Sunrakshakk Inds Q1 FY27 earnings call

Sunrakshakk Industries reported its strongest quarter to date in Q1 FY27, with consolidated revenue from operations surging by 120.64% year-on-year to ₹276.33 crores. Profit after tax (PAT) also saw a significant increase of 130.67% year-on-year, reaching ₹15.04 crores. Basic EPS for the quarter stood at ₹4.85, marking a 101.24% increase compared to Q1 FY26. Sequentially, revenue grew by 39.85% and PAT by 24.30% over Q4 FY26.

The company's strategic pivot towards FMCG-led businesses has gained momentum, with FMCG, FMCG intermediate, and edible segments now contributing approximately 90.60% of consolidated revenue, significantly up from 83% in FY26. This shift reinforces the company's position as a diversified growth-led FMCG entity. Management expects this trend to continue, with textile business contributing 8-10% and FMCG 90-92% of total revenue in the longer run.

During the quarter, a new soap production line was commissioned at the existing Roorkee facility, adding 1,700 metric tons of monthly capacity. This expansion increased the aggregate installed capacity for FMCG and FMCG intermediate to 20,840 tons per month, up from 19,640 tons per month in Q4 FY26. The company currently operates at 50-55% capacity utilization and aims to increase this by another 25-30% by FY28, leveraging existing infrastructure for future growth.

Geopolitical tensions and crude oil price volatility led to higher raw material costs for dyes, chemicals, fuel, and packaging materials like PP. This impacted the consolidated EBITDA margin, which moderated to 8.18% in Q1 FY27 from 9.28% in Q1 FY26 and 10.19% in Q4 FY26. The textile business was particularly sensitive to these cost movements, affecting its profitability in Q1 FY27, though management expects normalization of costs by Q3 or Q4 FY27.

The FMCG segment's EBITDA margin improved to 8.55% in Q1 FY27 from 7.90% in Q1 FY26, reflecting continued operating leverage. However, the consolidated PAT margin moderated sequentially from 6.12% in Q4 FY26 to 5.44% in Q1 FY27, primarily due to the raw material cost pressures. Segment-wise, Roorkee's soap and noodle sections, Bhilwara's home care, detergent, and edible businesses, and Guwahati's cosmetics and noodle sections all showed sequential revenue growth, contributing to the overall strong top-line performance.

Sunrakshakk has set an internal target of achieving ₹1,000 crores in revenue by FY28, with an expected revenue of ₹900-1,000 crores for FY26-27. Management foresees a revenue growth of 15-20% for FY27-28. Profitability is targeted at approximately 6% for FY26-27, with an expected improvement of 0.75-1% in FY27-28, aiming for around 7% by FY28, driven by scale and increased capacity utilization. The company is confident in achieving the FY28 revenue target with its existing capacities.

The ₹98.65 crores raised through a preferential issue were primarily utilized for acquiring the food manufacturing facility in Bhilwara and the soap noodle and cosmetic manufacturing facility in Guwahati. The Roorkee capacity expansion was funded through retained earnings of the subsidiary. Management stated that major CapEx activities are largely complete, with minimal new investments expected in the next 1-1.5 years, focusing instead on optimizing working capital and utilizing existing capacities more efficiently.

The company is actively developing new products, particularly in the food sector, to leverage existing capacities and explore new market opportunities. While there are no immediate plans for acquiring manufacturing facilities, management remains open to lucrative investment or acquisition proposals that align with their strategic growth objectives. This focus on internal product development and strategic opportunities aims to drive future growth and diversification.