Asahi Songwon

Asahi Songwon reported consolidated revenues of ₹121 crores for Q2 FY26, marking a 19% QoQ and 15% YoY decrease. EBITDA for the quarter stood at ₹11 crores, down 7% QoQ and 23% YoY, with an EBITDA margin of 9%. For the first half of FY26, consolidated revenues were ₹271 crores, a 2% YoY decrease, and EBITDA was ₹23 crores, down 20% YoY, resulting in an 8.5% EBITDA margin. Net profit for Q2 and H1 FY26 was ₹2 crores and ₹5 crores respectively, both showing a 35% YoY decline.

The blue business experienced a significant impact from US tariffs and customer nervousness, leading to destocking and a drop in utilization from 95% to 70%. Management expects utilization to recover to 85-90% by the Jan-Mar quarter of FY26. Despite the current challenges, the company believes the industry cycle is bottoming out, and they are working to mitigate margin challenges through de-bottlenecking and cost-saving measures.

The AZO pigment business, housed in the ATC Dahej plant, has turned cash contributive and positive after three years. Utilization for AZO improved to 57% in H1 FY26 from 45% in H1 FY25, with a target to reach 85% utilization, which is expected to make the plant PAT positive. The company aims for 13-15% EBITDA margins and ₹100-120 crores revenue at 85% utilization, with ROCE of 11-12%. Future capacity expansion for AZO will be incremental and funded by internal accruals.

The API business, particularly at the new Chhatral plant, faces significant utilization challenges, currently at about 15%. Management acknowledges this as a key area for improvement, focusing on beefing up the team, expanding into new geographies, and launching new products. One new API, Etoriocoxib, has been launched, with sales expected to start next quarter. Crucially, the European CEP filing for Pregabalin has been successfully submitted to EDQM, with approval anticipated in 7-8 months, which will open doors to regulated markets and improve realizations.

The company's major CAPEX cycle is largely complete, with past investments in ATC Dahej (₹85 crores) and Atlas (₹70-75 crores for Chhatral, ₹56 crores for Odhav acquisition) totaling approximately ₹121 crores for API. Future CAPEX will be minimal, primarily for maintenance and incremental capacity additions, funded through internal accruals. The company remains committed to deleveraging and is on target to meet its March 2026 guidance, supported by strong operating cash flows.

Asahi Songwon aims to reach ₹1000 crores in revenue within three years, driven predominantly by growth in ATC and Atlas. Management views the current challenging business environment as an opportunity for consolidation, with weaker players exiting the market, which is seen as beneficial for the long-term health of the industry. The company maintains an internal target of achieving upwards of 15% ROCE, expecting significant improvement within two years as utilization and profitability improve across segments.