Control Print Limited Q1 FY27 Earnings Call Summary

Event Participants

Executives

2 Jaideep Barve, Shiva Kabra

Analysts

12 Ashutosh Singh, Badri Narayana Ravi, Chirag Barasara, Diya Jain, Kewal Shah, Parag Hinde, Pranay Shah, Raj Vyas, Saket Kapoor, Saloni Arya, Samarth Singh, Vinit Thakur

Financials & KPIs

Geographic & Segment Commentary

• Coding & Marking (India): Core engine contributing 95% of operating revenue. Q1 growth was soft (5% YoY) due to sluggish pipes/extrusion demand and Iran-driven polymer price volatility; management expects normalisation, with FY27 standalone C&M growth guided at 10-15%. A price increase plus surcharge was implemented to recover sticky input cost inflation; target margins of 60% gross/30% EBIT remain intact. Market leadership maintained in cement, plywood, sugar, and dairy verticals.
• Track & Trace: Generated ₹20 crores revenue in FY26 and is at breakeven/mildly profitable. Pilots are underway with three large pharma customers for innovative anti-counterfeiting solutions, moving through IQ/DQ/PQ qualification cycles. TAM of ₹500-600 crores could expand to ~₹1,500 crores if the government mandate extends from top 300 brands (2,000 SKUs) to top 1,000 brands plus antibiotics and psychotropic drugs (~25,000 SKUs).
• Packaging (V-Shapes/CP Italy): Demand is not the issue; execution and machine reliability are. Focus is on stabilising co-packaging, quality, and cost structure; manpower rationalisation and sales force additions are underway, with raw material manufacturing being localised in India. Expected to break even in H1 FY28.
• Subsidiaries/International: Markprint (digital printing) and Codeology (Print & Apply) are seeing revenue growth with localised solutions; Print & Apply targets a market where competitors generate ₹25-30 crores each annually. CP & MEA FZE is likely to break even in FY27. Exports remain 4-5% of revenue.

Company-Specific & Strategic Commentary

• V-Shapes Turnaround: Demand confirmed, but systems remain "too finicky" for product changeovers; 70+ legacy machines in the market are mostly non-operational. Management is prioritising machine reliability, operator training, and in-house production stability over sales volumes to protect long-term reputation.
• Final Capital Infusion: Tech transfer of V-Shapes IP to Control Print is in progress; this is expected to be the last cash infusion into the business, with ~₹65 crores invested to date.
• Assam UNNATI Facility: Project in limbo - government suspended incentives for new units; equipment for plastic film manufacturing already ordered, pending government reinstatement of the scheme.
• QR Code Regulation Expansion: Government proposal to expand QR code mandate from top 300 brands to top 1,000 brands plus antimicrobials/psychotropics remains a discussion paper; industry feedback and lobbying could delay or dilute implementation.
• Pricing Action: One price increase plus a surcharge (since the Iran war began) implemented to restore margins eroded by sticky supplier cost increases on qualified/imported products.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

V-Shapes Demand vs. Execution

• Question: Is the V-Shapes issue a demand problem or an execution problem; who are the potential customers and geographies? (Samarth Singh)
• Answer: Demand is real - food is the biggest but price-sensitive market, pharma has long gestation, and cosmetics/nutraceuticals are the two largest target industries with clear functional use cases. Legacy V-Shapes peaked at €12.5 million sales in 2021, but most of the 70+ installed machines are not running because the system is too fiddly, especially for product changeovers. Focus is on fixing execution before scaling sales. (Shiva Kabra)

Subsidiary Health & Investment Roadmap

• Question: What is the status of subsidiaries, how much more investment is needed, and what is the way forward? (Saket Kapoor)
• Answer: Markprint's digital printing technology has been localised and is selling actively in India; Codeology's Print & Apply gives access to a market where competitors do ₹25-30 crores each annually. CP Italy is streamlining costs, reducing back-office headcount, adding salespeople, and strengthening India-Italy coordination. CP & MEA FZE should break even this year. (Shiva Kabra)

Management Confidence & Shareholder Communication

• Question: If management says "if sales happen," what should investors conclude about confidence in the strategy? (Saket Kapoor)
• Answer: Control Print only recognises a sale on customer sign-off, not on intent or purchase orders. The standalone C&M business is the predictable engine with 60% gross/30% EBIT margin targets; the company will not sell machines that don't perform perfectly, even if it boosts short-term sales. Packaging losses should narrow with better co-packaging pickup. (Shiva Kabra)

Track & Trace Pharma Pilots

• Question: What is the update on the two large pharma companies previously at final negotiation stage? (Saloni Arya)
• Answer: Pilots are running with three pharma customers through IQ/DQ/PQ qualification cycles; each customer may have a different outcome and timeline. Track & Trace already generates ~₹20 crores annually and is breakeven; the innovative solutions are far more mature after 1.5-2 years of customer feedback. (Shiva Kabra)

Standalone Growth Slowdown Root Cause

• Question: Why only ~4% growth on standalone basis vs ~10% average over the last 12 quarters; what is the root cause? (Badri Narayana Ravi)
• Answer: Q1 is seasonally slower after March year-end; sluggish pipes and extrusion business reduced consumable offtake. Iran-driven polymer price volatility caused customer deferrals, but business was returning to normal by June. (Jaideep Barve, Shiva Kabra)

Margin Sustainability

• Question: Why the margin compression and what is the sustainable margin for FY27? (Vinit Thakur)
• Answer: C&M margins are essentially unchanged ex-FX; the PBT difference vs Q1 FY26 is largely attributable to foreign exchange fluctuations. The Q1 consumables sales dip should ease, and Q2-Q4 trends look positive. (Jaideep Barve)

V-Shapes Breakeven Timing & Assam Capex

• Question: Will V-Shapes break even in H2 FY27 or slip to FY28; is the Assam capex for co-packaging only? (Kewal Shah)
• Answer: The Packaging business will likely break even in H1 FY28, not H2 FY27. The Assam UNNATI facility was planned for co-packaging and core film manufacturing, but the project is in limbo pending government reinstatement of suspended incentives. (Shiva Kabra)

QR Code Anti-Counterfeiting & Pricing Model

• Question: Has the QR code copy problem been solved; how is per-code pricing structured? (Chirag Barasara)
• Answer: Counterfeiting has not been addressed - that is the basis of Control Print's unique solution. Pricing is per QR code with a bucket-based volume methodology: high-value/low-volume products cost more per code; high-volume/low-value products cost less. Equipment, AMC, and software are charged separately. (Shiva Kabra)

Pull-the-Plug Framework

• Question: At what point will you stop investing in underperforming businesses? (Ashutosh Singh)
• Answer: QRiousCodes is already breakeven/mildly profitable; international business should break even. The Packaging opportunity is too large to abandon - local material manufacturing and economies of scale provide margin levers. A tough call would be taken only if there is no path forward, but currently it's an execution issue, not an opportunity issue. (Shiva Kabra)

QR Code Mandate Expansion

• Question: With the government expanding QR code Track & Trace to vaccines, anti-cancer drugs, antimicrobials, and narcotics, do we expect substantial growth? (Parag Hinde via Vinay Pandit)
• Answer: The proposal expands from top 300 brands (2,000 SKUs) to top 1,000 brands (25,000 SKUs), potentially growing the market from ₹500-600 crores to ₹1,500 crores. However, it remains a discussion paper with industry feedback being collected; implementation would be two-phase, starting July next year at the earliest. Management is cautious on unannounced regulation. (Shiva Kabra)

Key Takeaway

Control Print's Q1 FY27 standalone operating revenue grew 5% YoY to ₹105 crores (consolidated: ₹115 crores, +3.6% YoY), with margins held despite a consumables slowdown in pipes and extrusion linked to Iran-driven polymer volatility and FX pressure on PBT. Management reaffirmed the core Coding & Marking engine (95% of revenue) with 10-15% FY27 growth guidance and 60% gross/30% EBIT margin targets, supported by a recent price increase and surcharge. Strategic focus remains on fixing V-Shapes machine reliability - the stated execution bottleneck - with packaging breakeven now guided to H1 FY28 and the IP tech transfer expected to be the final cash infusion (~₹65 crores invested to date). Track & Trace pilots with three pharma customers could benefit from a QR code mandate expansion from ~2,000 to ~25,000 SKUs, potentially taking the TAM from ₹500-600 crores to ₹1,500 crores. The Assam UNNATI project remains in limbo due to suspended government incentives. Watch points: V-Shapes execution progress, consumable demand recovery, and the regulatory timeline for QR code expansion.