Revenue growth masks 38% profit decline; margin pressure ahead

Revenue 705.4 Cr (16.3% YoY), EBITDA margin 25.4% OPM (down 200 bps QoQ)

Reported PAT 99.7 Cr down 37.9% YoY; claim uses adjusted Q1'26 (79 Cr ex-deferred tax)

Growth driven by volume + realization, but CPVC utilization 50-55%, ECH 70-75%, caustic 75%

ROCE fell 24% → 16% (18% ex-CWIP); net debt-to-EBITDA rose 0.6x → 0.8x

Prior FY26 guidance was 10-12% volume growth for FY27. Call commits to 15-20% CAGR for next 5 years via new capex and market expansion.

Prior call aimed to 'maintain profitability levels' (implying 22-25% margins). New guidance: epoxy ~15-18% EBITDA margin (high volume, low margin); target 20% ROCE instead of margin %, acknowledging blend-down.

Epoxy 125k ton + MPP multipurpose plant newly announced. FY27-FY28 capex ~400 Cr/year. Peak revenue 1,300-1,500 Cr from this 600 Cr outlay.

Caustic utilization fell to 75% vs. expectations; CPVC at 50-55% due to inventory control by customers and PVC price volatility. Expect short-term glut from Grasim and own ramp-up.

Mix of LER + value-added products. Market size 2.5-3 lakh tons, double-digit CAGR growth. 50% ECH consumption internal (epoxy + MPP), 50% for external customers. Europe export potential post-FTA.

Currently base products (OCT, PCT, DCT). MPP enables photochlorination, downstream derivatives. Target ₹500 Cr combined MPP + chlorotoluenes revenue by FY29-FY30 (3 years).

Q1 FY27: ₹35k-36k per ECU; Q4 FY26: ₹30k. Currently ₹31k-32k (cooled off from war peak).

Caustic 75%, ECH 70-75%, CPVC 50-55%, chloromethanes 100%, peroxide 85-90%.

EBITDA margin will be lower (4x turnover vs 1x currently). But ROCE focus ensures project fits 20% ROCE target even with lower margins. No specific blended margin guidance given.

₹1,300-1,500 Cr (combined capex peak revenue).

Ethylene-based PVC already higher priced than MIP floor. No major impact. Helps convince customers CPVC requires ethylene-based PVC, not coal-based.

India will remain net importer due to alumina expansion driving demand. Short-term glut risk, but long-term absorption expected as downstream applications grow.

Glycerin pricing depends more on palm oil prices and biodiesel policy than byproduct status. Propylene competition helps currently. No imminent pressure from B50.

Internal target 20%+. Realistic guidance: 15-20% CAGR over 3-4 years on both top and bottom line.

MPP for chlorotoluenes/ECH derivatives (pharma, agrochem, water treatment). Epoxy for infrastructure/renewable energy/auto/coatings. Different customer bases and end-uses.

FY28 also ₹400 Cr. Tax rate ~25%.

40% internal, 60% debt.

Short-term glut expected as competitors ramp. But India demand growing infrastructure-driven. Long-term positive. Q3-Q4 are strong CPVC seasons; Q1-Q2 weak due to monsoon/inventory cycles.

₹250 Cr done; at optimum ₹300-350 Cr revenue. Combined with MPP ramp: ₹700-800 Cr top line. 22-23% margins, 1.5-2 years to ramp.

Realistic 3-4 year CAGR (internal aspiration 20%+). Depends on epoxy/MPP ramp-up, market absorption, and macro stability. Upgraded from prior 10-12% volume growth guidance.

3-year revenue target assuming successful pilot, customer approvals, and ramp-up post-FY28 commissioning. High customer approval risk for specialty products.

Epoxy at peak: portion of 125k ton capacity at higher margins; MPP: chlorotoluenes derivatives push up realizations.

Epoxy will have lower margins (4x turnover vs 1x current) but high asset base justifies via ROCE. Blended margins expected to compress near-term before offset by volume.

Hedged guidance. New projects will dilute blended margins. Near-term margin compression likely as epoxy scales.

On track, within budget. 40% internal, 60% debt financed. Q2 FY27 pilot commissioning expected.

CPVC utilization 50-55% due to inventory control by pipe customers and PVC price volatility. Grasim and own 75k ton capacity expansion expected to create short-term glut.

Epoxy (125k ton) and MPP plant capex (₹600 Cr) depend on pilot success, customer approvals for specialty derivatives, and market absorption. 1.5-2 years to peak utilization.

New projects will have lower EBITDA margins than current 25% portfolio. Epoxy is high-volume, low-margin (4x turnover vs 1x currently). Blended margin compression expected before volume offsets.

Caustic utilization 75%; new capacity announced by peers. Risk of near-term oversupply despite India's long-term net import status (alumina expansion). Pricing pressure possible.

ROCE fell from 24% to 16% (18% ex-CWIP) in Q1. Target 20% ROCE on new capex seems aggressive given lower margins and ramp-up friction. If utilization stalls, ROCE could remain depressed.