LXCHEM - Laxmi Organic Industries Limited Share Price

Management provided a cautiously optimistic outlook for Laxmi Organic Industries Limited. Dr. Rajan Venkatesh, the Managing Director and CEO, emphasized the challenging conditions in the global chemical industry but noted signs of stability and potential recovery in demand, particularly in packaging, inks, and adhesives. He indicated that the acetic acid prices, crucial to their operations, dropped over 20% between 2024 and 2025 but are showing signs of rebounding, with recent pricing moving between $360 to $380.

For Q3 FY26, the company reported a 9% decrease in revenues compared to the previous quarter, with EBITDA down by 33% to approximately INR 50 crores. Profit After Tax (PAT) was reported at INR 25 crores compared to INR 29.3 crores in the previous year. Key pressure points included a decline in the Specialties segment's pricing and the phasing out of agrochemical intermediates.

Forward-looking, the management highlighted major initiatives:

1. The ongoing expansion at the Dahej facility is on track, with Phase 1 operational and Phase 2 slated for completion by the end of Q4 FY26. The total capex for the Dahej facility is INR 710 crores.

2. For the Specialties business, there is focus on ramping up new diketene derivatives, with revenues expected to materialize in FY27 following customer qualifications.

3. Management aims to achieve volume-driven growth, focusing on operational efficiency and cost discipline to counter the current pricing pressures.

4. The Lote facility's operations are progressing well, adhering to environmental regulations with no hazardous discharge.

Overall, while challenges remain, management expresses a commitment to improvement in profitability and operational execution moving into FY27 and beyond.

Question 1:

Jainam Ghelani: So my first question is mainly on the ethyl acetate spreads. So what are they currently? And how do we foresee them going in Q4 as well as FY '27?

Answer: Currently, ethyl acetate spreads are closely tied to acetic acid prices, which have recently moved from $320-330 to around $360-380. We believe that the worst is likely behind us, and we're cautiously optimistic about profitability improving in Q4 and FY '27, provided we see stabilization and slight increases in acetic acid pricing.

Question 2:

Jainam Ghelani: Sir, does that mean that the worst in terms of acetic acid is behind us and from Q4 onwards we should see improvement in the profitability on the Essentials front?

Answer: Yes, the price points of $320 to $330 were not sustainable. The leading producers are adjusting their capacity, which supports our view that prices won't return to those lows. Therefore, we anticipate gradual improvement in profitability in our Essentials business.

Question 3:

Jainam Ghelani: So in Q4, you mentioned that our Dahej Phase 2 should come online. So almost INR 1,000 crores of capex should be over. So how do we see that ramping up over FY '27 and FY '28?

Answer: The Dahej capex is actually INR 710 crores, with Phase 1 already operational. The significant ramp-up from Phase 2, which includes diketene derivatives, should commence by the end of Q4. FY '27 will primarily focus on customer qualifications, while FY '28 should more significantly contribute to revenues.

Question 4:

Jainam Ghelani: Sir, in the third quarter, our Specialties segment just saw 12% to 13% EBITDA margin. So how do we see that recovering over the year? And when do we see the margins to recover to almost 20% to 22%, which was our earlier outcome?

Answer: Recovering margins will depend on a few factors, primarily the stabilization of feedstock prices and the successful ramp-up of new products. While we are focused on regaining our margins in the 20-22% range, it may take time as we also navigate through increased costs from our new facilities.

Question 5:

Rohit Nagraj: Did we see any secondary impact from the U.S. tariffs during this quarter?

Answer: Our exposure to the U.S. market is relatively minimal, accounting for about 10% of our total revenue. Thus, while there is some impact on our customers, it hasn't materially affected our results in Q3.

Question 6:

Ankur Periwal: Now you rightly mentioned the pricing decline in acetic acid and the resultant contraction in spreads. Do we have adequate capacity, surplus capacity now to ramp up the volumes further?

Answer: Currently, we are operating at high capacity levels, so future volume growth will heavily depend on the new capacity from our Dahej facility. We anticipate that this new capacity will positively impact our growth in FY '27.

Question 7:

Nitesh Dhoot: What is your thought on the overall medium-term supply-demand dynamics for acetic acid?

Answer: Although there is new capacity on the horizon, the price points seen recently aren't sustainable for many producers. As such, we expect the supply-demand dynamics to improve as producers scale back capacity to maintain profitability, supporting better price points over the medium term.

Question 8:

Chetan Doshi: What is the current volume from the Dahej operations, and how do you see that ramping up?

Answer: Currently, I'd like to keep the specific volume confidential as it's tied to contractual agreements. However, we are ramping up in sync with our customers, and I expect a gradual increase aligned with their growth plans.