Knack Packaging Q2 FY27 Earnings Call — Analysis (NSE: KNACK)
Knack Packaging delivered 52.5% YoY revenue growth in Q2FY27 driven by export volumes, but EBITDA margin contracted 285 bps to 16.35% due to polymer inflation and freight spikes, with pricing pass-through expected to restore margins from Q3.
Result quality: watch — Margin pressure. Management sentiment: optimistic.
The take
Q2FY27 Revenue from Operations ₹294.76 Cr ( +52.5% YoY ) . Guidance raised — Q3FY27 ebitda margin recovery above 16.35% . New story: IPO-funded capacity expansion .
Results
Revenue grew 52.5% YoY to ₹294.76 Cr while EBITDA rose 29.9% to ₹49.77 Cr, with EBITDA margin contracting 285 bps to 16.35% and PAT rising 21.2% to ₹25.02 Cr.
Financial highlights
| Metric | Value | Change | Basis |
|---|---|---|---|
| Revenue from Operations | ₹294.76 Cr | +52.5% | yoy · Q2FY27 · Q2FY26 ₹193.26 Cr |
| EBITDA | ₹49.77 Cr | +29.9% | yoy · Q2FY27 · Q2FY26 ₹38.30 Cr |
| EBITDA Margin | 16.35% | -285bps | yoy · Q2FY27 · Q2FY26 19.25% |
| Profit After Tax | ₹25.02 Cr | +21.2% | yoy · Q2FY27 · Q2FY26 ₹20.64 Cr |
| PAT Margin | 8.22% | -212bps | yoy · Q2FY27 · Q2FY26 10.34% |
| Volume (Metric Tons) | 11,252 MT | +13.3% | yoy · Q2FY27 · Q2FY26 9,927 MT |
| H1 Revenue from Operations | ₹569.11 Cr | +47.2% | yoy · H1FY27 · H1FY26 ₹386.73 Cr |
| H1 EBITDA | ₹108.94 Cr | +41.5% | yoy · H1FY27 · H1FY26 ₹76.98 Cr |
| H1 PAT | ₹55.55 Cr | +34.5% | yoy · H1FY27 · H1FY26 ₹41.30 Cr |
Guidance
Management expects EBITDA margins and per-kg realizations to recover starting Q3FY27 as cost pass-through takes effect and Mexico JV approaches operational breakeven.
What management committed to
- We expect margin to recover from Quarter 3 FY27 onwards as pricing adjustments flow through. — above 16.35%, Q3FY27
- We expect volume growth to continue, supported by the ramp-up of contracted orders including the renewed international contract. — increase over 11,252 MT, Q3FY27
- We are expecting to achieve approximately 50% utilization of the newly added 5,040 MTPA capacity in Q3 FY27. — 50% of 5,040 MTPA, Q3FY27
- The Sayem Knack JV in Mexico is expected to reach breakeven in Q3 or Q4 FY27. — breakeven, Q4FY27
- We are targeting to get back to EBITDA per kg of approximately INR54 in Q3 or Q4 FY27. — INR54 per kg, Q4FY27
Key themes
Margin recovery via price pass-through and capacity expansion
How the narrative shifted
- Premium pinch-bottom mix shift: Share dipped to 21% from 22.5-23% due to customer conversion lags, but the focus and bullish stance remain unchanged.
- IPO-funded capacity expansion: Added concrete detail on rental plant ramp-up; timeline unchanged.
- Raw material cost volatility & pass-through lag: This is a new macro headwind not present in the prior narrative; management is defensive but confident in recovery.
- Mexico JV scale-up to breakeven: New thread; JV losses were not a prior narrative focus but are now discussed as a temporary factor.
Operational commentary
- Announced 3-year contract renewal and new order worth ~₹150 Cr per year on October 2, 2026, with a major international pet food and animal nutrition corporation
- Customer base expanded to 2,040+ accounts with 13,974 SKUs as of September 30, 2026, serving exports across 75 countries across 6 continents
- Current plant capacity utilization is running at 90%–91%, with 11,252 MT produced/sold in Q2FY27
- Added 5,040 MT capacity in August 2026 via a leased facility which is ramping up to ~50% utilization in Q3FY27
- Pinch-bottom bags contributed 21% of Q2 revenue (up from 17%–18% last year); management is aggressively converting regular PLWPP bag clients to premium pinch-bottom bags
- Ongoing major capacity expansion to scale total installed capacity from ~42,000 MT to 70,000–72,000 MT (adding 30,000–32,000 MT) targeted for commercial production by October 2027
- Sayem Knack JV in Mexico is operating at 70–90 MT/month against 400 MT/month installed capacity, targeting breakeven threshold of 120–130 MT/month in Q3/Q4 FY27
Analyst Q&A
Q. What drove the gross margin and EBITDA per kg decline from ₹54 to ₹45 per kg, and when will it recover?
Polymer prices jumped 25%-30% within weeks due to West Asia conflicts. Because production takes 1-1.5 months and contracts adjust on a 1-quarter lag, Q1 priced orders were fulfilled with high-cost Q2 materials; margins should recover in Q3 and Q4.
Q. What is the capacity and utilization breakdown for the high-margin pinch-bottom machinery?
Pinch-bottom represents 21% of revenue. The two newly added machines operate at 60%-70% utilization as customers convert filling setups. Overall conversion capacity is expanding towards 32,000 MT out of 72,000 MT post-expansion.
Q. Why did operating cash flow decline in H1 from ₹39 Cr to ₹22 Cr despite profit growth?
Operating cash flow was impacted by ₹26.9 Cr higher inventory value due to polymer price inflation and scaling, plus ₹55 Cr higher export receivables which have longer credit cycles than domestic sales.
Q. When will the Mexico greenfield JV reach breakeven and stop dragging consolidated PAT?
Installed capacity is 400 MT/month and current run-rate is 80-90 MT/month. Breakeven occurs at 120-130 MT/month, which management expects to reach in Q3 or Q4 FY27.
Research and educational content only. Not investment advice.