Shaily Engineering Plastics Limited

Shaily Engineering Plastics delivered a robust Q1 FY26, with consolidated revenue growing 38% YoY to INR 246.7 crores. This growth was primarily fueled by the Healthcare segment, which saw a significant 181% YoY increase in revenue to INR 77 crores, now contributing 31% to the total revenue mix. The company's operational efficiency also improved, with the machine utilization rate rising to 49% from 39% in the prior year, and EBITDA margin expanded by 840 bps to 28.5%.

The company is undertaking a substantial capacity expansion, investing INR 125 crores in FY26 to add 50 million pens capacity. This expansion is being executed in two phases, with 25 million pens capacity coming online by Q2 FY26 and another 25 million by Q1 FY27, bringing the total effective capacity to 70-75 million pens. This new capacity is primarily for the IP-led Harmony and Neo pen platforms, with 50-60% of the total capacity expected to be backed by customer commitments.

Management provided insights into the GLP-1 market, noting that while oral medications are emerging, injectables are expected to dominate, especially in the generic space. They project oral medications to capture 20-25% of the market share in the foreseeable future. The company has started commercial manufacturing for GLP-1 pens, with a shift towards higher commercial supplies anticipated in Q3 and Q4 FY26, which is expected to positively impact realizations and margins.

The services business experienced margin pressure in the past due to increased employee costs for development. However, management expects margins to improve from Q1 FY26 onwards. The company's core objective in this segment is to target big pharma by developing breakthrough technologies and next-generation drug delivery systems, moving beyond current B2 products like pens, and focusing on innovation in areas beyond GLP-1.

While the US market accounts for 16% of revenue, management noted a 'fluid situation' with potential for delays, though no current cancellations. The launch of the Teriparatide product is awaiting regulatory approval, expected this calendar year. Additionally, the eye applicator product is projected to generate approximately INR 25 crores in business annually, with supplies expected to commence in Q4 FY26 after qualification.

Shaily Engineering Plastics has strategically opted for multiple 80 parts per minute lines for capacity expansion, deeming it more cost-effective than a single 300 parts per minute line due to a 4-5x cost difference. The company relies on business agreements and volume commitments, including take-or-pay contracts, to underpin its capacity additions, ensuring demand for the expanded manufacturing capabilities. This approach allows for flexibility and optimized capex utilization.