Why Manali Petrochemicals Share Price is Falling

The petrochemical sector in India is growing steadily, driven by demand from industries like automotive, construction, and pharmaceuticals.

Petrochemical products are essential for manufacturing everyday items, and India's reliance on imports for raw materials, especially crude oil derivatives, impacts production costs.

The sector also faces fluctuations due to global price volatility and regulatory changes, making it challenging for companies to maintain stable margins.

Manali Petrochemicals is a key player in this sector, producing products like propylene glycol and polyether polyol, which are used in pharmaceuticals, automotive, and consumer goods.

Recently, Manali Petrochemicals share price came under investor focus as it dropped by 6.5% following the announcement of its quarterly results.

Let's review the company's latest financial performance to understand why Manali Petrochemicals share price is falling.

Disappointing Quarterly Results

In Q2 FY25, Manali Petrochemicals reported a significant decline in total income on a standalone basis. It posted total income of Rs 1.7 billion (bn) compared to Rs 2.2 bn reported in the corresponding quarter of the last year.

This dip in income is largely attributed to increased competition from imported materials sold at lower prices. The influx of cheaper imports has pressured revenue, as the company struggles to maintain market share at profitable levels.

For the quarter under consideration, the company incurred a loss of Rs 140.8 million (m), a stark contrast to the Rs 47.3 m profit it achieved in the previous quarter.

This shift from profit to loss reflects the dual challenges of heightened raw material costs and intense competition, impacting the company's profitability. Rising input costs for key raw materials further limited margin recovery, leading to these losses.

Even on a consolidated basis, the company showed a dull picture.

For the six months ending 30 September 2024, total income reached Rs 4.8 bn, down from Rs 5.9 bn year-over-year (YoY). This decrease reflects ongoing headwinds in the sector, as lower income from the domestic business offsets performance gains in its overseas subsidiaries.

However, despite reduced income, the company managed to report a consolidated profit before tax (PBT) of Rs 184.2 m, down from Rs 208.2 m the prior year, highlighting operational resilience, particularly through contributions from its international units.

Profit after tax (PAT) on a consolidated basis reached Rs 132.2 m, a decrease from Rs 149.7 m, reflecting reduced margins but underscoring the stabilising effect of the overseas operations.

Manali Petrochemicals share price decline of 6.5% following its quarterly results can be traced to the decline in standalone earnings, increased competition from imports, and rising raw material costs.

What Next?

The recent quarterly performance underscores the ongoing macroeconomic pressures facing Manali Petrochemicals, especially as it grapples with rising raw material costs and competition from cheaper imports.

This challenging environment has put the company in a difficult position, particularly given its inability to pass on rising input costs to customers. These factors have collectively affected its profit margins, reflecting the need for strategic adjustments.

Looking ahead, Manali Petrochemicals is adopting a balanced approach. The company plans to prioritise cost efficiencies to better manage operational expenses, which could help stabilise margins in the current competitive landscape.

Despite the domestic challenges, the strong contributions from its overseas subsidiaries have been a bright spot, supporting the bottom line and demonstrating the potential of its diversified business structure.

These subsidiaries are expected to play an increasingly important role in driving Manali's long-term performance, providing a crucial counterbalance to domestic market pressures.

In terms of expansion, reportedly, Manali Petrochemicals is progressing with plans to broaden its product portfolio and increase production capacities.

With both greenfield and brownfield projects in the pipeline, such as the propylene glycol and polyester polyol plants, Manali aims to strengthen its presence in high-demand sectors like pharmaceuticals and consumer goods.

The planned West India greenfield expansion for polyols, targeting 30,000 tonnes per annum, also signals a strategy to tap into local markets more effectively, reducing dependency on imports and supporting better supply chain control.

The company's investment in renewable energy and RLNG-based systems aligns with a broader strategy for cost savings and sustainability, and this shift may gradually reduce reliance on traditional energy sources, optimising operational costs over the long term.

How Manali Petrochemicals Share Price has Performed Recently

In the past five days, Manali Petrochemicals share price tumbled 6.7%. In the past month its share price is down 10.5%.

In 2024, so far its share price is down 13.7% and it has slipped 2.9% in the last year.

The stock touched its 52-week high of Rs 105 on 10 July 2024 and a 52-week low of Rs 55.9 on 28 March 2024.

About Manali Petrochemicals

Incorporated in 1986, Manali Petrochemicals Limited manufactures and sells Propylene Oxide, Propylene Glycol and Polyols, which are used as industrial raw materials.

Located in Chennai, the company is the only domestic manufacturer of Propylene Glycol. Also, it is the first and largest Indian manufacturer of Propylene Oxide which is the input material for the aforesaid derivative products

For more details about the company, you can have a look at Manali Petrochemicals factsheet and quarterly results on our website.

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