Sumitomo Chemical India Q2 FY27 Results Analysis: EBITDA Margin Compresses 297 bps, PAT Slips 11.55% (SUMICHEM)

Sumitomo Chemical India Ltd's Q2 FY27 numbers came in soft, with revenue of Rs. 907.31 Cr (-2.42% YoY) and PAT growth of -11.55% YoY. Here's a quick read of what worked, what to watch, and what management said.

Quarter Snapshot

Q2 FY27 revenue fell 2.42% YoY to Rs.907.31 Cr — below even a weather-depressed base — while EBITDA margin compressed 297 bps to 20.47% and PAT fell 11.55%, missing management's open-ended guidance that margin and PBT parameters would not decline. Gross margin fell 243 bps on input-cost inflation despite inventory drawdown, and reported H1 PAT growth of +4.51% was entirely from a Rs.26.90 Cr insurance gain (normalized −1.13%). Cash conversion (CFO/PAT 1.20x), a debt-free balance sheet, and on-track Bhavnagar/Tarapur capex for Q4FY27 remain the offsets, but matching FY26 EBITDA requires +7.77% YoY H2 growth, rated Difficult.

Key Investment Insights

Key Positives

• H1 operating cash flow of Rs.446.83 Cr at 1.20x PAT and 1.07x EBITDA; free cash flow of Rs.414.40 Cr
• Balance sheet effectively debt-free with total borrowings of Rs.1.42 Cr and Rs.52.10 Cr cash plus large investments
• H1 EBITDA margin of 21.26% remains above the FY26 full-year margin of 20.72%
• Bhavnagar (Rs.55 Cr) and Tarapur (Rs.10 Cr) capex on track for Q4FY27 completion; CWIP rose to Rs.20.66 Cr from Rs.2.53 Cr at March
• Employee costs grew just 0.94% YoY and other expenses 0.10% YoY, both below revenue decline — compression is a gross-margin event, not an opex event

Risk Factors

• Revenue fell 2.42% YoY to Rs.907.31 Cr, below even a weather-depressed base quarter that management said should be ignored
• EBITDA margin compressed 297 bps YoY to 20.47%, missing management's open-ended guidance that margin and PBT parameters would not decline
• Gross margin fell 243 bps YoY to 40.66% as COGS ratio rose to 59.35% of revenue despite inventory drawdown
• Reported H1 PAT growth of +4.51% was entirely from the Rs.26.90 Cr insurance-claim gain; normalized H1 PAT declined 1.13%
• Matching FY26 full-year EBITDA of Rs.670.87 Cr requires H2 EBITDA of Rs.251.81 Cr, +7.77% YoY in the seasonally weaker half — rated Difficult
• Management's claim that price increases were being passed through was contradicted this quarter by the 243 bps gross-margin decline