Pondy Oxides & Chemicals Q1 FY26 earnings call

Pondy Oxides and Chemicals Limited (POCL) achieved its best-ever quarterly performance in Q1 FY26, with revenue growing 36% year-on-year (YoY) to INR 596 crores. EBITDA surged 82% YoY to INR 43 crores, resulting in record margins exceeding 7%. PAT also saw a significant increase of 90% YoY to INR 28 crores, with margins reaching 4.6% (up from 3.3% in Q1 FY25). This robust financial performance was driven by increased production, sales, and improved realizations across both lead and copper segments.

The company successfully commenced commercial production of Phase 1 of its lead capacity expansion (36,000 TPA) at the Thervoykandigai plant in Q1 FY26, operating at 40-45% capacity utilization. This utilization is projected to increase to around 70% in the upcoming quarters. Phase 2 of the lead expansion, adding another 36,000 TPA, is scheduled for commissioning in the second half of FY26 with an estimated capital expenditure of INR 20 crores. Overall, POCL targets an operating capacity of 120,000 tons for the current financial year.

The significant expansion in EBITDA margins was attributed to two primary factors: enhanced operational efficiencies and a higher contribution from value-added products (VAP). Management indicated that 1-1.5% of the margin increase stemmed from operational improvements, including modifications in processes and equipment over the past few quarters. An additional 0.5-1% was contributed by a higher quantum of VAP sales, with the lead segment's VAP mix reaching 71% in Q1 FY26, compared to 50% YoY.

POCL is actively diversifying its product portfolio. The copper segment saw its capacity utilization more than double in Q1 FY26, with volumes reaching 1,107 metric tons. The company targets copper revenues of INR 650-700 crores at peak utilization and aims for 4-4.5% margins in the current year. While the aluminium segment experienced a slight delay, management expects to report revenue numbers in Q2 FY26. The plastics segment, currently facing an EBIT loss due to administrative overheads from leased premises, is projected to become profitable from next quarter by relocating to owned facilities, which will save approximately INR 2 crores annually.

In Q1 FY26, POCL invested INR 8 crores in capital expenditure and plans an additional INR 42 crores for the remaining nine months of FY26, totaling INR 50 crores for the year. This capex is primarily directed towards Phase 2 of the lead expansion and setting up R&D facilities for value-added products. As of June 30th, the company maintained a strong financial position with INR 52 crores in cash at bank (including QIP and warrant proceeds) and a net debt of less than INR 100 crores, indicating prudent capital management.

Management highlighted favorable regulatory tailwinds, including the enforcement of BWMR (Battery Waste Management Rules) and anticipated changes in the Reverse Charge Mechanism (RCM) and GST, which are expected to formalize the scrap market and benefit organized players. POCL employs a hedged model for raw material procurement, sourcing approximately 80% from imports and 20% domestically, which helps mitigate price volatility. Despite discussions about global restrictions on scrap exports, management believes countries lack internal recycling capacity, and India's growing organized sector balances supply.

POCL outlined ambitious long-term strategic objectives for 2030, targeting over 15% value growth and revenue CAGR, along with more than 20% profitability growth. The company aims to achieve EBITDA margins above 8% and a Return on Capital Employed (ROCE) greater than 20%. A key part of this strategy involves generating over 60% of revenue from higher-margin value-added products and implementing a 20% plus reduction in energy consumption, reinforcing its commitment to operational efficiency and environmental responsibility.