Supreme Petrochem Limited (500405) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Supreme Petrochem Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Nupur Jainkunia from Valorem Advisors. Thank you, and over to you, ma'am.

Thank you. Good evening, everyone, and a warm welcome to you all. My name is Nupur Jainkunia from Valorem Advisors. We represent the Investor Relations of Supreme Petrochem Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the first quarter of the financial year 2026. Before we begin, a quick cautionary statement. Some of the statements made in today's conference call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. These statements are based on management's beliefs, assumptions made by an information currently available to management. Participants are cautioned not to place any undue reliance on these forward-looking statements when making any investment decision. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and the financial quarter under review. Now I would like to introduce you to the management participating with us in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Rakesh Nayyar, Executive Director and CFO; Mr. Dilip Deole, Chief Executive of Finance and Accounts; and Mr. D. N. Mishra, Company Secretary. Without any further delay, I request Mr. Rakesh Nayyar, sir, to start with his opening remarks. Thank you, and over to you, sir.

Thank you, Nupur. Good evening, everybody. It is a pleasure to welcome you to the earnings conference call for the first quarter of the financial year 2026. Let me brief you on the financial performance of the quarter, followed by some of the key operational highlights. On a standalone basis, the operating income for the first quarter was approximately INR 1,386 crores, which declined by 12% on year-on-year mainly on account of lower SM prices. SM prices in the relevant period for the last year were around $1,150 during for the quarter, whereas this year, it was around $1,000. The operating EBITDA was reportedly at approximately INR 115 crores, which is down by 29% year-on-year. The EBITDA margin stood at 9.36% for this quarter. The net profit after tax was around INR 81 crores for the first quarter. On the operational front, the company's sales volume of manufactured products in the first quarter of FY '26 increased by 0.5% only on a year-on-year basis to 93,853 MT. Unseasonal rains and a milder summer led to subdued domestic demand for cooling appliances such as air conditioners and refrigerators. Additionally, styrene monomer prices were lower in quarter 1 FY '26 compared to the same quarter in the previous year, which impacted revenue despite a marginal increase in the volume of manufactured products sold. On the CapEx project, pre-commissioning activities for the first phase of the ABS project are ongoing with support from our technical collaborators, M/S Versalis, we expect commercial operations now to commence in this current quarter. During the quarter, our acquisition of Xmold Polymers was completed. The integration of Xmold operations and processes with SPL's business is currently underway. The company continues to remain debt free with an investable surplus of over INR 700 crore as at the June 2025. Now with this, now open the floor for question-and-answer sessions. Thank you.

[Operator Instructions] The first question is from the line of Aditya Khetan from SMIFS International Equities.

Sir, just a couple of questions. Sir, first on to this quarter. Sir, generally Q1 seems to be a muted quarter only when we look at the history of the last, so 2 to 3 years. And in this quarter, because of declining styrene prices, the numbers has been quite lower. So how you see the -- so this performance is to improve in the subsequent quarters? Because this is a quarterly phenomenon and how things will pan out for the rest of the year?

Quarter 1 is, actually, not really muted quarter. It is always a better quarter. But this year, the -- there were 2 reasons for the quarterly performance to be not in line with the previous year's quarter. One, the styrene prices, which were kind of stable, as I said in the last interaction, till mid-March or so. And thereafter, the styrene prices dropped. And by end of April, again, they became stable. So April onwards, the price -- April end onwards, the prices are stable. But the fall happened within the 6 weeks or so. So that impacted the margins of the company in the first quarter. And also, the OEM sales were lower because of the undue seasonal rains -- unseasonal rains and the -- which impacted their lifting for the cooling devices, like ACs and refrigerators. So their sales were down. So in turn, our lifting was down, and the margins were under pressure. So these 2 were the major reasons for the performance since this quarter.

Got it. Sir, on to the styrene prices. Sir, this much drop in prices like, drop of roughly 15%, 20%. This is largely because of higher capacities [ built up ] in China, and now they have started to import or the demand at the ground, so that is itself also faltering. What is the reason for this?

No. See, the Chinese capacity has been there for some time now, but then the prices are a factor of many things from crude onwards to the delta between the naphtha and benzene, benzene to SM. So I wouldn't really comment on the styrene prices why they went down globally. But then the fact is that they are stable since April end. They were stable for the last full year, but in the 6 weeks, they fell down. And that impacted us, our performance in this quarter.

Got it. Sir, in this quarter, sir, have we consolidated the Xmold Polymer numbers also in this quarter?

There is a consolidated results also, but what numbers I've given you, they were for the standalone results.

Okay. Got it. Sir, on to the ABS part. Sir, for this fiscal FY '26, sir, what volumes we are building in that we could achieve? And what numbers on top-line? And for FY '27 also, what could be the number we can achieve?

This will be our first year of these -- and maybe 6 months of operations. First few months will certainly go in the testing, trial, acceptance of the product by the processors and the molders. So we expect that of the 6 months period, maybe we will be operating at 50% to 60% and then we will start ramping up. But the in next year, that is FY '27, we expect that we should be 80% plus.

Got it. And sir, just a clarification from both the phases. From Phase 1 and Phase 2, combined top-line would be around INR 2,000 crore as we had mentioned earlier?

Yes. On a 100% capacity utilization, it will be INR 2,000 crores.

Got it. So sir, on this Phase 1, 50%, 60%, INR 400 crore to INR 500 crore should be the top-line figure?

I have not calculated that, so I'll not comment on that, Aditya.

Got it. Sir, just one last question. Sir, on to the global to demand supply dynamics, you see there is a cycle standing, like, are we standing in the mid, and what are the chances, like, this could improve or this could be maintained, like, for the next couple of quarters? Any senses on this part?

See, the issue is only the -- how the trade flows change and how the American agreement shape up with the rest of the world. And if the American agreements or disagreements with some nations, then what will those nations do? And if -- whether they are the exporting nations or not exporting nations, so it will all depend upon that. If they -- if the, like, say for China, China is exporting processed goods. They don't export any polymers. And if their goods don't go there, so the people who are exporting to China, some of the polymers, they may not find demand in China. They may have to sell it to the other regions in the world. So the trade flows are today very -- we don't know which way they will flow, and it'll all depend upon the trade flows, the way they move ahead in the future now.

Got it, sir. Sir, any outlook on the exports market, like, sir, in this fiscal FY '25, we were at somewhere around 9%. And sir, earlier we had mentioned that we are looking to increase the exports market. But for the last 2 years, it has been quite -- in terms of the percentage, it has been stagnated. Absolute value has gone up, sir. What is the outlook like, sir, we're seeing for the next 2 years in exports market?

So the current year current financial year, that is FY '26, we hope to go up to 13% to 14% of our revenue from exports.

The next question is from the line of Pritesh from Lucky Investments.

Sir, I wanted to check because of styrene drop in price and usually, styrene is stored considering the consignment size that styrene has. What kind of M-to-M inventory loss for -- should have flowed the P&L?

Very difficult to define any absolute numbers of the inventory loss because the consign -- the orders are placed, has the consignments on high seas, consignments in our stocks here. So it's a continuous flow of materials. So I wouldn't put any definite number on the inventory loss.

But it's fair to assume that the swing in per tonne profitability or the swing in EBITDA for the price Y-o-Y prices realization means still higher. The whole swing is to do with the styrene M-to-M?

Sorry, I couldn't get you. Can you repeat your question?

I'm saying the swing that we see in your profitability is largely to do with the M-to-M of styrene.

No, it's not only styrene. As I said, the offtake in the season by the OEMs was also down. And with that, the margins were under pressure also because the lifting by them was low undue seasonal rains, their AC lifting was not there. And so in turn, our sales was down. So all that is a combination of factors. It's just not the styrene prices alone.

But this you are referring to on a Y-o-Y or on a Q-o-Q basis, all this assessment of yours?

I'm talking about Y-o-Y.

So then the realization on a Y-o-Y basis is higher, right, for the 5% drop in volumes that you have, your realization is about 150 versus 144. So then I couldn't comprehend the assessment that you're giving.

What is the number of styrene you have?

From your presentation, your sales is 1,84,000. Okay. Now I got it. I have done one error. Okay. Understood, sir.

Okay.

[Operator Instructions] The next question is from the line of Sailesh Raja from B&K Securities.

Sir, in one of our recent LinkedIn post, we highlighted that the development of new EPS grade, that is 300HD, specifically targeted at helmet manufacturing. So with the government mandating 2 helmets per 2-wheeler sold, so could you please elaborate on the opportunity size this present? Have we already started supplying EPS to helmet manufacturers or this is a new business opportunity for us?

No, we have already started. There was a grade development done. And -- but prior to that also, the -- we were marketing and selling our stuff to the helmet manufacturers. Only thing is that this -- with some further improvements and some special strength has been provided in this grade, and that makes it better for the helmets. And so far, we are the only ones who are supplying to the helmet manufacturers in India.

Okay. So what is the volumes that we sold, sir, last year?

I wouldn't have that number separately, please.

Okay. But we have 100% share?

Yes. As of today, yes.

Okay. Sir, as mentioned in the annual report and also...

100% share of the organized sector. Unorganized sector, so I'm not aware of that, Sailesh.

Okay. As mentioned in the annual report with China achieving self-sufficiency in peers, so Asian exporters are increasingly focusing on India potentially creating pricing pressure. Sir, out of the total polystyrene market size of around 3.5 lakh tonnes, so what proportion is currently made through imports? And you mentioned in recent interview that we have increased our polystyrene exports. Is this due to soft domestic volume and pricing since exports generally have lower profitability, as you mentioned. I wanted to know why...

We -- there are 2 reasons. One, we have always been exporting. We have been exporting not only to the local Southeast Asian country -- sorry, in the South countries, but Gulf also and Africa also, Europe also. And not today, we have been exporting for last almost now 28, 29 years, we are exporting. And now we have additional capacity after the implementation of our expansions. So we had slowed down on exports, but now we will be increasing our exports also. That is what we had mentioned. And as far as the imports into India is concerned, India's total market size versus imports, almost close to 18% to 20% of the domestic market is affected by imports. Almost 18%. Out of the last year's market of I think, 330,000 tonnes, 340,000 tonnes, 60,000 tonnes was the imports.

Okay. Sir, additionally, polystyrene operation already running at 90% utilization and with Haryana expansion still 2, 3 years away. So what is the road map for growth in polystyrene product?

Sorry, I couldn't get you.

Our polystyrene operation already it is operating at 90% utilization, right, sir?

No. We are operating at almost 81%, 82%.

Okay. And Haryana expansion is still 2, 3 years away, right, sir?

Yes, it is away. It is still some times away.

Okay. Sir, any plans to expand polystyrene capacity in the existing facilities?

Yes. If required, we can increase capacity here. We can do some debottlenecking there. But once we are through with our ABS, then we will consider if required.

Okay. Sir, regarding our ABS product, so what is the structure of the technical collaboration with the Versalis? Is the technology fee a onetime arrangement or is an ongoing annual payment?

No, it's a onetime fees.

Okay. How much it is, sir?

I'm sorry, I won't be able to tell you that, sir.

Okay. Sir, one last question. Sir, one of our peers, EPACK is significantly adding capacity. So existing line, they have a capacity of around 40,000 tonnes, and they are adding another 72,000 tonnes. So in this context...

Sorry?

EPACK.

They are adding line for?

EPS. So in this context, how we are preparing ourselves to derisk from potential volume and pricing pressure?

We haven't seen there -- when you say they have almost what you said 40,000 tonnes or 48,000 tonnes, but no, we haven't seen any such material in the market. Okay. Maybe I'm not aware well. But then we are selling our quantities.

Okay. So we are not seeing any volume or pricing pressure?

No, we are not seeing any threat so far to our volumes. We will maintain our volumes.

The next question is from the line of Aditya Khetan from SMIFS Equities.

Sir, post this ABS's plant, our focus now shifts to the Phase 2 of ABS or we are focusing on to developing the Haryana plant now?

Will be the focus will be both the projects. The ABS will be now the -- here, it will be easy to implement. That is okay, fine. But then as far as Haryana is concerned, that focus also remains there for the North market.

Got it. Sir, on to polystyrene. So generally, we know it is $150 to $200 per tonne on the spreads part. So similar, sir, how much would be ABS?

ABS? [Foreign Language]

Okay, sir no worries. Sir, when we talk on to the newer products, apart from ABS, so the newer products, we would be developing into the Haryana plant only. Whatever the downstream, we would be making of...

Yes, they'll be in Haryana. Only the -- as far as [ indiscernible ] is concerned, it will be more -- apart from ABS, it will be compounds business.

Got it. Sir, on to the Phase 2 ABS, earlier, sir, like in the last call, you had mentioned that, that would be delayed by the 1 year. So it would start technically by FY '28. Any plans, sir, so we can start the plant earlier because we have developed Phase 1. So we would be having the know-how. How...

Make efforts, but as of now, it will be in FY '28 only.

It will be in FY '28. Okay. Okay. And sir, just on to the numbers. So when we look -- so technically, so in this year, FY '26, ABS would not be contributing to EBITDA. It would be so making loss at the EBITDA. So how you see numbers like from the existing businesses, we are expecting growth? And from the ABS EBITDA, how things would look at the number on EBITDA and on to the profitability side, sir?

As far as ABS is concerned, I wouldn't rule out that we will incur 0 EBITDA. I'm confident we'll certainly make some money out of it. Though it will be our first 6 months of try only operations and at the lower capacity, new product acceptability issues, all those will come, testing trials, but then I'm still confident that we will be earning some contribution from that business.

Got it. And sir, for the Phase 1 ABS, we could have incurred around INR 600 crores in CapEx?

Yes, that could be the number, closer to that.

Got it. So sir, nothing new is lined up for FY '26 in terms of CapEx as of now?

The ongoing expenses would be there. Some money for is Panipat, some money is for our existing complex. So they will continue. We already said we'll be spending around INR 200 crores, INR 250 crores this year.

Got it. Sir, one last question. Sir, when we look at China, so they have developed the styrene monomer and the polystyrene capacities have also gone up considerably. So comparing it with India, like comparing it with Supreme and other players in terms of cost structure, how you see like we can compete with them? And if suppose they offload at lower prices in the global market, how competitive we could be? And could we maintain our market share in the near-term?

The Chinese cost unless they are an integrated plant would not be lower. And most of their polystyrene plants are not integrated plants. And the plants which are in the inner part of China, which are not closer to the port, their freight cost itself would be so high that for them, exports would be uneconomical. Though China gives subsidies also, a lot of subsidies, but it's only that the plants which are closer to the port areas, yes, they can export. And if they have their own because they do a lot of processing, they don't export much polymers anywhere. They are always doing value addition by way of polymers and every household article in all over the world, you will find is from made in China only. So there only difference would be that whatever they were importing earlier and from the countries like Taiwan, Korea, Thailand or wherever else they were importing it from, the exports of those very countries will go down, and those countries will look at the new locations to sell their material. I would say that the fear is not so much from China, but fear is more from the other nations who were supplying to China, but now they may have to look at other territories to export.

Sir, any idea in terms of the global demand and supply? How much would be China today?

China has a capacity of close to 300 -- 3 million tonnes of polystyrene, whereas the total worldwide demand -- they are almost close to 20% to 25% of the global capacity today or the production also.

Okay. And sir, in ABS, similar, sir, how much would be the global demand and supply in ABS?

ABS also is close to, say, 12 million tonnes or so is the current demand of ABS globally.

The next question is from the line of Levin Shah from Motilal Oswal.

I had a question on this ABS capacity. So when is it coming on stream?

It will be in this very quarter, it will be operational now.

Okay. So by August is when we expect the plant to commercialize?

Yes, by August end, maybe yes.

Sure, sure. So for this full year, we'll have around approximately 6 to 7 months of sale that will be reported for ABS, right?

Yes, that's right.

And post commissioning the plant, how long will it take for it to stabilize in terms of output? Will it take a quarter or it should take -- we should build in more time before it actually normalizes?

Maybe 3 to 6 months is the max we are expecting.

The next question is from the line of [ Nirav Timudia ] from [ Anvil Wealth ].

A few clarifications. Like last time you mentioned that our EPS capacity of 24,000 tonnes was supposed to get commissioned by the end of this quarter 1 FY '26. So where are we in terms of this capacity?

That is all also ready, but then our focus right now is on ABS and post the ABS, then that will also get commissioned.

Correct. And sir, like what we see or read around the news articles is that a lot of capacities for the petrochemicals predominantly on the cracker part in the Europe have been old and some of them are getting closed also. So does this provide us an opportunity in terms of export volumes, both for EPS as well as polystyrene within that geography?

True, I agree. This is what -- your suggestion is perfectly right. This is -- we are also considering that to look at the European area. We are already there. But then currently, the European PS is also available. Demand is low there. But then Europe is always on our horizon.

Correct. So this won't be only restricted to PS, right? We'll be also supplying some of the EPS also out of India where possibly we have developed some grades, what you mentioned last time, which are very specialized grades and finds application outside India. So...

We are exploring markets for that.

Correct. Correct. Sir, second is on the value-added grades, like you mentioned on -- in an interview that this quarter, we were at 36%, but possibly on a yearly basis, we normally do 40%, 45% of the volumes from the value-added grades. So just because of the seasonal factors, what you mentioned in the opening remarks, our value-added grades to the OEs were slightly lesser. And because of that, our value-added grade proportion was impacted. Is the right assumption? And again, we'll be back to that 40%, 45% range by the end of this year.

We have never crossed so far 40%. We have been in the range of 35% to 40%. This quarter, we were at around 36%. And only thing is just with our ABS coming in and more of ABS compounds available to us, our value-added norms may cross 40% going forward. But whether it happens in the next quarter or it happens in the fourth quarter, I can't say today, but then our target is that.

But that would be combining ABS also and not only the PS part.

ABS and ABS compounds also, we will be taking that also.

Correct. Sir, third is on the volume part, like you guided for a 12% volume growth in this financial year. So if we just do some math, like does it also include the ABS numbers? Because what you mentioned in your opening remarks, probably 5% of the volume growth would be taken care of through the ABS. So rest 7% would be coming from rest of the products or this 12% is...

12%, it is combined with ABS. ABS contributing very minimal volumes this year, but then combined with ABS, we hope to do 12% volume growth this year.

Correct. And sir, last from my side is like normally in a quarter, our trading turnover used to be around 22%, 23%. So what was this for this current quarter, Q1 FY '26? Hello?

Hello?

Yes, sir.

We got lost somewhere. You were asking something on the trading. What was the question?

Yes, sir. I was asking that last year, our trading revenue was close to around 23% out of our total sales. So what was it for this current quarter, Q1 FY '26?

I think this quarter, we were closer to 20%.

Correct, yes. And sir, normally, you give the breakup in terms of like within the manufacturing sales, close to around 2/3 is PS, 1/4 is EPS and rest is XPS and compounds. So has this ratio changed this quarter? Or was it in the similar line?

It continues to be the same.

[Operator Instructions] The next question is from the line of Radha from B&K Securities.

In continuation with the -- your answer to the previous participant. So if you have a onetime payment of technical fee to Versalis or ABS, so is it fair to assume that this year, the profitability will be impacted because of this?

So that is a capital cost that does not impact the P&L.

Okay. So it will be depreciated over the years?

Yes.

Sir, there will be some trial run costs, et cetera, because of the new capacity. So you have guided for 12% volume growth. So considering all the factors, do you expect the EBITDA growth to be higher than volume growth this year?

I wouldn't make any guess on the EBITDA because EBITDA is also a factor of many other things. But then I'll only make a guess on the volumes and volumes will be closer to 12% growth.

Okay, sir. Sir, you've given in your presentation, you have given some of the presentations to state governments for using XPS insul board. So as on date, how many state governments have approved this product for usage in road development and building solutions? And what is their feedback?

I don't have readily any number of how many state governments because I think almost close to 15, 16 states, if I'm right, but I would make a guess. I'll ask the relevant concern people for this. I really don't have the ready answer for it.

Sir, any color on how is the feedback coming from them? Is there a pick up in product approvals from the -- from your interactions?

Feedback for?

For this product sir, XPS inusl board.

Your voice is not clear. Your feedback for?

XPS insul board. For the product XPS insul board.

XPS insulation board is a super product. The only issue there is that the individual houses, the row houses or the Bungalow or the small houses, they are the ones who are not using it. There, the sale is very minimal. But otherwise, on large institutional projects, the product is very well accepted and all the educational institutions, hospitals, hospitality, malls, they are all using our product. So there, the sale is picking up, but then the actual sale will come from the retail and that retail because of the many things, this involves an extra cost, so the contractor or the architects, they kind of dissuade it looks to the individual owners or either the small contractors don't know how to make and apply these boards. So -- but the sale there has not picked up. The sale from the institutional buyers is great.

Sir, could you name some of the key projects wherein they have used this product?

We have used it in all [ AiMS ], just to name you one. And our Zozila Pass, which was a tunnel made up near in the Kashmir, Ladakh sector, then Zozila Pass, it has been used. New parliament house used it. So IIT Jodhpur is a major example of it. They used it extensively and their air conditioning load has substantially come down.

Okay, sir. Very good to know this. Sir, last question, your presentation talks about EPS recycling. However, I wanted to understand whether for PS also, post-consumer products are also recyclable.

See, the PS post-consumer waste is not much there because if the EPS goes in for packaging and extensively for all your OEM appliances. And earlier, it was also in the disposable footwear. So the visibility of the EPS dispose or the post-wear consumer waste was very high. Whereas in the PS, the PS goes into the appliances, mainly or household goods. So there the -- see, that kind of a waste is not there. Today, a refrigerator is bought and used for how many years, 10 years or so in an ordinary average family or an air conditioner is used for 10 years or so. So a washing machine is used for maybe 10 years again. So the post-consumer waste actually comes more in the case of EPS.

As there are no further questions from participants, I now hand the conference over to the management for closing comments. Over to you, sir.

Thank you to you all for participating in this earnings con call. If you have any other further questions or would like to know more about the company, please reach out to our Investor Relations Manager at Valorem Advisors. Thank you so much.

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