30-Oct-2026 18:40:01
KUANTUM PAPERS Q2 CONCALL: RETAINS ₹1,300 CR+ FY27 REVENUE TARGET, EXPECTS 18–20% EBITDA MARGIN IN FY28; PLANS 7–11% PRICE HIKES, TARGETS 25–30% SPECIALTY PAPER MIX & ₹180 CR ANNUAL DEBT REPAYMENT
• FY27 Revenue Guidance: Management reiterated its target of achieving ₹1,300 Cr+ annual revenue, supported by higher production following completion of its paper machine modernization programme. • H2 FY27 EBITDA Margin Outlook: Management indicated an EBITDA margin expectation of approximately 14%, supported by higher realizations, improved production efficiency and operating leverage. • FY28 EBITDA Margin Outlook: Management expects EBITDA margins to recover toward 18–20% in FY28, compared with the 10–12% levels seen during the industry downturn. • FY28 Business Outlook: Management expects significantly better performance in FY28, supported by upgraded manufacturing capacity, cost savings, higher selling prices and an increasing specialty paper contribution. • Paper Price Hike Guidance: Management expects cumulative price increases of approximately 7–11% through Q3 and Q4 FY27, supported by stronger seasonal demand. • Price Hike Implementation: Company implemented an approximately 4% price increase toward the end of September 2026, which management indicated has been sustained by the market. • Q3 Pricing Outlook: Management expects further price increases after Diwali as demand from paper converters and other customers strengthens. • Price Hike Sustainability: Management expects improved paper realizations to sustain for at least the next two quarters, supported by the traditionally stronger second half. • Specialty Paper Mix Target: Management aims to increase specialty paper contribution to approximately 25–30% over the next 12–15 months, compared with 17–18% currently. • Specialty Paper Expansion: Company is developing higher-value products and optimizing machine configurations to improve realizations and product margins. • Production Capacity Outlook: Management expects optimized marketable production of approximately 600 tonnes per day following completion of the modernization programme. • Maximum Production Capacity: Company's upgraded machinery can produce approximately 675 tonnes per day at the specified 64 GSM reference, subject to product mix. • Production Mix Strategy: Management is prioritizing higher-value lower-GSM papers, including 52, 54 and 58 GSM products, which may reduce tonnage but support better realizations. • PM3 Modernization: Company successfully commissioned its upgraded PM3 machine on August 28, 2026, completing the rebuild in 59 days against the planned 65-day shutdown. • Paper Machine Upgradation: All four paper machines have now been upgraded under the company's modernization programme. • Q3 Production Recovery: Management expects Q3 production to improve significantly as PM3 resumes stable operations following its Q2 shutdown. • PM3 Shutdown Impact: Management indicated that the shutdown resulted in approximately 6,300 tonnes of lost production during Q2. • PM3 Operating Performance: Management indicated that the upgraded machine was operating steadily during October, with further optimization underway. • Wood Pulp Efficiency: Upgrades to the double displacement digester improved wood pulp yield by approximately 1%. • Steam Consumption Savings: Steam consumption in wood pulping declined from approximately 1.8 tonnes to 0.8 tonnes per tonne of pulp following process improvements. • Chemical Cost Savings: Company's revised chemical procurement arrangements are expected to reduce overall chemical consumption costs by approximately 1.5–2%. • Raw Material Efficiency: Management indicated that the combined cost and consumption of agro and wood raw materials improved by approximately 15–17% compared with Q1. • Copier Paper Production: Company achieved record monthly copier paper production of 4,482 tonnes during August 2026. • New Specialty Paper Launch: Company commercially launched PFAS-free, 40 GSM oil- and grease-resistant paper for food-wrapping applications during Q3 FY27. • Wood Price Outlook: Management expects greater availability of domestic wood over the next two years, potentially supporting stable or lower wood prices. • Wheat Straw Price Outlook: Management expects temporary price increases caused by harvesting disruptions and labour shortages to normalize after Diwali. • Raw Material Cost Outlook: Management expects temporary raw material and fuel inflation to moderate by November–December 2026, although market conditions remain uncertain. • Chemical Inflation Impact: Management estimated that higher chemical costs, particularly sulfuric acid, had an impact of approximately 2% of quarterly sales. • Fuel Cost Pressure: Management highlighted elevated coal and fuel costs due to supply allocation constraints and geopolitical developments. • Coal Supply Situation: Company continues to source coal from the open market, although reduced allocated supplies to industrial users have increased procurement costs. • Energy Mix: Management indicated that approximately 85% of its relevant fuel mix is coal-based, with the remaining 15% from agricultural sources. • Imported Paper Competition: Management indicated that higher ocean freight rates have reduced imported paper volumes, supporting domestic demand and supply conditions. • Anti-Dumping Duty Outlook: Industry representations covering writing and printing paper have been accepted for examination by relevant government departments. • Trade Protection Timeline: Management indicated that anti-dumping, anti-subsidy and minimum import price representations could progress over the next 3–6 months, subject to government decisions. • Minimum Import Price Proposal: The writing and printing paper industry is seeking protection similar to measures already applicable to certain kraft paper and paperboard products. • Environmental Projects: Company is implementing lime kiln and CNCG systems to strengthen environmental compliance and operational efficiency. • Environmental Clearance: Management indicated that the required environmental approval application is at an advanced stage, with a decision awaited. • Capital Work in Progress: Approximately ₹139 Cr of remaining CWIP relates mainly to project completion, auxiliary systems and environmental initiatives. • Future Capex Outlook: Management indicated that the major modernization investment has been completed and does not currently foresee significant additional near-term expansion capex. • Annual Depreciation: Management expects depreciation of approximately ₹80 Cr per year following completion of the modernization programme. • Debt Position: Management indicated that the company is near peak debt of approximately ₹700 Cr and expects borrowing levels to reduce going forward. • FY27 Debt Repayment: Management confirmed approximately ₹180 Cr of scheduled debt repayments during FY27, with repayments progressing as planned. • FY28 Debt Repayment: Management indicated a similar repayment amount of approximately ₹180 Cr for FY28. • Deleveraging Strategy: Management is prioritizing operating cash flow generation and debt servicing rather than share buybacks or changes in the equity capital structure. • NCD Fund Utilization: Company raised ₹100 Cr through non-convertible debentures, with proceeds fully utilized for prepayment of existing term loans. • Forestry Expansion: Company added approximately 2,300 acres under its social farm forestry programme, taking total plantation coverage beyond 22,000 acres. • Clonal Sapling Production: Company achieved record quarterly production of approximately 17.93 lakh clonal saplings. • Sapling Production Target: Management aims to increase annual clonal sapling production to approximately 1 Cr over the next 2–3 years to support long-term wood availability. • Q2 Revenue Performance: Operating income stood at ₹279 Cr, with production and sales affected by the PM3 shutdown. • Q2 EBITDA Performance: EBITDA stood at ₹35 Cr, with margin at approximately 12.4%, reflecting lower selling realizations and higher input costs. • Q2 Net Profit: PAT stood at approximately ₹2 Cr, with PAT margin at 0.8%. • H1 Revenue Performance: Operating income increased approximately 16% YoY to ₹533 Cr. • H1 EBITDA Performance: EBITDA stood at ₹75 Cr, broadly in line with the corresponding period last year. • H1 Net Profit: PAT stood at approximately ₹9 Cr, affected by higher depreciation and finance costs. • Key Challenges: Higher coal and chemical costs, volatile agricultural raw material prices, dependence on paper price increases, elevated debt and depreciation, import competition and timely realization of efficiency benefits remain important factors.
KUANTUM PAPERS LIMITED