POCL - Pondy Oxides & Chemicals Limited Share Price

Pondy Oxides and Chemicals Limited (POCL) has provided an optimistic outlook for FY '26, anticipating significant growth driven by recent capacity expansions. Key highlights from management include:

1. Revenue Growth: POCL expects a revenue increase of 30% to 35% for FY '26, building on the robust performance of FY '25 where revenue reached INR 2,028 crores, a 33% year-on-year increase.

2. Expansion Initiatives: The company has expanded its lead production capacity by 72,000 metric tons per annum at the ThervoyKandigai plant in two phases. Phase 1 has commenced with a production capacity of 36,000 metric tons, with commercial production starting in Q1 FY '26. Phase 2 is scheduled for completion in H2 FY '26 with an additional INR 20 crores allocated for the expansion.

3. EBITDA Margins: Management targets an EBITDA margin of 6% for FY '26, with aspirations to exceed 8% by 2030. This expansion of margins will be driven by improving operational efficiencies and higher value-added product sales.

4. Production & Capacity Utilization: POCL has reported increased production, with lead output increasing by 30% for FY '25 to 94,115 metric tons annually. The company aims for 15% volume growth focusing on lead production, alongside ongoing improvements in copper and plastics.

5. Credit Rating: The company received a credit rating upgrade from CRISIL A-/Stable to CRISIL A/Stable, reflecting strong financial health and stability.

6. Investment in R&D: POCL plans to establish R&D facilities for value-added products to boost revenue contribution and improve profitability.

The company's strategy emphasizes disciplined capital allocation, with anticipated capital expenditure of INR 75 crores in FY '26, intending to further strengthen core operations in nonferrous metals recycling and sustainability initiatives.

Q&A Section Summary from Pondy Oxides and Chemicals Limited Earnings Call

Question 1: "Can you elaborate on which segments you will be expanding your capacity with the INR55 crores of capex guidance?"
Answer: "We plan to allocate approximately INR20 crores for the second phase of our lead expansion. The remaining INR55 crores will be spent on enhancing capacities in our copper and plastics verticals, both at the new plant in Tamil Nadu and our existing operational facilities."

Question 2: "What will be the new capacities for plastics and copper after this expansion?"
Answer: "For copper, we aim to increase capacity from 9,000 tons to approximately 12,000 tons. For plastics, capacity will remain similar, but we will enhance efficiency and quality through better processing equipment."

Question 3: "What revenue contributions did copper and plastics generate this quarter?"
Answer: "In Q4, lead revenue was about INR1,942 crores; copper contributed approximately INR55 crores; and plastics, around INR31.5 crores. We plan to give detailed segment reports from the first quarter onward."

Question 4: "Regarding our negative operating cash flow due to high inventory, was this also due to falling lead prices?"
Answer: "No, inventory accumulation was not due to price speculation but was necessary for a smooth start-up of our new lead plant. With commercial production commencing, we expect inventory levels to normalize."

Question 5: "What is your outlook on working capital days moving forward?"
Answer: "We improved working capital days from 55 in FY24 to 50 in FY25. Our target for FY26 is to bring it down to approximately 45 days, particularly as we ramp up production."

Question 6: "What EBITDA per ton can you expect with the new facilities?"
Answer: "With the new lead plant, we anticipate an EBITDA per ton of lead in the range of INR14,000 to INR14,500 on a blended basis. For new copper and plastics outputs, we expect margins to improve gradually."

Question 7: "Have you faced challenges from OEMs establishing their own recycling plants?"
Answer: "We haven't seen significant changes in procurement from OEMs since they continue to source scrap from us despite their internal capacities. Their operations focus more on tolling and self-sourcing, rather than diverting existing contracts."

Question 8: "What is your anticipated revenue guidance for FY26?"
Answer: "We expect revenue growth of 30% to 35% year-on-year, with contributions ramping up notably from Q2 onwards due to new production capacities coming online."

Question 9: "What challenges do you foresee as you scale up?"
Answer: "As we scale, I anticipate maintaining robust procurement and sales strategies to mitigate competition. We have established a strong supply chain and our focus remains on securing markets and improving operational efficiencies."

Question 10: "What is your long-term view on copper margins as the facilities scale up?"
Answer: "We expect copper margins to eventually align with those of lead, aiming for around 8% on a blended basis across our segments as we enhance value-added processing in the coming years."

These summaries encapsulate key insights from the Q&A section, providing an overview of management's responses to investor inquiries.