CHEMPLASTS - Chemplast Sanmar Limited Share Price

During the Q4 FY '25 earnings conference call, management provided a detailed outlook highlighting improvements in financial performance, despite headwinds in the PVC industry due to oversupply and pricing pressure from imports. The company reported a top line of INR 4,346 crores for FY '25, a significant increase from INR 3,923 crores in FY '24, with EBITDA rising from INR 26 crores to INR 219 crores.

Management noted that the Specialty Chemicals segment experienced a 37% increase in volumes, reaching 98,339 tons, and that revenues from this segment were INR 1,764 crores with a 53% year-on-year growth. The Custom Manufactured Chemicals business exceeded INR 500 crores in sales and achieved over 80% growth during the year.

Looking ahead, management expects demand for specialty chemicals to drive growth, emphasizing the recently approved INR 340 crores investment in a Greenfield project for R32 refrigerant, projected for completion by October '26. They are optimistic about an improved pricing environment and a revival in demand across their product portfolio by the second half of FY '26. Additionally, the imposition of antidumping duties on paste PVC from specific countries is expected to provide relief, although lower-quality imports remain a concern.

Management indicated confidence in achieving steady utilization rates at the new Cuddalore plant (approximately 10 kt per quarter by next two quarters), along with expectations of stabilization in suspension PVC volumes following government procurement initiatives. Overall, the management's outlook is cautiously optimistic about making significant progress in driving future growth while addressing challenges related to market dynamics and regulatory frameworks.

Here are the major questions asked and their respective answers from the Q&A section of the Chemplast Sanmar Limited earnings conference call held on May 14, 2025:

1. Question: "Regarding R32, can you provide the capacity addition we are looking at? How do we plan to sell it once the regulation kicks in? With so many announcements regarding R32, how do you view the economics of this gas for us?" Answer: "We anticipate a healthy production quota for R32. This quota allocation has traditionally been country-based, and we expect strong demand domestically and globally. We are confident in the sale of our product, but we will detail capacity specifics after obtaining environmental clearance."

2. Question: "The capex of INR 340 crores seems on the higher side compared to peers. Is it because it's a completely greenfield project for us?" Answer: "Yes, this is a greenfield project, and capex varies based on capacity and contingencies. We're conducting extensive studies on HF sourcing, balancing between domestic and imports, so we're confident about procurement."

3. Question: "The PVC business has struggled recently. What's the outlook?" Answer: "We've faced challenges primarily due to dumping. However, we see potential with the imminent antidumping duties, and demand remains strong. Apparent domestic consumption grew from 4.0 million tons to 4.3 million tons, reinforcing long-term optimism."

4. Question: "What are the growth prospects for the CSM business, particularly with the recent launch of MPB blocks?" Answer: "We expect continuing strong growth, largely due to the ramp-up from recent investments. For FY '26, we aim to exceed INR 1,000 crores in revenue, supported by demand from agrochemical cycles."

5. Question: "Can you clarify the R32 quota mechanism and its timing?" Answer: "Quota allocation will be determined based on national HFC production between FY '24 and FY '26, with individual quotas set afterward. We believe there will be sufficient allocation for all players."

6. Question: "What are your thoughts on the profitability in the CSM segment, and when can we expect improvement?" Answer: "We are currently PBT positive and expect margins to improve with new product launches and efficiencies. We're focused on maintaining profitability as we scale further."

7. Question: "Is there potential for cost optimization in the PVC business to enhance margins?" Answer: "We continually explore cost optimizations. Our recent expansions were aimed at maximizing operational leverage to mitigate the effects of external pricing pressures."

8. Question: "What margins do you expect for the Suspension PVC segment moving forward?" Answer: "Once antidumping measures are enforced, we expect margins to recover, typically ranging from $180 to $220 over VCM, although external factors may presently impact pricing volatility."

This summary captures the essence of the Q&A session while including relevant details and guidance provided by the management.