Shaily Engineering Plastics Limited (SHAILY.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Shaily Engineering Plastics Limited Q2 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Amit Sanghvi. Thank you, and over to you, sir.

Thank you very much. Good evening, and a very warm welcome to all the participants to the Q2 and HY FY '26 Investor Call. I have with me Sanjay Shah, Chief Strategy Officer; and SGA, our Investor Relations Advisers. I hope you've had a look at our investor presentation that is uploaded on our website as well as the stock exchange. Let me start by giving some highlights on the operational performance and the business performance in the quarter gone by. In Q2 FY '26, we have delivered strong revenue growth of 34% to INR 257 crores on a year-on-year basis, with EBITDA margins expanding by over 1,000 basis points to 31.8%. The growth is attributable to improved traction in our Healthcare segment, which showed a growth of 163% on a year-on-year basis to INR 98.6 crores. The Healthcare segment's contribution to the overall revenue mix has doubled to 38% now. Let me give you a short brief on the overall business updates for Q2 FY '26. Starting with the Healthcare segment, the company actively engaged in global industry platforms exhibiting at CPHI Worldwide in Frankfurt, PDA Europe in Vienna and PODD in Boston, where it conducted over 130 meetings with multiple customers. The quarter also marked the launch of our next-generation GLP-1 device known as the Shaily Axiom Max. It's a fixed-dose pen with no priming required, low dose force as well as a dose counter, further strengthening the company's device portfolio. In addition, the company also signed 4 new projects with customers across GLP-1 and other therapies. As part of its ongoing capacity expansion, 19 new machines have been installed at manufacturing facility during quarter 2 FY '26. We're in the process of increasing capacities from 40 million pens to 80 million pens by the end of FY '26 to cater to increasing demand and are investing approximately INR 125 crores for the same in FY '26. Looking forward, we expect Healthcare segment to grow at over 30% to 40% annually for the next few years. Coming to the Consumer segment, we've been awarded 5 new projects from 3 different marquee home furnishings customers, further strengthening our presence in the consumer segment and reinforcing long-standing customer relationships. In the Industrial segment, we've been awarded 1 new project from an automotive major during the last quarter. Lastly, on the Consumer Electronics front, as mentioned earlier on previous earnings calls, we are working on a few products, and we expect revenues to begin for this segment in H2 of this year itself. So, that is all from my side. I shall now hand over the call to Sanjay to give you the operating and financial highlights. Thank you very much. Over to you, Sanjay.

Thank you, Amit. Good evening, everyone. I shall share with you the highlights of our operational and financial performance of Q2 and H1 FY '26, following which we'll be happy to respond to your queries. During the [ quarter ], we processed 6,652 tonnes of polymers as against 6,186 tonnes in Q2 FY '25, a growth of 7.5%. For the half year period, we processed 13,668 tonnes of polymers as against 12,088 tonnes in H1 FY '25, growth of 13.1%. Machine utilization rate stands at about 48% in both Q2 FY '26 and H1 FY '26. We expect this to increase going forward. Exports during Q2 FY '26 and H1 FY '26 stood at 68% and 72%, respectively, of total revenue. I shall now brief you on the consolidated result highlights for Q2 FY '26. Revenue stood at INR 257 crores as compared to INR 192 crores during Q2 FY '25, a growth of 34% year-on-year. EBITDA has doubled to INR 82 crores as compared to INR 41 crores during Q2 FY '25. EBITDA margin stood at 31.8%, an increase of 1,030 basis points over Q2 FY '25. PAT stood at INR 51 crores as compared to INR 22 crores during Q2 FY '25, a growth of 134% year-on-year. PAT margin stood at 20%, an increase of 860 bps over Q2 FY '25. Coming to segmental revenue breakup for Q2 FY '26. In the Consumer segment, revenue stood at INR 135 crores as compared to INR 139 crores during Q2 FY '29 (sic) [ Q2 FY '25 ], a dip of around 3%. In the Pharma segment, revenue stood at INR 99 crores as compared to INR 37 crores during Q2 FY '25, a growth of 163%. In the Industrial segment, revenue stood at INR 23 crores as compared to INR 16 crores during Q2 FY '25, a growth of 45%. Now coming to H1 FY '26 consolidated highlights. Revenue stood at INR 503 crores as compared to INR 371 crores during H1 FY '25 a growth of 36%. EBITDA stood at INR 152 crores as compared to INR 77 crores during H1 FY '25, a growth of 96% on a year-on basis. EBITDA margin stood at 30.2%, an increase of 930 bps over H1 FY '25. PAT stood at INR 92 crores as compared to INR 39 crores during H1 FY '25, a growth of 135% on a year-year basis. PAT margins stood at 18.4%, an increase of 780ps over H1 FY '25. Cash PAT for H1 FY '26 was reported at INR 116 crores as compared to INR 60 crores during H1 FY '25, a growth of 94%. Our ROCE and ROE stood at 42.3% and 32.7%, respectively, as on 30th September 2025. The growth in business has been achieved with disciplined use of capital. Our debt to equity stands at 0.3x and our fixed asset turnover ratio stands at 2x as on 30th September 2025. Coming to segmental revenue breakup for H1 FY '26. In the Consumer segment, revenue stood at INR 286 crores as compared to INR 271 crores during H1 FY '25, a growth of 6%. In Pharma segment, revenue stood at INR 176 crores as compared to INR 65 crores during H1 FY '25, a growth of 171%. In Industrial segment, revenue stood at INR 41 crores as compared to INR 35 crores during H1 FY '25, a growth of 17%. Board of Directors of the company have approved grant of 94,500 stock options to eligible employees of the company under the Shaily employee stock option plan. This reflects the company's continued commitment to recognizing and rewarding employee contribution while also aligning the interest of employees with long-term shareholder value creation. That is all from our side. Now we can open the floor for Q&A.

[Operator Instructions] We take the first questions from the line of Rupesh Tatiya from Long Equity Partners.

Congratulations on fantastic set of results. My question is, sir, recently, Dr. Reddy has got notice of noncompliance for their ANDA for semaglutide in Canada. I mean, without going into whether they are your customer or not, I mean, I'm not sure, do you -- and I think Dr. Reddy was one of the very early filers of semaglutide in Canada. So, without going into whether they are our customer or not, do you feel that the Canadian launch now is pushed forward from, let's say, January '26 to maybe April '26 or even later? Is that how -- any comment on that?

Look, I think our customers are the closest to the authorities in terms of understanding what's really happening at the moment. But having said that, I have 2 comments. One is that Shaily as a company and a strategy has onboarded a majority of the generics for their GLP-1, especially semaglutide, which means if a particular customer does launches on time or not, someone is going to launch and hoping that we are with them when they launch. So, I think our risk is fairly covered from that perspective. Now again, we're not saying Reddy's are our customers on their program or not. What we're saying is that we've done this program with several generics, generic majors who have -- also several of them have filed in Canada. So, we are hoping that we will still be the beneficiary of that launch. Whether the launch gets pushed out, I think January launch was always very difficult given that patent expiry in India itself is March. So, we had always planned our launch program based on a March launch in Canada. Now, if a customer launches in January, great. We're very, very happy for them and for our partnership. But I think we had always anticipated a March launch.

Okay. Okay. So given this -- I mean, I think I was going through Sandoz con call also, and I think they are also very tentative about Canada approval. So, given this industry backdrop, do you feel that whatever budget we had to sell semaglutide pens in all the markets, do you feel -- is there some impact on that? Or whatever is our budget that number still holds?

Our budget still holds. So, we have started manufacturing and supply, which means given there's no adverse market condition or health authority conditions, our budget should still hold.

Okay. Okay. And any -- I mean, I don't remember if you have given a guidance, but what is the guidance for total number of pens and then GLP pens in particular in that for FY '26?

So, Rupesh, we have not been giving any guidance. As Amit mentioned earlier, majority of the people who have filed in Canada have filed with Shaily's device. So that's where we would leave it.

Okay. But -- okay. And sir, this -- I think one line of 25 million, I think, was going to come online by Q2. So, has that line come online? And how is that line doing in terms of efficiency and other things?

The line has -- sorry, go ahead, Sanjay bhai.

Yes. So, Rupesh, on the line also what Amit had mentioned last time on the call is, the line would basically be operational by end of Q3 of FY '26. As part of that, we have installed 19 machines, which is what we have announced post the Q2 earnings. Amit, you want to add something.

No, I was just going to say the line will -- I was going to say the same thing. The line will be operational shortly. So, it's under -- yes, there's a process to do before the line becomes fully operational. It will be shortly from now.

Okay. Okay. And then the final question, sir, is on Consumer Electronics side, where -- I mean, any update, progress in terms of product developments, qualification, all that? And can we see some commercial supply or let me ask this, can we see...

No. I mean I mentioned we'll start commercial supplies in the -- in H2 of this financial year, which means that, of course, we've done development work.

And would it become significant next year to our revenue?

No.

[Operator Instructions] We take the next question from the line of Harssh Shah from JM Financial PMS.

Firstly, congrats on a strong execution. A few questions from my side. So firstly, on the gross margin front, especially on a stand-alone basis, if you could help us understand what has led to such a sharp improvement on a sequential basis? I understand that the healthcare revenue has been doing very well for us. But even if I look for the last 3 quarters on a sequential basis, the healthcare revenue has been growing in excess of or close to about 30%-odd. Some color on gross margin would be very helpful and whether these gross margins are sustainable? Yes, that's my first question.

So, 2 -- So Sanjay bhai, you want to take it? Go ahead.

Yes, Amit. So, Harssh, if you look at our gross margin improvement, we have been saying that as our own IP-led pen platforms, the revenue starts increasing, you will see improvement in gross margin. That's one of the reasons why there has been an improvement in gross margins. We have also added some products on the other parts of the business where our gross margins are better. So, it's a combination of these 2 factors, which has led to an improvement in gross margin. Our take is that the gross margin improvement, which is happening will continue to happen. You should -- a lot of it will also depend on the product mix which we do during that quarter. But our take is that as our own IP-led pen platform's revenue increases, you would see improvement in margins.

Got it. Secondly, any update on the Dubai subsidiary in terms of what our plan is considering that we have sanctioned a loan of INR 8 crores for CapEx and some other requirements, something on that front?

So, we are increasing the breadth of our innovation services. So, apart from just doing the engineering work that we do in the U.K., we're increasing it from a service perspective, servicing customers for assisting with filing, with assembly setup, with testing setups. So, it's going to be for some time a service-led -- innovation service-led kind of business, primarily targeting the Middle Eastern market, Middle Eastern and Asia Pac market from here.

So any plans of setting up a capacity there maybe?

Not sure at the moment.

So, Harssh, we would [indiscernible] that at the right time.

Sure. Got it. And lastly, on the Consumer Electronics segment, right? So last time, if I remember it correctly, Amit sir did mention that we would like to apply for the turnover-based incentive scheme in the component manufacturing. And I believe the deadline was somewhere around 30th of September for target segment A, B, C and E. So, have you applied for that? Or how is it?

So Harssh, from the components which we are doing, you would not have qualified for A,B,C. We will basically be looking at it separately and making an application once we have clarity on that.

Got it. Okay. And just last one question from my side. So, in the consumer segment, wherein you have won recently the new -- 3 new marquee customers, right? So, the scale up or probably the revenue, when should one expect to start flowing in the P&L?

So, first, there are not 3 new customers. These are existing customers. One is a long-term customer with whom we have been doing business; 2 are customers with whom we have started doing business in the current year. We have just added new projects with them. Most of these projects would have a project execution time of about 6 months to 8 months before we start supplies.

We take the next question from the line of Ritesh Shah from Investec.

Congrats on a good set of numbers. A few questions. Amit, the first question was on concentration risk. I think you partly addressed to it. But hypothetically, say, if I'm a customer and if I face several delays; one is, does the customer, which is me, still continue to procure the pens or the devices from you given I would presume this is not just-in-time inventory. So that's the first question. A second related one is, if I'm your customer, do I have that flexibility to use the same device in other EMs? So, is the concentration of device something similar, which makes it fungible? That's the second thing. And the third thing is if the second option is fungible...

Hello? Am I audible?

Yes, you're audible, Amit.

Okay. Okay. Yes, Ritesh, so customer concentration risk, really, we sell a product or maybe 2 products for semaglutide. We don't just have 1 customer on a particular platform. And there is -- and therefore, we have also built the capacity needed so that we can maximize market opportunity. Even if one capacity is less utilized versus the other, we can maximize in terms of achieving our full potential for the projections we have. I really don't see a very significant risk. And plus, our contracts would also be covered with committed volumes. If not committed volumes, there would be a sort of a pay process, right? So, a take-or-pay. Now not that we don't want to support our customers. We're -- in their time of need, we are very happy to extend support, but it has to be reasonable support. So, capacities are limited when it comes to GLP-1, especially in the launch period, which means that those who want to get ahead of the market and secure their supplies, not miss out on the opportunity, will need to commit to capacities and have committed to capacities. And as far as supply chain is concerned, we have common materials across all our platforms. So, diverting one material to another platform is very easy to do.

Yes. So, I just wanted to understand, so, hypothetically, if there are any regulatory risk -- delays which are there, does Shaily's dispatches get impacted? Or is it the customer is okay to stock it given eventually the demand will be there?

It's too detailed question. I mean it depends on the scenario. If a customer is going to get delayed by 12 months or 14 months, then they have the issue of...

It seems like the line for the management has got disconnected. Please stay connected till I rejoin him. Thank you for waiting patiently, the management's line has been connected. You can proceed with your answers sir.

What did you hear last, Ritesh?

Yes. I think you said this is too complicated a question or too detailed a question, something of that sort.

No, no. So, what I said after that was...

I think we lost you over there, sir. Hello?

Sorry, sorry. I don't know. There is something wrong with my network today. What I was saying is that if a customer is going to get delayed by over 12 months, for example, then what would happen is that supplies will need to be delayed because they will not have enough shelf life when they put the product on the market. But if it's -- if we're talking about a few months, a quarter here and there, it doesn't really impact supplies because everybody needs to do the volume built up for the launch.

Right. Sir, the question over here is if say, hypothetically, the delay is 12 months, will we use the flexibility to supply the same device given we have derisked ourselves given we supply to multiple companies?

Of course, of course, of course.

Okay. That helps. My second question was, you indicated that we move from 40 million to 80 million devices by end FY '26. Just wanted to have a sense on how does the insulin pens stack up on the overall scheme of things, given incrementally our focus will be on GLP-1?

So, look, we're looking at potentially somewhere around 12 million to 15 million insulin, not more at this point. It's all a scale-up on GLP-1.

Okay. And would it be possible to bifurcate between pens and autoinjectors..

Not at this point. At some point in the future, yes; but not at this point.

Sure. That helps. And the last one, I think you alluded to the opportunity on Consumer Electronics. Can you highlight what is the scope of opportunity over here? Like, you did indicate that the revenue is not going to be material enough next year. But if you take a 3-year, 5-year view, how should one approach this particular segment?

Your guess is going to be as good as mine in terms of what we actually do on consumer electronics. But look, there is very significant growth opportunity there. And the scope is also very significant. So, it could be a $20 million business or could be a $100 million business, I really don't know, but it can be very substantial.

Sure. And just a follow-up, sir, what is the moat in this particular business that we have? So GLP-1, we understand, but Consumer Electronics, is this something which is very, very niche to what Shaily has offered the vendors wherein we actually stack up right at the top?

I don't think there is another plastic component manufacturer -- domestic plastic component manufacturer that can achieve the requirements. The precision requirements are exceptionally stringent in this industry. So it would be -- yes.

We take the next question from the line of Vivek Gautam from GS Investment.

Congratulations on best yet numbers, sir. I have recently started tracking the company, so don't mind, sir. So, one thing is about the Chinese competition for our pen segment. And second is any threat and oral medicine threat for the GLP-1, sir?

I think on orals; I answered it during the last couple of earnings calls. So far, there isn't an oral which is as effective. Second, because -- primarily because the requirement of API is exceptionally high and the availability -- the bioavailability of the molecule is very, very, very low, 1/10th -- less than 1/10th of the injectable. Is there a market going forward? Yes, there's always going to be a market for orals, but we think it's going to be limited to 25%, probably a max of 30% Again, even if orals do come in, they're not going to be -- they're primarily going to be marketed by the innovators. So, price point affordability and the ROW market opportunity that we're seeing for semaglutide right now is not something that will go away, right? So that's on the oral. Chinese competition, I mean, look, there's 5 knockoffs of the Ypsomed UnoPen and the BD Pen in China. They're doing some small volume business in China itself, nothing outside -- not a whole lot outside of China, but you will always find some markets, right, potentially markets like India, Bangladesh or some other APAC markets where the patent regime is not so strong, intellectual property regime is not so strong, where they can sell their products. there is a market for everything on GLP-1s, right from bottom of the barrel in terms of price and quality to basically selling the Rolls Royce of GLP-1s. So, I think we shouldn't worry too much about Chinese competition. At the same time, we need to scale up, because Chinese are exceptionally good at what they do, and they can catch up in a relatively short period of time. So, our strategy to mitigate China is to scale up the business as much as possible, become large enough so that you cannot be uprooted.

And sir, our product demand for the healthcare is spread out over many, many countries and the patent is expiring in many countries. So, the opportunity size for us remains very, very large. And I would like to, once again, congratulate you for your stupendous progress starting from 2 injection molding machines to this stage, and it's been a great progress sir.

We take the next question from the line of Anand Jain, an individual investor.

Congratulations on a great set of numbers. Amit, my first question is on, what are our Middle East plans? Because from what I understand is, the regulations there say that if you have to sell in Middle East, you have to set up factories over there. So, can you just answer this, like how -- what are we planning to do in the Middle East?

Anand, I just answered that question on an earlier one. It's that at the moment, the Shaily Innovations FZCO has a primary objective of providing services around people's clinical batches, filing strategy, testing setup because there's lot of companies that have never done this before. So, assistance and service around assembly setup, how to do the final assembly, how to get the cartridge filling right, how to do testing of the pen or the final product for batch release. So, these are the services we are going to provide out of Shaily Innovations FZCO, primarily to start with. We will also do some design work or R&D work in the future. But this is what we're doing to start with, particularly focused on Asia-Pac, South Asia and Middle East market.

So, we don't have plans for setting up any factories and doing large CapEx there in Middle East, Abu Dhabi, Dubai, anywhere?

As and when we have plans and something is concrete, we will be informing the market.

Great. Second question is on the Consumer business. What we have seen is it's stagnant. And is it because of the tariffs? Or do we -- and do we expect growth for this year in this business?

So, Anand, if you look at H1, the Consumer business has grown. And I think on an overall basis, you will see growth on the Consumer business. We have said this in the past also that there will be varying growth numbers across different segments of the business, with the Pharma business growing at the fastest and then Industrial and the Consumer because the base of the consumer business is pretty large. So that's what we would look at. Currently, we have not seen much impact of tariffs because the tariffs came in, I believe, sometime in September -- end of September sort of a thing. So, we are not seeing much impact of tariffs. But how will things pan out is something which can -- we do not know right now in terms of how it will look in the future.

Okay. One question on the Consumer Electronics side is, what we are seeing generally is that most of the companies who plan CapEx on the consumer electronics side, the large vendors actually expect them to do CapEx in and around, let's say, Bangalore, Hosur, that belt. So, are we planning a CapEx in that area? And how significant could be or any -- and also anything on the product approval and CapEx plans on this?

So, Anand, I think on the Consumer Electronics also, when we have something more definitive to share on our CapEx plans, we will certainly inform the exchange. But essentially, you're right that for sizable business opportunity, capacity will need to be created somewhere in the region where this business actually exists.

Okay. Great. Last question from my end. One is, you said that we are partners with most of the players in Canada. So, like what I see is there are 6 players who are registered in Canada. So, like are we partners with 4 or 5 of them? Is that like...

I'd say we are partnered with 50% to 60%.

Okay. Last question, just last question. Any new industries that we are targeting in the next 1 or 2 years, is there anything interesting we're doing in any other industries, which is as high tech as what we have been doing in the Consumer Electronics side?

I think we mentioned semiconductors last time on the last call. So, we are building a strategy around the semiconductor business and where Shaily can participate with what specific products. And some discussions are slightly more advanced. Some are slightly more nascent. But again, as and when we have more to report, we will.

So, we have identified the products here in semicon industry, I would assume we have, right?

Some products we have, yes.

We take the next question from the line of Vishal Manchanda from Systematix.

My question is, with respect to EBITDA margins, can we expect them to sustain at similar levels in FY '27?

I believe so. I believe so. And I would go as much as saying that, look, if our Healthcare business is scaling and becomes a bigger part of the overall revenue, then the potential is to increase, certainly to increase.

Okay. Okay. On the Healthcare business, if you could share how many players we would have partnered for pen? Just the numbers, number of players you would have partnered?

Just on GLP-1s, we would have close to 24 -- 23, 24 partners, if I'm not mistaken. And the extended partnership, because our partners also have partners, right, multiple partners. So, the extended partnership would be very, very significant.

Yes, I got it. So, basically, an Indian company having a partner abroad in a different territory.

Yes, Indian company, European company, American company, all have multiple partners.

And with respect to the Consumer Electronics business, if you could share some color on when the commercial revenues can begin? And what would be the initial CapEx you would look to do here?

Too soon. I mean, we will start supplies in the second half, which is between now and March. Now what's the revenue? We don't know. But it's not going to be a very significant number, I can tell you that.