Knack Packaging Ltd (KNACK) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Good evening, everyone. Welcome to our quarterly earnings call. We will begin shortly.
Moderator: Ladies and gentlemen, good day and welcome to the Q2 and H1 FY '27 Conference Call of Knack Packaging Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. We are pleased to have with us the senior management team led by our Chairman and Managing Director, Mr. Alpesh Tulsi Bhai Patel and our Chief Financial Officer Dr. Ajay Kumar Dubey, who will share his perspective on the company's performance for the quarter and key business developments during the period. Before we begin, I would like to remind everyone that certain statements made during this call may be forward-looking in nature. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. I now hand the conference over to management. Thank you, and over to you.
Alpesh Tulsi Bhai Patel (Knack Packaging Ltd): Good afternoon, and thank you all for joining Knack Packaging's quarter two and half year one, financial year '27 earnings call. On the call, I am joined by Dr. Ajay Kumar Dubey, our Chief Financial Officer and Adfactors PR, our investor relations partner. I am pleased to share that quarter two FY '27 was a stable and strong growth for Knack Packaging. In quarter two FY '27, we delivered our highest ever quarterly revenue. On a consolidated basis, the revenue from operations rose 52.5%. EBITDA rose 29.9% and PAT rose 21.2%, all on year-on-year basis. Talking about the industry, the first half of the year was a challenging period from an input cost perspective. The conflict in West Asia disrupted supplies and price of polypropylene. Our key raw material rose more than 50% within few weeks, and the prices remained elevated throughout the quarter. At the same time, disruption in the Red Sea increased the freight cost, which matters to us as an exporter to 75 countries. These factors exerted pressure on the industry as an increase in input and logistic costs outpaced the pace of corresponding selling price revisions. Knack was impacted by this industry-wide cost pressure. However, with our three decades of experience, long-standing relationship with our vendors and strong procurement ecosystem, we were able to mitigate the price rise. Talking about our EBITDA, it grew on absolute basis. However, the EBITDA margin was impacted in quarter two FY '27. About 45 to 50% of our customers are on conversion cost model where the bag price moves with the polymer price, but this price revision take effect take effect and we have already revised prices with our customer and initiated cost pass-through. And we expect this to reflect in our realizations
Alpesh Tulsi Bhai Patel (Knack Packaging Ltd): and from quarter three FY '27 onwards subject to market conditions stabilization. Despite this, we see immense growth in the industry. Our growth ahead lies in our competitive strength. We have focused on three key pillars which are product innovation, integrated manufacturing facility, and our long-term customer relationship. We work closely with major companies in food, pet nutrition, fertilizer, and other 25-plus industries, and many of our customers have grown with us. Packaging typically accounts for only about 1% to 2% of our customers' end product price, yet it is often the first physical touch point between a brand and its consumer, and can influence the purchase decision, especially in the competitive categories. Once supplier has proven its reliability and consistency, customers rarely risk a change. As a result, our customer stickiness is very high. As on 30th September 2026, we served more than 2,040 2,040 customers with 13,974 SKUs, up from 2,000 customers and 13,500 SKUs at the end of Q1 FY '27. Our export market contributed a significant part of our revenue during the half, as of September 2026 and we sold to 75 countries across six continents, up from 74 countries at the end of Q1 FY '27 and 71 countries in FY '26. Our exports included US, Europe, Asia, and Africa. Coming to H1 FY '27, our top line growth was driven by significantly higher export volume, deeper wallet share with existing global FMCG, pet food, and agri customers, and addition of new international accounts. We saw sustained demand from our premium bags, both domestically and in our export markets. Importantly, we began fulfilling orders from new customers ahead of our next phase of capacity expansion. As a recent update, on 2nd October 2026, we announced a new order and three-year contract renewal worth about INR 150 crore per year from an international customer, one of the largest private corporation in the world, from the pet food and animal nutrition packaging, including in the United States. This renewal underscores our reliability and our product quality at a global scale. Looking ahead to the rest of FY '27, our focus will be on profitable growth. Our priority is to restore our EBITDA margin as pricing adjustment flow through from Q3 FY '27, and then to improve it further by increasing the share of value-added products, controlling costs, leveraging our integrated setup. We also scaling up the Knack Siam JV in Mexico towards breakeven and building our order book more stronger. Now, I will hand over to Dr. Ajay Dubey, our CFO, who will provide the detailed financial highlights for Q2 and H1 FY '27.
Ajay Kumar Dubey (Knack Packaging Ltd): Thank you, sir. Good afternoon, everyone. I will now walk through our consolidated financial performance for Q2 FY '27 and H1 FY '27. Q2 performance, revenue for Q2 performance '27, our consolidated revenue from operation was INR 294.76 crores, compared with the INR 193.26 crores in Q2 FY '26, a year-on-year growth increase of 52.5%. This growth was driven by the significantly higher export volume, deeper wallet share with the existing customers, new international accounts, and ramp-up of recently added capacity. About EBITDA and margins, our EBITDA for Q2 FY '27 was INR 49.77 crores, compared with INR 38.30 crores in Q2 FY '26, up 29.9%. The EBITDA margin was 16.35% against 19.25% a year ago, a decline of the 285 basis points. This reflected industry-wide cost pressures. Polymer price rose with the crude oil and freight costs increased because of disruption in the Red Sea. Pricing adjustment with our customers follow up with a lag of 1
Ajay Kumar Dubey (Knack Packaging Ltd): quarter, and we expect margin to recover in from quarter three financial year 27. About the PAT, profit after tax for quarter two financial year 27 was 25.02 crores versus 20.64 crores in quarter two financial year 26, up 21.2%. The PAT margin for quarter was 8.22% compared with 10.34%, a decline of 212 basis points. Apart from this pressure on EBITDA, PAT was affected by 2.62 crores share of loss of Mexico JV in quarter two, which I explain in the half year numbers. Basic EPS of the quarter was 2.0 7. So now, H1 performance I will just review. So, revenue of H1 financial year 27 consolidated revenue from operation was 569.11 crores, up 47.2% from 386.73 crores in H1 financial year 26. EBITDA and margin, EBITDA for H1 financial year 27 was 108.94 crores compared with 76.98 crores in H1 financial year 26, up 41.5%. The EBITDA margin for half was 19. 14% against 19.91% a year ago. ROE stood at 19.42%, with ROC at 28.76%. The moderation in ROE and ROC was expected outcome of the IPO, which expanded to capital base. The funds were progressively deployed towards the capital expansions and growth initiatives. Both ratios were expected to improve in the coming quarters. About the PAT, profit after tax for H1 financial year 27 was 55.55 crores compared with 41.30 crores in H1 financial year 26, up 34.5%. The PAT margin was 9.76% against 10.68% in H1 financial year 26. PAT for half included a loss of 6.06 crores from the Siam-Knack JV in Mexico. The JV is scale-up phase, and this loss flowed directly into the consolidated PAT with no matching revenue. As the JV reach breakeven, this tract will reverse the support of our PAT margin. Key ratios about, our balance sheet strengthened further, debt-equity ratio improved to 0.26x from 0.68x a year ago, and our working capital cycle was 75 days against 76 days in quarter two financial year 26. With this, I open for floor for a question-answers. Thank you.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, please press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Bhavna Israni from Ambit Asset Management. Please go ahead.
Bhavna Israni (Ambit Asset Management): Hello, am I audible?
Alpesh Tulsi Bhai Patel (Knack Packaging Ltd): Yes madam, you are audible.
Bhavna Israni (Ambit Asset Management): Yes, yes. So, good morning sir. So, just wanted to know how much volume growth we have done in this quarter and what is our current plant utilization?
Ajay Kumar Dubey (Knack Packaging Ltd): So basically in last quarter we have closed 10,940 metric tons and this quarter we closed 11,252, which is 3% growth from the quarter. Basically our plant is almost utilized 90-91% capacity.
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