KNACK Q1 FY27 earnings call

Knack Packaging Limited delivered a robust Q1 FY27, with consolidated revenue growing 40.50% year-on-year to INR 2,647.71 million. This growth was primarily fueled by a 20.90% increase in sales volume, reaching 10,940 metric tons, alongside improved capacity utilization. The company's EBITDA surged by 53.14% to INR 591.73 million, expanding its margin to 22.35% from 20.65% in Q1 FY26, attributed to operating leverage and stringent cost management. Profit after tax also saw significant growth of 47.96% to INR 305.28 million, with PAT margin improving to 11.53%.

The company is strategically shifting towards higher-margin products, with pinch-bottom bags now contributing 22.5% to 23% of sales, up from 19-20% in the previous year. This shift is supported by recent investments in specialized machinery for these products. Exports remain a key growth driver, currently accounting for 55% of sales, with a 5-6% higher gross profit margin compared to domestic sales. Knack Packaging has expanded its international footprint to 74 countries in Q1 FY27, up from 71 in FY26, and continues to add new customers globally.

Knack Packaging is operating at a high overall capacity utilization of 91%. To support immediate growth and bridge the gap until its new plant is operational, the company has leased additional facilities, including one added just 15-20 days prior to the call. The new manufacturing facility, funded by IPO proceeds, is on track for commissioning by October 2027, which will boost total installed capacity to 70,000 metric tons per annum from the current 43,300 metric tons. This asset-light approach for semi-finished goods production allows for continued scaling without compromising quality.

The company emphasizes its strong customer retention rate of 90%, built on quality, commitment, responsiveness, and transparency. Packaging costs typically represent a small fraction (1-2%) of the end product price, giving Knack strong pricing power and enabling it to pass on raw material price fluctuations to customers. Long-term contractual relationships, such as with Cargill (contributing 12% of USA sales and growing from INR 40 crores in 2020 to INR 140 crores currently), provide revenue stability and growth. The company also reported a foreign currency gain of INR 1.6 crores in Q1 FY27.

Knack Packaging highlights its integrated manufacturing model, covering the entire value chain from tape extrusion to final bag conversion, which ensures quality control and efficiency. The company's early mover advantage in printed and laminated woven PP bags, introduced in 2004, continues to differentiate it. Ongoing investment in new product development and leveraging its 30 years of experience in forecasting and managing raw material procurement further strengthen its competitive position. The company also benefits from solar power, saving approximately 1.1% in electricity costs compared to Q1 FY26.