Gulshan Polyols Q1 FY27 earnings call

Gulshan Polyols Limited reported a record-breaking Q1 FY27, with consolidated revenue reaching INR646 crores, marking an 8% year-on-year growth. EBITDA surged by 135% to INR91 crores, leading to a significant expansion in EBITDA margin to 14.2% from 6.5% in the previous year. Profit after tax (PAT) also saw a remarkable increase of 307% year-on-year, reaching INR54 crores, reflecting strong operating leverage and cost discipline.

The ethanol business continues to be a primary growth engine, contributing INR426 crores in revenue and INR81 crores in EBITDA, with an 18% EBITDA margin. The company's installed capacity stands at approximately 26 crore liters per annum, and it has secured orders for 19 crore liters, with an additional 2 crore liters unofficially announced. Management is confident in securing further allocations to meet the FY27 target of 22 crore liters, supported by the government's sustained commitment to the ethanol ecosystem and E20 blending.

The grain processing business showed signs of recovery, reporting INR170 crores in revenue and INR8 crores in EBITDA, benefiting from improved market conditions and R&D initiatives to reduce energy costs. The mineral chemical business remained stable and consistently performing, generating INR24 crores in revenue and INR5 crores in EBITDA, with a healthy 23% EBITDA margin. This segment provides stable cash flows and long-term customer relationships, contributing to the overall portfolio's resilience.

The company's FY27 priorities include maximizing asset utilization, improving operational efficiencies, strengthening the balance sheet, and generating higher free cash flow, as the majority of recent capital expenditure is now behind them. Future growth, starting in FY28, will focus on expanding into specialty and import-substitute chemicals, as well as grain-based derivatives, aiming for businesses with strong entry barriers and higher value addition. The on-site plant at Trident is expected to be operational by the end of FY27, generating additional revenue.

Feedstock availability remains favorable, with continued access to FCI rice at attractive prices and increasing domestic maize production. While Q1 saw conducive raw material prices, management anticipates temporary margin pressure in Q2 due to higher grain prices, as Q2 is seasonally weaker for procurement before the new Kharif crop. The company manages volatility by stocking up during harvest seasons, though inventory limits are 40-45 days due to high volumes (3,000 tons/day across 4 plants).

The government's E20 blending target has been achieved and is not expected to be rolled back, saving INR40,000 crores in foreign exchange annually. The E30 target is set for 2030, with any current protests viewed as temporary. Discussions are ongoing regarding opening ethanol exports to neighboring countries, which, if materialized, would significantly boost demand and diversify the buyer base beyond domestic government mandates, although this has not yet started.

For FY27, Gulshan Polyols maintains its consolidated revenue guidance of INR2,600 crores, with EBITDA margins targeted at 10-11% and PAT margins at 5-6%. The strong Q1 performance, with a 14.2% EBITDA margin, was attributed to exceptional market conditions. Management emphasized that the full-year guidance is conservative, acknowledging seasonal fluctuations and aiming to outperform these targets.