Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Filatex India Ltd (BOM:526227, Financial) reported a year-on-year increase in EBITDA from INR 232 crores to INR 239 crores.
- The company achieved a net profit increase from INR 89.9 crores to INR 110.7 crores year-on-year.
- Production increased from 380,000 metric tons to 406,000 metric tons year-on-year.
- The company is adding a 70 tons per day capacity to produce polyester chips, expected to boost margins by INR 15 crores annually.
- The Indian government has announced a PLI scheme and mega textile parks, which are expected to benefit the industry.
Negative Points
- Revenue for Q4 FY24 decreased from INR 1,083 crores in Q3 FY24 to INR 1,026 crores.
- EBITDA for Q4 FY24 decreased from INR 74.3 crores in Q3 FY24 to INR 64.8 crores.
- Profit before tax for Q4 FY24 slightly decreased from INR 47.7 crores in Q3 FY24 to INR 47.2 crores.
- The company faces significant competition from cheaper Chinese imports, impacting margins.
- Interest costs have fluctuated significantly due to currency exchange impacts on ECBs.
Q & A Highlights
Q: Congratulations on a good set of numbers in a challenging environment. My question is on fabric and yarn import while there has been an anti-dumping duty which has been levied, just wanted to understand how is the domestic business environment? Are we seeing some improvement in the margin? And sequentially, can we expect improvement in the margin as we progress towards FY25?
A: Regarding the anti-dumping duty, there is no anti-dumping duty. The government has put a QCO on yarns, and for fabrics, they have set a minimum duty value of $3.5 per kg. As for exports, it's difficult to compete with China due to their $70 advantage in PTA costs. However, domestic margins have started improving slightly and are expected to improve more after the first quarter of FY25.
Q: There has been a significant dip in interest costs in Q4. Any reason for this decline?
A: We have some ECBs in euros which are unhedged. Last quarter, there was a currency loss, but this quarter, there was a currency gain, leading to lower interest costs.
Q: On the capacity expansion, we have a 70-ton capacity per day. What will be the CapEx for this capacity?
A: The CapEx has been around INR40 crores to INR42 crores, and it is expected to be commercialized by this month.
Q: Regarding the recycling plant expansion, the cost has escalated from INR150 crores to INR300 crores. Any particular reason for this?
A: Initially, we planned to use pet bottles and yarn waste, but now we have developed technology to use fabric waste, which involves more costly machinery. This change has led to the increased cost.
Q: Can you let me know the acquisition cost of the Texfil acquisition?
A: The acquisition cost is INR20,000.
Q: What EBITDA margin or EBITDA per metric ton do you expect to achieve on a full-year basis in FY25 and FY26?
A: For FY25, we expect our EBITDA to improve by at least 40% to 50%, and for FY26, another 40% over and above FY25.
Q: What are the assumptions behind the expected margin improvements?
A: The global demand for filament yarn is increasing, and China is not adding new capacity for the next two years. This will create a global demand, and margins will improve to levels that justify new investments.
Q: Can you throw some more light on our realizations currently in the industry and both domestic and export, if any? And how do we see them in the coming quarters?
A: Realizations are similar to Q3 and Q4. However, we expect improvements from Q2 onwards as labor shortages and other issues get resolved.
Q: What is the sustainable margin that we can maintain in a normalized environment?
A: In a normalized environment, margins should range around 11% to 14%, depending on market conditions. We are developing new products and improving our product range to enhance margins.
Q: Given the historical margins, what has structurally changed for us to expect higher margins going forward?
A: Historically, China dominated the industry, but now they are not increasing production. This, along with the global demand for polyester filament yarn, will lead to improved and sustainable margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
