum to continue over the coming quarters. In titanium dioxide, as communicated earlier, operation remains suspended due to commercial unviability arising from the elevated raw material cost and the weaker price realization following the withdrawal of antidumping duty. As we have described earlier, one of the key raw material, which is based -- which is sulfuric acid, which is based on the sulfur because of the macroeconomic factor, the prices of the raw material has increased tremendously, which is impacting the overall cost of the product and making it unviable. Because of this factor, for the time being, the operation remains suspended. If we look at our financial performance on a consolidated basis in quarter 1 FY '27, revenue stood at nearly INR 542 crores, which is down by about 12% and the net profit grew by 280% on a year-on-year basis to INR 48.2 crores and our EBITDA grew by 46% on Y-o-Y basis to nearly INR 97.9 crores. EBITDA margin on a consolidated basis stood at 18% as compared to 10.9% in the corresponding quarter previous year. As of 30th June 2026, on a stand-alone basis, our total debt stands at about INR 555 crores, comprising of INR 474 crores in short-term debt and INR 81 crores in the long-term debt. Debt-to-equity ratio on a stand-alone basis stood at nearly 0.31. On a consolidated basis, our total debt stands at INR 732 crores, which includes INR 477 crores in the short-term debt and INR 256 crores in the long-term debt. Debt-to-equity ratio on a consolidated basis stood at 0.46. In quarter 1 FY '27, we have made a debt repayment of approximately INR 32 crores. So to conclude, despite of subdued demand environment during the quarter, our focus on optimizing the product mix, disciplined pricing strategy and continued efforts to enhance operational efficiencies enable us to deliver a healthy improvement in profitability. While near-term demand may continue to be influenced by the macroeconomic uncertainties, we remain confident in our long-term growth prospects given our state-of-the-art infrastructure, plant compatibility, diversified product portfolio and a strong geographic presence. With this, I hand over the call to the moderator to open the floor for questions and answers. Thank you.

[Operator Instructions] The first question is from the line of Rohit Sinha from Sunidhi Securities.

Congratulations for good set of numbers. So some of the questions from the pigment side, basically, although we have seen good improvement in the profitability of pigment side, but the utilization remains quite low. So how -- as you have indicated on the PPT that it's because of the softer demand, how we are seeing the demand right now? And would there be any possibility that we'll see better utilization level in this, or it will remain more or less under 45, 50 kind of level?

Thank you, Rohitji. So for the -- particularly in the pigment segment, the utilization level might be in the more or less this range in terms of the percentage. From the overall revenue perspective, we -- whatever we believe -- we believe that we will be somewhere in the range of INR 550 crores to INR 600 crores on an annualized basis in the pigment segment. But there will be -- compared to previous years, we have been working on various things to improve our operational efficiencies, which was -- which we were doing since last 1 year. And a lot of improvements has taken place and -- which is helping in terms of better operational cost reduction and which is helping to improve overall profitability in the pigment segment.

Okay. So I mean, just any thoughts on how this demand would be looking at in the Q2 or Q3 or 4, FY '27 per se, in the pigment side?

As I mentioned that overall, as a year point of view, we believe we'll be in the range of about INR 550 crores to INR 600 crores in top line revenue. Maybe on 1 or 2 quarters, there might be some macroeconomical factors might be impacting a little bit. But on a yearly basis, we are confident.

Just to add, Rohit, because last year, pigment was adversely impacted by the tariff. So from 1st April, so now that hangover is over. So things have started improving. So it has started picking up.

And secondly, on the Crop Protection side, as we had lower revenue in this quarter. So how -- again, here also, how we would be looking at the volumes going forward? And would there be a better realization or better product mix, which will lead us to better margins in this segment?

So Rohitji, as far as the Crop Protection segment is concerned, we are very optimistic from the growth perspective, be it this year or over a period of next 2 to 3 years' time because we have been investing heavily on new registrations, new product development and which is going to drive the growth of this segment. So maybe 1 or 2 quarters here and there, there might be some factors will be there because of the macroeconomical issues, which we all know. But on overall basis, we are very confident for the growth of this segment.

Okay. Okay. Any number we can have on the volume growth or the margin side?

So as we have been telling that on the top line basis, we'll be growing in double digit in the Crop Protection segment. At the same time, we focus on the profitability as well. So year as a whole, when we compare, there will be a double-digit growth in top line, and there will be healthy improvement in bottom line as well.

Got it. Got it. And sir, on the Nano Urea side, I think this quarter, we had some decent contribution from there. Would this be -- continue going forward? Or we see any improvement or how this number would be looking like?

Yes. So again, for the Crop Nutrition segment, where we have Nano Urea is one of the key products which we started with. We have added 3 more new Nano-based fertilizer, which is Nano DAP, Nano NPK, Nano Zinc, and we'll keep on adding other Nano-based fertilizers in the segment. So we are very optimistic for this segment as well. We have been doing developmental activity not only in India, but globally into different markets. In the few markets, we have started getting the orders, trial orders and the results are very good, very encouraging results are there in the market. So we are very optimistic from the growth point of view for the Crop Nutrition segment as well. So it will keep on showing the growth quarter-on-quarter basis along with the profit.

The next question is from the line of Harshit Singhania from RoboCapital.

Hello, am I audible?

Yes, Harshit, please.

Congratulations on a great set of numbers, sir. I just wanted to -- like I'm new to the company. So I just wanted to clarify or ask a few things. So in the last call, I think we have said that our peak revenue for agrochem infra is INR 2,500 crores. For pigments, it is INR 700 crores to INR 750 crores. So just to get a clearer picture, in the agrochem infra, we are including the Nano Urea in this. Is that right?

I'm sorry, Harshitji. We have not given such guidelines of INR 2,500 crore revenue for Crop Protection division and INR 750 crore guideline for Pigment division. We have not given such kind of guidelines. So that is incorrect. For the Crop Protection segment, we have been telling we'll be growing in double digit over a period of next 2 to 3 years' time. At the same time, we'll be maintaining the healthy profitability, which is the industry average is in the range of 15% to 17%. We will try to be in this range or maybe above this range for the Crop Protection segment. For the Pigment segment, demand or the growth will not be significantly heavy because it's a little less growth-oriented industry. Over there, we believe our revenue will be somewhere in the range of INR 500 crores to INR 600 crores. We are not doing any big CapEx in this segment. And we will try to improve the profitability compared to the previous years in the Pigment segment. For the Crop Nutrition segment, again, we have been adding a lot of new Nano-based fertilizers, a lot of new products. So far, the base of the revenue is very, very small, but we have a very optimistic view and the kind of the investment what we are doing in the developmental activity. We are very sure that it will drive a healthy growth for the company with a better profit.

So sir, at these current levels, then what would be our revenue generation at peak potential, like when we are at optimum utilization for all the segments?

So peak revenue -- so for this year, you are asking or overall, you are asking?

No, at optimum utilization. So if all the plants are at optimum utilization?

So still, there is a lot of gap. There can be much higher revenue for the agrochemical segment. In the Pigment segment, we ourselves are not doing the full utilization as the market is under pressure. So that is the case. So we believe on the better utilization, which is nearly 85% to 90% utilization for the Crop Protection segment, we can do the revenue in the range of INR 2,500 crores to INR 3,000 crores.

Okay. And for the Pigments?

For the pigment, as I mentioned, we are running in the range of nearly 40% to 50% range, where we'll be generating the revenue close to INR 500 crores to INR 600 crores. We don't plan to increase our revenue by doing more utilization because the market is under pressure from the demand point of view, there is overcapacity. So we look at the profitability rather than top line for the Pigment segment.

And sir, going forward in the year, can we expect similar margins to be maintained? Is this a sustainable level?

As I mentioned, for the Crop Protection segment, industry average is in the range of 15% to 17%. So we will try to be in that range or try to be above that range for the Crop Protection segment. For the Pigment segment, we were at very low level in terms of the EBITDA margin, where we have been trying to improve the EBITDA margin somewhere in the nearly 10% range or we'll try to be a little higher than that. This was one of the odd quarters, but we would like to improve the profitability.

The next question is from the line of Abhishek Jain from [ Cris ] PMS.

Congrats for a strong set of numbers in tough times. Sir, my first question on the pigment side. As you mentioned that your total revenue to be around INR 600 crores in Pigment segment and you are looking for the margin of around 10%. So will it be sustained in the second half as well, when the prices will start to go down?

So Abhishekji, as I mentioned, we will try to maintain our revenue somewhere in the range of INR 500 crores to INR 600 crores. From the profitability point of view, we have been taking some corrective actions at the operational level, which is helping to improve our overall cost and improve the profitability. As far as the realization is concerned, which is based on the market conditions, there will be definitely pressure based on the raw material prices and the sales prices. But whatever corrective actions we have been taking, we will try to be somewhere near the 10% EBITDA margin range.

Okay. And during this quarter, we have seen an expansion of margin from 3% to 12%. So what is the contribution of your operating efficiencies? And what is the contribution of your price increase in overall expansion in the EBITDA margin?

Yes. So yes, definitely, about 5% to 6% is because of the better realization and the balance is because of the better efficiency.

And what is your expectation on the pricing front in the quarter 2 and the second half of FY '27?

It is very difficult to predict in current scenario where every day, we have been getting different news from the macroeconomic factor point of view. If it would have been a stable scenario, then we can predict it. But in current situation, it would be very difficult to predict. So we have been -- along with our team, we have always been taking the calls on a regular basis based on the prices, based on the market conditions. So it's a very volatile situation right now.

Got it. And how is the current inventory position across distributors in Latin America, Europe and India? And has channel destocking completed? Or just we can go for the channel destocking in the coming quarter as well?

So the good thing, be it a Crop Protection division or be it a Pigment division, the good thing is there is not much inventory at the customer level or at the distributor level. So they have been buying the material on the spot basis based on their requirement. So it is not building the inventory, which is a very positive sign. And we have been seeing healthy demand in both the segments. The only factor is the macroeconomic factor, which is keeping everything volatile. Otherwise, from a demand point of view, there is a reasonably healthy demand.

Okay. So that means once that the prices will start to go down and the logistic prices will start to correct, then we'll see the healthy demand of these products and restockings will start, right, sir?

So both the things. So the prices will go down along with the decreasing in the raw material prices. So if the raw material prices will go down, the sales price will go down. If it doesn't go down, then it will be more or less in this range.

And my last question on the amalgamation of the few companies you are looking for, if you can throw some light over there.

So as per the scheme, so we have filed scheme in April, and then we had now a second motion application filed after getting approval from the secured and unsecured creditors. So now we are waiting for the next date of hearing from the NCLT.

And after this amalgamation, what would be the impact on the top line EBITDA and the PAT of the company? Is it EPS accretive or what is it?

This is the amalgamation of the 2 wholly owned subsidiaries. So whatever the consolidated financials you are looking, so it will be continuing that way. And this amalgamation, the accounting treatment will be pulling of interest method where every line item will get added to the MOL. So from the EBITDA business as usual, it will be continuing. So -- but it will be from the various synergies, which will be coming from the cost reduction or you can say, smooth operations. So those benefits definitely going to come.

How much impact on the margin because of this?

Margin from the business perspective, it may be more from a cost reduction. So for example, in the multiple, you can say, stock points, which we have, so it will not be there. So we have to close. So those type of costs will be down. So that will improve from the cost point of view and the compliance point of view.

So it will bring more discipline to the operations.

[Operator Instructions] The next question is from the line of Nipun Sharma from VLS Finance.

Am I audible?

Yes, Nipunji.

So congratulations on a good set of results. My first question is regarding Nano Urea. So in the last quarterly con call, when we had a conversation, you said that you are planning to expand the basket of Nano Urea for the future. So first of all, how is that going? And second of all, how much Nano Urea sales happened in this quarter?

So Nipunji, as we have informed, we have been expanding the basket for -- in this segment. We have got 3 new products in the basket now apart from Nano Urea. We have got Nano DAP, Nano NPK and Nano Zinc. So these are the 3 products which we have added, and we are in the process of getting approval in the different markets to expand this product sales as well. Gradually, the sales of Nano Urea is picking up well in domestic market as well as in the global market, wherever we have been getting the registration. So far, I think from the volume perspective, we cannot disclose the volume for the Nano Urea point of view, but there has been relatively healthy growth.

Okay. Good to hear. And any idea -- I mean, any guidance on how much this will contribute in the future? I mean, how much significantly this Nano Urea will contribute in the future?

So from the future perspective, we have a very, very optimistic plan for this segment, Nano fertilizer. So there will be a couple of hundred crore revenue coming from this segment over a period of next 2 to 3 years' time.

Okay. Good to hear. And my second question is on pigment. I mean, congratulations on having a good profitability for pigment. And my question was that is this profitability and the revenue from pigment sustainable for the upcoming quarters? I mean, can we consider this as a quarterly run rate for FY '27 and the following financial years?