28-Oct-2026 16:00:34
KNACK PACKAGING Q2 CONCALL: RECORD REVENUE SURGES 52.5% YOY, ₹150 CR ANNUAL EXPORT CONTRACT RENEWED, CAPACITY EXPANSION TO ~70,000 MT & MARGIN RECOVERY EXPECTED FROM Q3
• MANAGEMENT EXPECTS EBITDA MARGIN RECOVERY FROM Q3 FY27, SUPPORTED BY CUSTOMER PRICE REVISIONS, IMPROVED PRODUCT MIX & POTENTIAL STABILISATION IN POLYPROPYLENE PRICES • MANAGEMENT AIMS TO RECOVER EBITDA PER KG TOWARD APPROXIMATELY ₹54, SUBJECT TO SUCCESSFUL RAW MATERIAL COST PASS-THROUGH & HIGHER PREMIUM PACKAGING CONTRIBUTION • MANAGEMENT EXPECTS SEQUENTIAL SALES VOLUME IMPROVEMENT DURING Q3–Q4 FY27, SUPPORTED BY STRONG EXPORT DEMAND, NEW CUSTOMER ORDERS & ADDITIONAL MANUFACTURING CAPACITY • MANAGEMENT TARGETS TOTAL ANNUAL PRODUCTION CAPACITY OF APPROXIMATELY 69,000–72,000 MT VS CURRENT 42,000 MT, WITH MAJOR GUJARAT EXPANSION TARGETED FOR COMPLETION BY OCTOBER 2027 • MANAGEMENT EXPECTS HIGHER CONTRIBUTION FROM PREMIUM PINCH-BOTTOM BAGS, SUPPORTED BY CUSTOMER CONVERSION FROM CONVENTIONAL PACKAGING & TWO ADDITIONAL CONVERSION MACHINES • MANAGEMENT TARGETS MEXICO JV OPERATING BREAKEVEN AROUND Q3–Q4 FY27, SUBJECT TO VOLUME RAMP-UP TOWARD APPROXIMATELY 120–130 MT PER MONTH • Q2 REVENUE SURGED 52.5% YOY TO A RECORD ₹294.76 CR, DRIVEN BY HIGHER SELLING PRICES, EXPORT GROWTH & IMPROVED PRODUCT MIX • Q2 EBITDA GREW 29.9% YOY TO ₹49.77 CR, WHILE NET PROFIT INCREASED 21.2% TO ₹25.02 CR, WITH PROFIT GROWTH LAGGING REVENUE DUE TO RAW MATERIAL INFLATION • Q2 REPORTED EBITDA MARGIN DECLINED TO 16.35% VS 19.25% LAST YEAR, REFLECTING SHARP POLYPROPYLENE COST INCREASES & HIGHER EXPORT FREIGHT EXPENSES • H1 REVENUE GREW 47.2% YOY TO APPROXIMATELY ₹569.11 CR, WHILE EBITDA INCREASED 41.5% TO ₹108.94 CR & PAT GREW 34.5% TO ₹55.55 CR • H1 REPORTED EBITDA MARGIN STOOD AT 19.14%, WHILE PAT MARGIN WAS 9.76%, WITH Q2 PROFITABILITY AFFECTED BY A SHARP INCREASE IN INPUT COSTS • Q2 SALES VOLUMES INCREASED APPROXIMATELY 13% YOY TO 11,252 MT VS 9,927 MT LAST YEAR, WHILE SEQUENTIAL VOLUME GROWTH WAS AROUND 3% • PLANT UTILISATION REACHED APPROXIMATELY 90–91%, INDICATING NEAR-FULL CAPACITY & HIGHLIGHTING THE IMPORTANCE OF UPCOMING MANUFACTURING EXPANSION • POLYPROPYLENE PRICES INCREASED APPROXIMATELY 26% DURING Q2 & OVER 50% ACROSS A BROADER PERIOD, DRIVEN BY WEST ASIA GEOPOLITICAL DISRUPTIONS & CRUDE OIL VOLATILITY • APPROXIMATELY 45–50% OF CUSTOMERS HAVE CONTRACTUAL POLYMER PRICE PASS-THROUGH MECHANISMS, WHILE PRICE REVISIONS FOR OTHER CUSTOMERS CAN TAKE ONE TO TWO QUARTERS • RED SEA SHIPPING DISRUPTIONS INCREASED EXPORT FREIGHT COSTS, WHILE PRODUCTION & DELIVERY LEAD TIMES OF APPROXIMATELY 1–1.5 MONTHS DELAYED THE BENEFIT OF CUSTOMER PRICE INCREASES • COMPANY RENEWED A MAJOR INTERNATIONAL CUSTOMER CONTRACT FOR THREE YEARS, WITH MANAGEMENT INDICATING A MINIMUM ANNUAL CONTRACT VALUE OF APPROXIMATELY ₹150 CR • THE GLOBAL CUSTOMER OPERATES IN MORE THAN 100 COUNTRIES, WHILE KNACK CURRENTLY SUPPLIES APPROXIMATELY 8–9 COUNTRIES, PROVIDING POTENTIAL FOR GEOGRAPHICAL EXPANSION & ADDITIONAL PRODUCT ORDERS • RECENTLY ADDED MANUFACTURING CAPACITY OF APPROXIMATELY 5,040 MT AT A RENTED FACILITY IS RAMPING UP, PROVIDING NEAR-TERM VOLUME HEADROOM AHEAD OF THE LARGER GUJARAT EXPANSION • PLANNED GUJARAT EXPANSION WILL ADD APPROXIMATELY 27,000–30,000 MT OF ANNUAL CAPACITY, SUPPORTING HIGHER EXPORT VOLUMES & PREMIUM PACKAGING PRODUCTION • PREMIUM PINCH-BOTTOM BAGS NOW CONTRIBUTE APPROXIMATELY 21% OF REVENUE VS 17–18% EARLIER, REFLECTING GROWING DEMAND FROM PET FOOD, RICE, GRAINS & OTHER VALUE-ADDED PACKAGING APPLICATIONS • EXISTING PINCH-BOTTOM CONVERSION MACHINES OPERATE AT APPROXIMATELY 60–70% UTILISATION, WHILE MANAGEMENT DISCUSSED LONGER-TERM CAPACITY POTENTIAL OF AROUND 32,000 MT WITHIN THE EXPANDED SETUP • MANAGEMENT EXPECTS HIGHER PINCH-BOTTOM VOLUMES DURING FY28 AS NEW MACHINERY BECOMES OPERATIONAL, SUPPORTING IMPROVEMENT IN EBITDA PER KG & PRODUCT MIX • MEXICO JV HAS INSTALLED CAPACITY OF APPROXIMATELY 400 MT PER MONTH BUT RECENT SALES AVERAGED ONLY 80 MT, WITH MANAGEMENT TARGETING 100–120 MT PER MONTH DURING Q3 • MEXICO JV REPORTED Q2 LOSS OF ₹2.62 CR & H1 LOSS OF ₹6.06 CR, WITH LOW UTILISATION CONTINUING TO REDUCE CONSOLIDATED PROFITABILITY • COMPANY SERVES OVER 2,040 CUSTOMERS ACROSS 75 COUNTRIES & SIX CONTINENTS, WITH APPROXIMATELY 13,974 SKUS ACROSS MORE THAN 25 INDUSTRIES • H1 OPERATING CASH FLOW DECLINED TO APPROXIMATELY ₹22 CR VS ₹39 CR LAST YEAR, WITH INVENTORY INCREASING BY ₹26.9 CR & RECEIVABLES RISING BY APPROXIMATELY ₹55 CR • WORKING CAPITAL CYCLE REMAINED BROADLY STABLE AT 75 DAYS VS 76 DAYS LAST YEAR, WHILE DEBT/EQUITY IMPROVED TO 0.26X FROM 0.68X • ROE STOOD AT 19.42% & ROCE AT 28.76%, WITH MANAGEMENT ATTRIBUTING SOME MODERATION IN RETURN RATIOS TO THE ENLARGED POST-IPO CAPITAL BASE • MANAGEMENT REMAINS POSITIVE ON EXPORT DEMAND, THE ₹150 CR ANNUAL CONTRACT, PREMIUM PINCH-BOTTOM GROWTH & GUJARAT CAPACITY EXPANSION, BUT POLYPROPYLENE INFLATION, DELAYED PRICE PASS-THROUGH, MEXICO JV LOSSES, WORKING CAPITAL PRESSURE & EXPANSION EXECUTION REMAIN KEY RISKS
KNACK PACKAGING LIMITED