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Filatex India Limited Q1 FY25 Earnings Conference Call Summary
Call Details • Date: August 9, 2024 • Submission Date: August 13, 2024 • Participants: • Mr. Madhu Sudhan Bhageria (Chairman and Managing Director) • Mr. Madhav Bhageria (Joint Managing Director) • Mr. Ashok Chauhan (Chief Visionary Officer) • Compliance: SEBI regulations for disclosure
Performance Overview • Sales Volume: • Q1 FY25: 95,962 metric tons (down from 100,211 metric tons in Q1 FY24) • Financials: • Operating EBITDA: INR 61 crores (up 35%) • Net Profit: INR 32 crores (up from INR 18 crores year-on-year) • Challenges: • Margins under pressure due to: • Subdued domestic demand • Competition from Chinese imports • Global economic challenges (geopolitical tensions, fluctuating crude prices)
Sustainability Initiatives • Focus on sustainability in textiles: • R&D in recycling polyester • New recycling facility expected by December 2025 • Goal: 30% energy from renewable sources
Future Plans and Investments • Production Updates: • Trial production of cationic yarn has begun • Land procured for a new plant • Capex Guidance: • INR 300 crores for recycling • INR 125 crores for expanding polymer facilities over the next two years • Market Outlook: • Optimism for stronger second half of FY25 due to seasonal demand and potential garment export shifts to India
Investor Inquiries • Imports: • Yarn imports decreased; fabric imports continue • Government working on minimum import prices for additional HS codes • EBITDA Margins: • No improvement expected in H1; projected around 9% in H2 • Export Viability: • Exports limited to about 2% due to cheaper raw materials in China • Government support needed for fabric export growth • Current Margins: • Current EBITDA margins around 5-6%, slight declines expected, with improvements anticipated in Q3 and Q4 • Cationic Yarn Production Impact: • Initial production small, unlikely to significantly affect Q2 margins • Future Debt: • No new debt planned; potential INR 150 crores for recycling plant in FY26, leveraging state government interest subsidies
Conclusion • Call concluded with expressions of gratitude and hope for future discussions.
Submission Details • Date of submission: May 8, 2024 • Earnings call date: May 2, 2024 • Directed to: National Stock Exchange of India and BSE Limited • Key personnel: • Mr. Madhu Sudhan Bhageria (Chairman and Managing Director) • Mr. Madhav Bhageria (CFO)
Financial Performance • Decline in revenue, EBITDA, and net profit compared to the previous quarter. • Year-on-year profitability showed improvement. • Impact of global events (COVID-19, Russia-Ukraine conflict) on the textile fibers market. • Increased competition from low-cost imports, especially from China. • Challenges in the Indian polyester industry due to higher production costs and substandard imports. • Positive outlook due to domestic capacity expansions and government initiatives (e.g., PLI scheme).
Sustainability Initiatives • Transitioning to a circular economy in the textile industry. • Development of in-house R&D for recycling textile waste. • Operational pilot plant with plans for a larger facility (75 tons/day) by December 2025. • Global brands willing to pay a premium for recycled products.
Market Environment and Challenges • No antidumping duty but a minimum import duty on fabrics to combat low-priced imports. • Higher PTA costs affecting export competitiveness. • Anticipated improvement in domestic margins despite initial labor shortages.
Capacity Expansion and Financial Projections • CapEx of INR 42 crores for new capacity. • Projected 5-7% revenue growth in FY '25, driven by improved margins. • Expected EBITDA margins to improve by 40-50% in FY '25 and another 40% in FY '26.
Strategic Insights • Global filament yarn production around 50 million tons; no new capacity from China for two years. • Need for a 13-14% return on turnover to justify new investments. • Plans for a recycling project with expected turnover of INR 275-280 crores and a 40% EBITDA margin.
Future Outlook • Anticipated margin improvements by mid-2024. • Sustainable margins projected between 11-14%, depending on market conditions. • Potential for Indian manufacturers to export higher-value products. • Stable debt levels with no new loans expected, except possibly for recycling projects.
Conclusion • The call concluded with a follow-up meeting scheduled for July regarding Q1 FY '25 results.
Filatex India Limited Update Summary
Listing Details • Communicated with NSE and BSE on February 20, 2024. • Security symbol: "FILATEX" (NSE), Security code: "526227" (BSE).
Q3 FY24 Earnings Conference Call (February 16, 2024) • Performance Overview: • Production volume: 102,924 metric tons (slight decrease). • Sales volume: 100,745 metric tons (decrease). • Revenue: ₹1,083 crores (down from ₹1,108 crores). • Operating profit (EBITDA): ₹75 crores (39% increase). • Net profit: ₹35 crores (up from ₹23 crores in Q2 FY24).
• Challenges: • Global geopolitical tensions and inflation affecting the textile industry. • Competition from low-priced imports, especially from China, leading to margin erosion.
• Opportunities: • Potential for Indian manufacturers to meet global demand for synthetic fibers. • Government support through the Production-Linked Incentive (PLI) scheme and mega textile parks.
Industry Insights • Growing acceptance of synthetic fiber garments. • Anticipated addition of 2.2 million tons of PTA capacity by 2025. • Domestic demand for synthetic fibers growing at an 8% CAGR.
Company Initiatives • Expanding capacity for cationic chips to enhance margins. • Investing in renewable energy to reduce costs. • Developing a chemical recycling process for polyester waste, with a larger plant planned by September 2025.
Capacity and Profitability • Current capacity utilization near 100%. • Plans to adjust product mixes for future demand. • Need for price increases (Rs. 3 to Rs. 4) to achieve healthy margins.
Pricing Strategy and Financial Outlook • Target price of Rs. 12 to Rs. 14 per kg needed to support CAPEX. • Minimal current production from the recycling project, with potential EBITDA of ₹50 crores post-plant operation. • Managing a debt of ₹250 crores with no immediate repayment plans.
Market Challenges • Slowdown in buying due to MSME payment issues affecting the supply chain. • Anticipation of pent-up demand once payment issues are resolved, expected by April.
Conclusion • Optimism about future revenue from cationic chip plant and recycling project despite current market challenges. • Next conference call scheduled for Q4.
Filatex India Limited Q3 FY23 Earnings Conference Call Summary
Key Highlights • Date of Call: February 9, 2023 • Submission: Transcript submitted to National Stock Exchange and BSE on February 14, 2023.
Financial Performance • Production Volume: 99,969 metric tons • Sales Revenue: Rs. 1,070 crores • Net Profit: Decline attributed to: • Exchange losses from a weakening rupee • Increased competition from low-priced Chinese imports
Market Insights • Downstream Demand: Robust with full capacity utilization. • Chinese Imports: • Increased to ~200,000 tons in the first nine months of FY, up from <100,000 tons the previous year. • Recent decrease of 30-40% due to rising prices in China. • Exports: Increasing, allowing Filatex to compete in export markets.
Future Projections • Margin Improvement: Expected as Chinese imports decrease post-Zero-COVID policy relaxation. • Production Expansion: • Cautious expansion of polyester capacity. • Anticipated additional revenue of ~Rs. 300 crore by FY25. • Cost Savings: Projected annual savings of Rs. 10-12 crore from hybrid wind and solar projects and a new captive power plant.
Operational Updates • Recycling Plant: Progress towards regular production. • Working Capital: Strong position, minimal reliance on raw material imports from China.
Industry Trends • Shift from Cotton to Polyester: • Inquiry by Niraj Mansingka regarding blending trends. • Bhageria noted lack of insight as Filatex does not produce polyester fiber. • Significant price difference: Polyester at Rs. 100 vs. raw cotton over Rs. 225.
Conclusion • Bhageria expressed confidence in demand absorbing new capacity from competitors and thanked participants, looking forward to the next quarter.