Meghmani Organics (NSE:MOL) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Meghmani Organics Limited Q2 FY 'twenty seven Earnings Conference Call hosted by Aryan Capital Markets Limited. As a reminder, all participants' line will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Ms. Roshali Sadani from Arihant Capital Markets Limited. Thank you, and over to you, ma'am. Thank you. Good morning, everyone. Welcome to you all at the Meghmani Organics Limited for Q2 H one FY twenty seven earnings call.

0:45 On behalf of Arrange Capital Limited, I would like to thank the management of Meghmani Organics Limited for giving us this opportunity to host this call. Today from the management side, we have mister Munti Patel, Chairman and Managing Director Mr. J. S. Chahal, Chief Financial Officer Mr. Prateek Shah, Deputy CFO Mr. Nishant Vyas, Investor Relations. Without any further delay, I would like to hand over the call to the management for the opening remarks. Thank you to Shalitri. Good morning, everyone, and thank you for joining us on our quarter two FY 'twenty seven earnings call. I believe you have got a chance to go through the financial results and investor presentation uploaded on the stock exchanges and the website.

1:32 Before we move to the quarterly and half yearly financial performance review, I would like to share that we have received the Honorable NCLT's approval for the amalgamation of our two wholly owned subsidiaries, Kilburn Chemicals Limited and Meghmani Crop Nutrition Limited, with Meghmani Organics Limited, creating a single unified legal entity. This approval marks an important milestone in our journey. The scheme will enable us to achieve optimal utilization of existing resources through consolidation of operations and derive operational and financial synergies. Moving to our quarterly performance review. During the quarter, we delivered a healthy revenue growth with revenue increasing 18% year on year basis and 26% quarter on quarter basis, reflecting a continued positive momentum.

2:28 However, due to sharp increase in input and logistics cost, the and realization remaining broadly flat, our margins during the quarter were impacted. While the near term cost environment remains challenging, we are taking focused measures to optimize our product mix, enhance operating efficiencies and strengthen profitability. We remain focused on navigating the current environment while sustaining the underlying growth momentum of the business. On stand alone basis, in quarter two FY 'twenty seven, revenue stood at nearly INR658 crores, up by 18% year on year basis. Net profit for the quarter increased by 6% to INR45 crores on year on year basis, while our EBITDA remained flat at INR70.9 crore.

3:24 Our EBITDA margin for the quarter was impacted by elevated input and logistics cost. If we talk about the revenue mix in quarter two FY 'twenty seven, Crop Protection segment constitutes about 75% of the total revenue, while the balanced 25% was from the Pigment segment. Now let us look at the segment wise performance. In Crop Protection segment, production stood at nearly 10,000 metric tonne and the capacity utilization for the segment stood at 72%. Revenue and EBITDA stood at nearly INR496 crore and INR54 crore respectively. EBITDA margin for the segment was at about 11%. For the Pigments segment, production stood at 4,252 metric ton and capacity utilization for the segment stood at 51%.

4:17 The segment reported revenue and EBITDA of INR 161 crore and INR 16 crore, respectively. EBITDA margin for the segment was at about 10%. For the half year ended 09/30/2026, revenue from operations stood at $11.81 crore, which is up by 3% year on year basis. Net profit increased by 23% to INR 103 crore approximately and EBITDA grew by 9% to INR 164 crore. Moving to our Crop Nutrition segment. We have commenced the production of our newly introduced nano fertilizer products like Nano DAP, Nano NPK and Nano Zinc at our existing manufacturing facility in Saras.

5:07 These products complement our existing product portfolio and position us well to participate in growing adoption of next generation crop nutrition solutions. We remain optimistic about the long term growth prospect of this business. In titanium dioxide, operations continue to remain suspended due to commercial unviability arising from the elevated raw material costs and weaker price realization following the withdrawal of antidumping duty. Recently on 10/24/2026, the Ministry of Finance reimposed antidumping duty on titanium dioxide imports from China for a period of five years. While this is a positive development and should support a gradual improvement in the price realization, the economics of restarting the plant remains challenging.

6:02 Sulphuric acid, a key raw material is currently at significantly elevated level with prices having increased by nearly seven to eight times from the normal levels. Considering these factors, restarting operations is not commercially viable. Now if we look at our financial performance on consolidated basis in quarter two FY twenty seven, revenue stood at nearly INR666 crore, up by 16% on year on year basis and net profit grew by 193 to INR33.9 crore. Our EBITDA grew by 40% to INR73 crore. EBITDA margin on consolidated business stood at 11% compared to 9% in the corresponding quarter previous year. For the half year ended 09/30/2026, our consolidated revenue stood at INR $120.09 crore, up by 2%.

7:02 Net profit increased by 239% year on year basis to INR 82.1 crore and EBITDA grew by 44% to INR 171 crore. EBITDA margin on the consolidated stood at 14.1 compared to 10% in the corresponding previous year. As of 09/30/2026, on stand alone basis, our total debt stands at INR497 crore comprising of INR435 crore in the short term debt and INR62 crore in the long term debt. Debt to equity ratio on stand alone business stood at 0.27x. On consolidated basis, our total debt stands at INR661 crore, which includes INR438 crore in short term debt and INR223 crore in the long term debt. Debt to equity ratio on consolidated basis stood at 0.41.

7:56 Till September 30, we have made a debt repayment of approximately INR 64 crore. So to conclude, while the near term environment remains challenging, we remain focused on navigating the current environment while sustaining the underlying growth momentum of our businesses. With this, I hand over the call to the moderator to open the floor for questions and answers. Thank you. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one or the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles.

8:45 A reminder to all the participants, if you wish to ask a question, you may press star and one on your touch tone telephone. The first question is from the line of Ayush Jay, an individual investor. Sir, I have two questions. The first question was on trade receivables. They've gone up 200 crores. So could you give some explanation on that total right on that, please? Yes. Thank you, Ashish. Trade receivable has increased significantly in the current quarter. Reason being, the markets where we are operating over there, there has been increase in the credit what we are offering.

9:30 Current market is a little bit challenging where we need to push more and we need to support our customer base and to have a growth and have a sustainable increase in the sales, we have been giving a little more credit to the market. And sir, when do we expect this to normalize? See, normally, we were in the range of about one hundred to one hundred and ten days, it has increased to about one hundred and twenty five plus days. So we will try to improve, but for that the market and the demand has to improve so that we can command the situation. So in the near term, it looks a little difficult. Going forward, we'll try to improve by a few days. But it will always be in the range of somewhere one hundred and ten to one hundred and fifteen days.

10:21 You for that. Sir, my second question was on the pigments part of the business. It seems that exports have reduced and domestic sales have increased quite a bit. Could you please explain why the margins have seen an increase? How do you foresee this part of the business going ahead? Obviously, I think one of the quarter here and there, but where overall export will be in the range of approximately 75 percent to 80% for the pigment segment. Wherever we get the better realization, we focus on that segment. And sometimes there is opportunity arising from the domestic market or the export market. We continuously focus on doing that. So in last few quarters or few years, our profitability for the pigment segment was quite impacted and we were working on it to improve the profitability of the pigment segment to reasonable level. So I think in these two quarters, we have reached nearly 10% level now.

11:28 Thank you. Couple of more questions, if I may. We've seen prices increase in raw materials and logistics. Are we planning or are we trying to increase our realizations for the agrochemical business, sir? We keep on doing that, but the current market scenario is a little bit volatile because every day, there is a lot of volatility into the raw material cost. The energy cost has increased drastically. At the same time, the global market, because we are in the indirectly related to agriculture business, the price acceptance, sudden price acceptance takes a little longer time. So people would like to wait, understand the supply situation and there is no problem as far as the agrochemical supply is concerned.

12:19 So there is no panic. So the pressure is currently on the manufacturer level like us. We try to showcase the scenario, make people understand. That is what we have been trying to do, but it's been challenging. Going forward, we believe the logistic cost in few months' time should start going back to the normal level. It has already started going down a little bit. So we believe that in few months, it will be again back to the normal level. And let's hope the war in the Middle East area, if it gets upset, then we believe that the raw material prices will also get stabilized.

13:04 That will indirectly help us. Thank you, sir. And my last question would be, sir, any guidance for FY 'twenty eight? So from the growth perspective for the next two to three years, agrochemical segment will grow in double digit from the top line point of view. We'll also try to improve the profitability as we have been telling for the agrochemical segment on the long term perspective, we try to maintain the industry average somewhere in the range of 15% to 17 EBITDA margin. For the Pigments segment, there will not be significant growth potential. It will be more or less in the range of INR 600 crores, $6.50 crores top line. We have been working on optimizing the profitability, which we have been able to do it in the first and second quarter. We will keep on trying to improve it and we'll try to maintain somewhere near 10% to 11% EBITDA margin for the Pigment segment.

14:02 For the Crop Nutrition segment, we are very optimistic. We believe that going forward, the kind of the developmental activity and the product mix what we are introducing will give a very positive result going forward over a period of three years' time. It will also grow in double digit, though the base is small. Titanium dioxide segment for the time being too early to mention about it, though there has been positive momentum of regaining, reimposition of the antidumping duty. But still, the raw material scenario, which is a key is the sulfuric acid price is still significantly high, making it unviable to restart the operation for the time being. We are closely watching it and we can give the guidance once the scenario improves on that. Thank you.

14:54 Thank you, sir. And wishing you all the best for the future and Happy Diwali to you and the entire team. Thank you, sir. Thank you very much. Happy Diwali. Thank you. The next question is from the line of Yesh Sumani from Sumani Family Office. Sir, am I audible, sir? Yes, can hear you. Yes, sir. So my question was regarding the crop protection margin. So the guide in May, you guided the CP margins about 15% to 17%. In Q1, came in around like 19 or 20%. So but the Q2 margins fell to around 11%.

15:42 So is the guidance still valid? And what drove the drop like? Was it raw material prices or Chinese technical pricing, product mix, something else? So, Yashi, the raw material prices increased significantly in the second quarter. The thing is because of the war, the raw material started going up even in the first quarter itself. But we were holding some low price raw material inventory, which helped us in the first quarter. In the first quarter, we were again able to pass on a little bit price increase because people were a little bit panicked and they did not know what is going to be from the supply chain point of view. But as time move on, people understand the supply is more or less stable. There is no issue from India or China.

16:29 So then again, there was a pressure on the manufacturing side. At the same time, the raw materials, the basic raw materials, which are directly or indirectly linked to the crude oil has gone up significantly. At the same time, the utility cost, energy cost has also increased. The coal price also gone up significantly. And adding to one more factor in the second quarter, we faced a lot of problem from the logistic cost point of view as well. So all those factors created a major problem. Now going forward, we believe the logistic cost has started going down gradually. It will be normalizing in next few months' time. As far as the raw material is concerned, we believe the disturbance in the global market should get normalized, the kind of the news what we have recently got that it should be the war with the Iran should get normalized soon. Let's hope for the best. If it happens, then raw material prices will become normal.

17:33 That will help us indirectly. At the same time, we try to play with a different product mix. We try to convince the customer about the scenario. But if there is a stability in the raw material prices, stable increase in the raw material price, then we are able to pass it on. But if there is a lot of volatility increase and decrease in terms of war situation, then it is very difficult to take a call at the customer level as well. So that is the scenario. So it's we have been passing through the challenging time, but we have been taking optimistic steps in the current scenario, and we are very positive that one of the quarters there has been reduction in the profitability, but on the long term perspective, we are very optimistic to maintain the EBITDA margin of 15% to 17% from the crop nutrition crop protection segment.

18:26 So thank you for your answer. So my next question would be regarding TiO2. So are you considering any strategic options for that, like such as any partnerships, divestment or something or any other strategy? So we have been working on this project. We have been applying different strategies to look at what to do with this current asset what we have created. At the same time, we have been exploring different options, but the market currently is a little bit challenging. If the situation is better, normal, then you can attract different projects, different companies all put together. So we are exploring all the possibilities for this asset.

19:14 So going forward, if there is any positive improvement is there, we'll be informing the investors from the betterment point of view. Thank you very much. So I'll just wait in the queue. Thank you. Thank you. The next question is from the line of from Agrawal and Company. Please go ahead. Thank you so much for the opportunity. So I had a question regarding the revenue. Revenue grew from 40% year on year, but margins up to 10.1% from 12.1% in quarter one.

20:02 Was this a deliberate volume for margin rate of? What margin should we expect in the medium term? So, Kusaji, we have been trying to maintain the growth momentum in the top line along with the volume growth. That's what we have been doing. The current situation is a little bit volatile as far as the profitability is concerned because of the input cost has increased significantly. So in the near term, it looks a little bit challenging. But on the long term perspective, we are very optimistic to bring back the profitability for the crop protection segment in the range of 15% to 17% in the pigment segment to the nearly 10% to 11%. So on the consolidated basis, somewhere in the range of about 13% to 14%.

20:54 Okay, sir. Sir, production grew to 13% year on year to four to five twenty, yet revenue grew 40%. How much came from the price mix and currency? So currency, we already know the kind of the momentum it has happened in last one year. So that is one factor, but mainly it is because of the different product mix where we get the better realization, better profitability. So we focus on that. Sometimes we play with the volume, sometimes we look at the formulation where we get the better realization somewhere, sometimes we look at the different technical product where we get the better realization.

21:40 So based on that, we have been trying to maintain it. So it's partly because of the dollar rupee rate, partly because of the different product mix. Okay, sir. Another question. How many new registrations or high value products are in pipeline for FY 2027 and FY 2028? And what revenue could date add at Meghmani? So there are many registrations in pipeline in the different market. The product what we introduced in last three, four years, those products we have been registering into various markets in Latin America, in North America, in Africa, Asia, everywhere.

22:31 The various countries of company, we have been exporting to more than 70 countries. And so depending on country to country, there has been different regulations. And each country takes different time line for getting the approval and registration. So we have a pipeline of product for the registration up to 2031. So we'll every year, we will be keep on getting new product registration in different markets, which will drive the growth forward. That is why we are very optimistic to have a double digit growth in the crop protection segment over a period of next three to five years. Have one more last question.

23:18 How are the demand trends in Europe and The U. S. Across pain and plastic? Is the global overcapacity easing? Europe is passing through very, very challenging time. We all know we have been getting the news in the media. So the cost in the Europe has gone up. The viability is not there in those markets. We have been trying to pass on the price increase, but the demand is getting impacted in the Europe significantly. So in The U. S, still there is a good margin, good demand. We have been doing the business. Last year, there was a tariff related issue, which impacted the pigment business in The U.

24:03 S. Market. But this year, so far, it is not there. Let's hope it doesn't come again. So Europe is a challenging market going forward. Whatever business we can get, we have been doing, but otherwise, we are focusing on any all other markets. As far as agrochemical is concerned, we don't do we do hardly 1% or even less than 1% business in the Europe market. It's very highly, highly regulated market and very difficult to predict because they keep on banning the product and if you spend money on doing the registration and if they ban the product, then we lose the money. So as far as the agrochemical is concerned, we are not focusing much on a Europe market.

24:53 Apart from that, we have been doing business in the rest of the world. Okay, sir. That's it from my side. Thank you so much. Wishing you a happy Diwali. Thank you very much. Happy Diwali to you as well. Thank you. The next question is from the line of Ruchali Sadani from Arihant Capital Market Limited. Please go ahead. Thank you. Hello, sir. So just a question that are you planning to enter any new chemistry such as the fungicides or any special pigments or any other adjacent categories? So, Ruchal, we keep on doing the development for new new products.

25:46 We don't announce the new product names till we do the commercialization. We do under coding, our R and D development activity remains everything under coding. But we keep on looking at it and once we get the success commercially as well as the viability point of view then only we launch the product. Okay. And next question is how much do byproduct and coproduct sell contribute to revenue and how have their price moved? Think byproduct out of coproduct is not even 1%. It's a very, very small amount. So we don't focus on that. It's a very, very small amount.

26:33 Okay. And are there any contingent liabilities or any legal matter that could have become material? No. We don't have any major contingent liability. Okay. My last question would be the Q2 pigments realization was out roughly about INR $3.80 per kg. So how did this change year on year and quarter on quarter and what is the outlook for H2? For the pigment segment, so far the market was accepting the price increase along with the raw material price increase. So that was a positive thing. So whatever increase in the raw material was happening in the pigment segment, so far we have been able to pass it on. But in the Crop Protection segment, it was very difficult.

27:24 That was all my questions. And just to add to Shalini, actually realization per tonne calculation is not the right method because we have product mix, which range category is different actually. For each product, is a different realization. So, we cannot average it out. So, best method is to measure the EBITDA percentage. Okay. Thank you. A a reminder to all the participants, if you wish to ask a question, you may press star and one. The next question is from the line of from Meghmani Organics. Please go ahead.

28:10 Hello, sir. Thank you for giving me the opportunity. I just wanted to understand what is the kind of outlook that you have for the crop nutrition segment, the Nano India, what is happening in India? I think there are some adverse reports that India is going back to maybe urea manufacturing, correct? So because the nano urea thing is not working as much. So first question is, what is your outlook on that? And if you can share any kind of sales or margin guidance for the next four to six quarters? Sir, my second question is on agrochemical export growth or in terms of the Latin American and The U. S. Markets.

28:59 I think we are operating at 72% capacity utilization. And do you see that now with things stabilizing, we can move up to 85%, 90% capacity utilization? Thank you. So, Shanti, as far as the crop nutrition segment is concerned, now we have got earlier when we started, we launched only NanoUrea, but now we have got a couple of more products in the basket, more than 10 products we have got in the basket. NanoUrea, there has been if you look at the media or the if you do the Google search, you will find a lot of negativity about the product. But as far as the product is concerned, it is working very well on the field. And initially, when the product was launched, it was a wrong marketing campaign by one or two companies that it can replace urea.

29:53 At the field level, as it make money, we have been doing the right field activity, giving the right guidance to the farmer, where we have been telling it cannot replace urea 100%. It can only replace urea to some extent because based on the application. And we have been giving the right guidance how to use the product application wise. So if you unless if you guide the farmer how to use the product, when to use product, with what dosage, if they don't use proper protocol, then they will not get the result. And that's what happened. Initially, when Ipko started marketing, then it was like one bottle can replace one bag of urea, which was completely wrong campaign.

30:41 It has got strength equivalent to one bag of urea, but it cannot replace urea. So now it's been a little bit challenging. We have been doing a lot of field activity. We have been showcasing the trial and giving the right protocol to the farmers. So that's what we have been doing. And now they have been getting good results in different crops. So slowly, gradually, the adoption is increasing. At the same time, the nano DFE has got much more positive impact in the Indian market, which is we have already introduced in this financial year. So that will also have a positive impact. At the same time, we have been doing a lot of developmental activity of this product in the export market, being we are taking the help of like we are present in more than 70 countries in the crop protection segment.

31:33 We have got a huge customer base. So we are leveraging that infrastructure, and we are introducing this product into export market as well by showcasing them the new trials, doing the registration. Again, in the global market, it's a new concept. So it takes a little bit time, but the kind of the result and what we are seeing on the field, it is very encouraging and it gives confidence to the customer and the farmer. So going forward, over a period of next three years, there will be good amount of growth happening in the top line of Crop Nutrition segment and it will add healthy profitability to the overall company, somewhere in the range of it has got EBITDA in the range of 20% to 22%.

32:25 And sir, this was reflecting in basically the line, right, where we are showing the other than the other, right? INR 1.4 crores and INR 3.1 crores as EBITDA. Correct, yes. Okay, okay. Right. Sir, think one or two more questions I have is that, yes, I have like for small investors like us, you have been associated with the company for a long time, and we have seen the fantastic growth of the company over the last ten years. Two new companies, both of them doing well. Both of these companies put together have a net add of around INR 120 crores, INR 150 crores a quarter, right?

33:15 But after the demerger, think Meghmani because of the adverse cycle suffered a bit. So do you are you thinking of rewarding small shareholders through dividend, etcetera, in the foreseeable future, sir? Shyanki, we have been we were giving regular dividend, but last two, three years were a little bit volatile where we need to focus on the cash flow. So I think going forward, if the market improves, if we have a good amount of cash flow, then definitely for the betterment of the investors, we'll be announcing that dividend. Thank you, sir. And happy Diwali and great comeback, sir, on this year. And I think with the logistics cost and everything looking on it, we hope that we are able to have a great H2 and many congratulations on the great results.

34:04 Thank you very much. Happy Diwali to you as well. Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments. Over to you, sir. On behalf of the management, we thank you for joining us today. We hope that we have been able to address most of your queries. In case of further queries, you may reach out to Mr. GS Jahal or Mr. Nishant Vias, and they will connect with you offline. Wishing you all a very happy Diwali and a prosperous New Year. Thank you. Thank you. On behalf of Arihant Capital Markets Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.