Supreme Petrochem Limited (500405) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Supreme Petrochem Limited Q3 and 9 Months FY '26 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.

Good evening, everyone, and a very warm welcome to you all. My name is Purvangi Jain 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 third quarter and nine months of the financial year 2026. Before we begin, let me mention a quick cautionary statement. Some of the statements made in today's earnings 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. Such statements are based on management beliefs as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial performance for the quarter under review. Now let me introduce you to the management participating with us in today's earnings call. We have with us Mr. Rakesh Nayyar, Executive Director and CFO; Mr. Dilip Deole, Chief Executive Officer, Finance and Accounts; and Mr. D.N. Mishra, Company Secretary. Without any delay, I request Mr. Rakesh Nayyar to start with his opening remarks. Thank you, and over to you, sir.

Thank you, Purvangi. Good evening, everybody. It's a pleasure to welcome you to the earnings conference call for the third quarter and nine months of the financial year 2026. I'll give a brief overview of the financial performance for the quarter ended 31st December '25. On a stand-alone basis, the operating income for the third quarter was INR 1,265 crores. It was lower by 10% year-on-year, mainly on account of fall in SM prices. Average published price of SM during third quarter of FY '25 was about USD 1,040, while the same dropped to about USD 810 MT in October -- December 2025, which resulted in the fall in the revenues as well. The operating EBITDA stood at INR 69 crores at a margin of around 5.47%. The total EBITDA, including other income, stood at INR 78 crores with a total EBITDA margin of INR 6.12 crores (sic) [ 6.12% ] . The net profit after exceptional items and tax was INR 30 crores. For the 9 months of the financial year 2026, the operating income was INR 3,751 crores. The operating EBITDA stood at INR 262 crores with an operating EBITDA margin of 6.97%. The total EBITDA was INR 294 crores with total EBITDA margins of 7.77%. The net profit after tax and the exceptional items stood at INR 159 crores. On the operational front, the sales volume of the manufactured products stood at 91,265 MT in quarter 3 as against 85,537 MT in quarter 3 FY '25. And for the 9-month period, volumes stood at 262,537 as compared to 260,416 in the corresponding period of the previous year. On the raw material front, after witnessing a prolonged decline until November 2025, styrene monomer prices kind of stabilized and with an upward -- and showed an upward bias. The trend has encouraged processors to increase their offtake of styrenics products in December. With regards to our CapEx project, the ABS plant with an installed capacity of 70,000 MTPA was successfully commissioned and production started in September 2025. The ABS plant operated satisfactorily; however, operations were suspended in December 2025 due to malfunctioning of a critical production equipment. Necessary action is being taken in consultation with the engineering consultant, equipment supplier and technical collaborator to restore the operations. On the balance sheet side, the company continues to remain debt-free and all capital expenditure is being funded entirely through internal accruals. As of 31st December 2025, we maintain an investable surplus of INR 463 crores. With this, I conclude my opening remarks. We now open the floor for question-and-answer sessions. Thank you.

[Operator Instructions] The first question comes from the line of Nirav Jimudia with Anvil Wealth.

Sir, a few questions. Sir, first is on the ABS plant. Like we commissioned the plant in September and the equipment failure and the subsequent things happened in the month of December. So in our overall sales volume, what we have reported in Q3, is it possible to share the contribution of ABS into those numbers, a? And b, when can we again restart the plant and take the capacities to the optimum levels in terms of the production?

Collaborators, the engineering consultant and equipment suppliers, they have already reached our site last week, and they are evaluating all options. So I really can't tell you at what -- when and -- when it will start operations. And -- but only thing I can tell you at this stage is that the plant ran very smoothly and the commissioning and operations are very smooth when it was operating in the month of October and November. But then this unfortunate incident happened, and we had to shut down in December. And it's a proprietary critical equipment. So we could not have opened it here also. Their arrival was delayed because of the Christmas holidays and the New Year holidays in Europe and the visa issues and all that. But now finally, they are here and the work is on. But we have no definite answer from the team yet that by when it can be operated.

Correct. And sir, any number in terms of the contribution...

All styrenics for us. So as far as segment-wise numbers are concerned, we never share and I won't be able to share that number, please.

Correct. Correct. Sir, you mentioned that the plant ran very smoothly. So -- and we subsequently also commissioned our compounding line of ABS in quarter 3 also. Yes -- so have we got an opportunity to convert those ABS into the compounds in Q3 and the volumes have been a part of...

We have converted the ABS -- our ABS into compounds and have also successfully marketed them also. Since our material of ABS is very white, unlike the other one, original emulsion grade material available in the market, which is more of an ivory or a yellowish tinge. So there were issues with regard to the -- originally the master batches, the quantity of master batch, the color matching, those issues came because our material is absolutely white, which needs less of pigments and others. So that matching process took some time. But now wherever that matching has happened, the -- not only of color compounds, but as well as the other additive compounds are also doing well there.

Correct. Sir, second question is on the demand for EPS. So how we have seen the demand for EPS here in India for Q3 and 9 months of FY '26. Also, if you can share the market size of EPS in India and your thoughts on the subsequent quarters, how the demand of EPS is panning out?

In India, EPS is all right. In the first 6 months, the -- like any other polymer -- because the OEMs lifting was less, the demand was also slow there. But then in the current quarter, the market picked up. And our estimation is that in the current quarter, the market picked up by almost -- as compared to the previous year by almost 6% or so, the market grew. As far as the demand is concerned, the overall market size of EPS in the country is around 160,000 tonnes.

Correct. Sir, third question and probably the last one. Sir, how do you see -- or let's say, if I rephrase it that with it. Sir, from the polystyrene part, are we working on any newer applications, which could be potentially be termed as the value-added grades in the -- either on the GP side or HI side, your thoughts here? And since we have been predominantly a polystyrene player and now we have added the ABS capacities. And since the Panipat plant is far away, are we planning any debottlenecking for the existing PS capacities?

At the moment, I would say that whatever is being discussed in-house, but that is still not officially -- we cannot share that thoughts with you. So I would give a pass to your question, Nirav.

Correct. And sir, any grades on which we are working so far as the polystyrene is concerned?

Yes. There are grades on HIPS and GP also. The grades are being developed. But then unless and otherwise they are fully developed and marketed successfully, very [indiscernible] to comment on that. So that's why I said that unless it's open out, I can't really comment on.

The next question comes from the line of Sailesh Raja with B&K Securities.

Sir, it looks like you are unwell today. I hope you feel better soon. So I have three questions to ask. First is, so excluding the ABS capacity, we have achieved 80% utilization level in 3Q. And with the IOCL styrene monomer plant facing commissioning delays, so how is management thinking about sustaining growth in the near to medium term? Are there any plans for capacity expansion or debottlenecking to support volume growth in the interim phase?

Sailesh, I just answered this to Nirav also that we are discussing internally certain plans, but it is too premature for me to say anything at this forum. And you're right that our polystyrene plant operated at 80% in this quarter. Our EPS plant also operated at almost 87%, 88%. So the demand up in the last quarter, particularly towards the end of the quarter after the styrene prices kind of stabilized, which were -- had a free fall for the last almost one year. So we are fully appreciative of the fact that the -- going forward with the IOCL styrene plant getting delayed, our Panipat plant will also get delayed. And to meet the domestic demand, we need to be working on the -- some steps we have to take. So we are working on that. And then I -- yes, I've still a cushion of almost 20%, 15% there. And we are also in the export market. So to some extent, we have cushion there also. So in the near future, we don't see that there is -- that we will have any constraints as far as supply to the domestic market is concerned or meeting the domestic demand is concerned.

Okay. Okay. So what is our total exports volume in 9 months?

The total export volumes, we don't give the numbers separately, Sailesh. We have been always giving one number only. And -- but that these exports this year are better than the last year.

Okay. Okay. So now that size of the company, it is a $1 billion market cap company and inventory level always we maintain at very lean at 30, 40 days. But if you see the quarterly performance, there is a lot of volatility. So unlike styrene product, the compound business across peers appears relatively stable. So what step that we are taking to reduce the earnings volatility and improve the predictability?

The raw material volatility is there. But then we have been also mitigating that volatility by keeping very lean stocks or the way we have negotiated our contracts with our suppliers so that we are affected, not that we are fully insulated. But then the -- to some extent, the impact is reduced. It is cushioned for us. And as far as going forward with the ABS product coming in, ABS compounds coming in, so they are the other products which gets added to our portfolio. And the compounds business, you rightly said, provides a cushion there towards the volatility is concerned. So our focus will be more on the ABS compounds with our own ABS available and the compounding facility to the extent we have, we should be focusing on that.

Okay. Okay. Sir, again, same question about the ABS side. So how serious is the malfunction in the new manufacturing equipment? Does it entail any incremental CapEx or execution risk beyond what was originally estimated? And also, are these issues covered -- yes.

The capital cost is not an issue here. The -- because even if there is any -- these equipment are under warranty...

I wanted to ask, is there any insurance or performance warranty...

Since the -- these are the proprietary equipment and we don't have the drawings for it, we cannot touch the equipment because otherwise, the warranty will go away for us. So yes, the impact is certainly, it's a big setback for us in terms of the loss of production and the opportunity to penetrate the market for in this interim period. But all efforts are being made so that we are able to commission the plant at the shortest period.

Okay. That is great, sir. Sir, one last question, sir, has there been any transition in demand from suspension grade ABS to mass ABS grade in the market where [indiscernible] has set up plants before Supreme like in China or Middle East...

With the mass ABS only being 10% of the global capacity today and 90% is still suspension. So automatic -- and the demand is there for all ABS. So it all gets absorbed. So it's very difficult to say that some specific application shifted to mass unless otherwise a global application-wise study has been done, but which we don't have any data about.

The next question comes from the line of Aditya Khetan with SMIFS Institutional Equities.

Just a couple of questions. Sir, first on polystyrene, when we said earlier, like we used to mention like the average gross spread should move -- were around $150, $200 per tonne. So today, sir, where are they standing? And what are the reasons like for the compression we are witnessing? Sir, second question is on to the mass ABS. Sir, when we -- so we know like the technology is quite new in India, and there are no players who have adopted this technology. Although sir, not asking for a time line, but in the near term, how quickly can you start the plant considering all the issues can be resolved? And similarly, sir, when we have -- I think, sir, -- so with this kind of a product, ABS, the order book already would have been full, like so before commissioning the plant only. So what are we saying to the customers now? Like are we delaying the -- you can say the sampling of -- are we delaying the product sending to them?

Aditya, see, as far as our ABS is concerned, we did not take any advanced order book as we wanted to use -- let everybody use it for the applications. And we -- as I explained in earlier speaker's case, because it's more whitish like any other polymer as compared to other suspension grade materials -- emulsion grade material. So the master batch comparison and matching is an issue. And this is like any other polymer, there is no such advanced order book for these products. That's one. And as far as the start-up date is concerned, I really can't comment on today. But we -- since the whole team of engineering consultants as well as the equipment supplier have already arrived, they are at our plant. They are open the equipment, looking at it unless we get a green signal, some kind of an idea or a commitment from there, I really can't comment on it because whether they are going to just replace some part or they have to repair that part, all that is not known to us at this stage. And it's a massive equipment, which they have opened up and they're working on it. So it's very difficult for me to say. As far as the margins are concerned, yes, globally also the styrene prices when they were falling, everyone want destocks. They do not want to keep any material, that is one. That pulls down the demand. And also the demand in Europe and other countries was on the lower side. And the styrene prices, which last year were closer to $1,050 or so. In this quarter, they averaged at almost $810 and that was almost a fall of over 20% prices. So that shrinks the market because the -- in the falling market, the demand automatically shrinks. So these are the reasons for the PS margins to shrink also and demand also has come down. First 6 months of the year, because of the early monsoons and the very pleasant weather continuing for a long period, the cooling devices demand was down. The ACs, refrigerators, coolers, their demand was also down. So the OEM pickup in the first 6 months of the year was low. Now the -- from December onwards, the OEM season starts. And we have seen in the last two weeks of December that the pull from the OEMs is better now.

Okay. Sir, with the uncertainty around ABS, what sort of volume growth are we targeting for FY '27 and '28?

FY '27, '28, if I -- unless I know the -- our likely date of commissioning of ABS to comment on that is very difficult. And assuming that the -- it's operational by the end of this current financial year, then we should be logging in almost closer to 10% or so should be our growth.

Okay. And sir, the contribution from the base business would be how much from this 10%?

The contribution from base business would be closer to 3% to 4%.

Okay. Okay. So 7% would be from ABS, if it started commission from this quarter?

Yes.

Okay. Got it. Sir, just one last question. Sir, when we look at the import history of PS, polystyrene in India, sir, in this calendar year, CY '25, so just gone by, so there has been the highest import which has happened over the last 10, 15-year data when we look. Obviously, the import is from China, wherein large capacity...

No, you're talking about FY '25?

Sir, CY '25, calendar year '25 from Jan to December.

Okay.

So sir, the import has been quite high of polystyrene and a lot of imports are coming from China. Any sir idea like which are the large capacity, sir, which are expanding in China today?

Imports from China are not high. The imports from Thailand are high this year. And also that the -- there is -- though they all get cleared under this HS code, one needs to go and segregate this data because there is a lot of the -- though it is called reprocessed or regranuled polystyrene that gets imported, which is used in an application where the prime grade polystyrene is not used like your wall panels, et cetera, or photoframes. So the imports are happening there. And now in India, the wall panel business has picked up a lot. The -- that material is getting more and more diverted to that place. But there has been an increase. You are very right. There has been an increase in the calendar 2025, particularly this is in the month of March, April and May. These would be three months when all of a sudden bulk of it came.

Correct, sir. Any supply chain, sir, which has happened like you see like a lot of material which are coming, low-cost imports. Any particular reason, sir, like [indiscernible] capacities which have been added, which have started, which is going...

A major part of this coming in as a recycled material or the B grade material, which is getting used for the -- where the typically recycled material is used because there, you don't need the impacts, you don't need the finish, you don't need any color issues. And there are -- mainly there are photoframes and wall panels.

Okay. Okay. So these are having no competition with the refrigerators, ABS or the...

Material which comes from Thailand, South Korea, Taiwan, they are the major source of Singapore. They are the ones from there what material comes that has a competition and which has been there historically always. Now the whole material coming in from U.S.A. today, that is all fully recycled material or the material which comes from even -- you will see, if you look at the country-wise data there, you will see even material coming in from Ghana and Slovenia and El Salvador and all that. Those volumes are essentially recycled material because they do not have capacities, they have to produce polystyrene.

The next question comes from the line of Rahul Agarwal with IKIGAI Asset.

Sir, a few questions and just to extend a bit on the earlier discussion. If I have to really understand this performance over a bit of medium term, right? I mean the quarter volatility keeps on happening. But if I look at next two, three years and your experience into this industry, both in terms of volume growth, pricing and margins, like typically at this current pricing of polystyrene and ABS, how should the Indian market actually behave in terms of both customers and manufacturers in terms of how would they expect this to actually play out over a 3-year time frame? So both from a demand-supply perspective and from a manufacturer margin perspective, cyclicality in this industry. Right now, we're seeing normalization of margins after COVID. Has this happened in your view? How do you see pricing moving further in India and outside India imports? Some comments over there at the industry level and from an Indian manufacturer level will help. So that's the first question.

Polystyrene is not separated or differentiated from other polymers. The cyclicity which you see in the other polymers, we get to see in this once in a while. The demand as far as India is concerned will grow because of the thrust on the exports, PLI schemes and the affluence level going up in India. The Indian OEM appliance manufacturers, be it air conditioners, refrigerators, washing machine guys or even the smaller appliances people, all are out there to increase their capacity and new capacities are coming up in the electronics and electricals. The demand for polystyrene is bound to grow there. And we do not see that there will be any setback or there will be any issues with regard to the growth. It is -- as far as we are concerned, as I said earlier, we -- currently, we are operating at 80% of our capacity. And though we have margins still, but going forward, we may have also to look at debottlenecking our plant or increasing our capacity at our existing complex at Amdoshi. Now as far as the prices or margins are concerned, much gets determined by the events happening globally also. We are not separated or isolated from the world. So if there is a price pressure, the deltas -- global deltas go down, and that eventually gets reflected in the domestic market as well. So I will only talk about the demand and India demand is bound to increase and it will increase. There will be minor setbacks, like last year, we had first 6 months, there were no lifting by the OEMs, reduced lifting by the OEMs because of the extended monsoons and early monsoons. So all those issues will come up. But on a year-on-year basis, the demand for polystyrene will grow.

Right, sir. Sir, but as you said, December obviously indicates that there is some stabilization on styrene monomer pricing, offtake is better. Purely from what we have seen last 10 years, current pricing looks like pretty much at low levels. The INR depreciated significantly in January, right? So would that mean that incrementally, if I take a next 3-year view, do we think there is a bottom here? Or do you think incremental global supply can actually take this styrene mono prices? It's still difficult to predict that. There will be some marginal cost of production cost, right, for global market.

Styrene monomer, again, is not in place in isolation. Styrene monomer is also a combination of ethylene and benzene. And the styrene producers can only withstand the fall in prices, they are selling prices up to an extent. If they fall is more, they are losing money, they are bound to shut down their units for one reason or the other reason. And the prices will fall, but then after a period, they are bound to go up. So there is a limit up to which the prices can fall. And we think that with the current set of the benzene or ethylene and everything, the prices had already fallen too much, and that is why now they are witnessing some stability with an upward bias a bit. But let's hope this continues for a while.

Got it, sir. Secondly, sir, on ABS, on the import trends, right? I mean ABS is a larger quantity of import in the country. We saw BIS removals happening sometime in November, December. I don't know why, but there are a lot of polymers where BIS was removed. Clearly, it means that there is a shortage and the country domestic capacity cannot meet demand in the country. But have we seen higher Chinese imports happening in ABS? Maybe some comments on the quantity, the country. You mentioned something on the polystyrene side where we are seeing imports from Thailand. But anything on the ABS side, what kind of changes are expected globally in terms of supply/demand? How could that behave going forward?

The ABS supplies to India are mainly from Korea and Taiwan. And Chinese exports to India have been negligible. the BIS getting removed certainly opens the window for China to start supplying to India. But then there are other issues there because depending upon the location of the plant, because if there are plants in land in China, there are local freight there and freight from China to India, all those issues are there and their quality also. So it's difficult to say whether they will replace the Korean demand or they will replace the -- sorry, the Korean supply to India or the Taiwanese supplies to India. But then as of now, the Chinese supplies to India as far as ABS is concerned, they are practically nil.

And in history, has it ever happened? Because I also did some channel checks. It looks like distributors have to say that the material is not very linear in supply. Sometimes they sell, sometimes they don't really have the material. And second is, as you said, the matching of colors and quality with customers is a big headache, right? So ultimately, it has to be more consistent supply of quality.