Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tinna Rubber & Infrastructure Ltd (BOM:530475, Financial) recorded a 69% year-on-year growth in consolidated top line for Q1 FY25.
- The company achieved a 40% growth in EBITDA and a 130% growth in net profit year-on-year.
- EBITDA margins improved from 14.53% in Q1 FY24 to 18.16% in Q1 FY25.
- The infrastructure segment witnessed a strong growth of 48% year-on-year, contributing 45% of the revenue.
- The company secured new contracts for 15,000 tonnes of crumb rubber modified bitumen, underscoring its strong position in the Infra sector.
Negative Points
- Higher freight rates due to unrest in the Red Sea region adversely impacted operating margins.
- The company faced exceptional one-time costs, including employee performance bonuses and ESOP scheme expenses.
- There was some confusion and discrepancies in the reported growth percentages for EBITDA.
- The company has planned a significant capital expenditure of approximately INR50 crores for FY25, which may impact cash flow.
- The expansion into international markets like Saudi Arabia and South Africa involves risks and uncertainties, including the lack of EPR benefits.
Q & A Highlights
Q: Does any tire manufacturing company purchase EPR certificates from us? If yes, then can that company set up its own recycling plant in the future?
A: Tire companies setting up their own recycling plants is unlikely. Historically, tire companies that ventured into recycling eventually separated from the business. We don't foresee tire companies entering this space in the future. - Gaurav Sekhri, Joint Managing Director
Q: If we remove EPR certificate from the bottom line and top line, the top line grew 56% and the bottom line only 19%. What is the reason behind this?
A: Isolating the EPR benefit, our bottom line was impacted by higher freight rates and one-time exceptional costs. Despite this, our operational EBITDA margin remains healthy at around 13.5%. - Gaurav Sekhri, Joint Managing Director
Q: Can you explain the accounting for the extended producer responsibility (EPR) certificates?
A: We accounted for the credits earned in FY24 based on the government portal's records. This will be a recurring line item, and we expect the volumes to increase going forward. - Gaurav Sekhri, Joint Managing Director
Q: Are we looking at any new technologies or fields in the recycling space from a three- to five-year perspective?
A: We will remain focused on tire recycling and value addition of products. We have expanded into passenger car radials and initiated a DPE business. Our focus will remain on tire recycling until 2027. - Gaurav Sekhri, Joint Managing Director
Q: What is the total revenue potential from the CapEx we are doing?
A: Our earnings guidance for this financial year is around INR500 crores. The CapEx underway is preparing us for Vision '27, aiming for INR700 crores next year and INR900 crores the year after. - Gaurav Sekhri, Joint Managing Director
Q: Will the company face any impact from the low production of natural rubber for tire manufacturing on its industrial segment?
A: No, we have nothing to do with natural rubber. In fact, tightness in natural rubber supply could benefit us as tire companies may increase their use of recycled rubber. - Gaurav Sekhri, Joint Managing Director
Q: How do you calculate the amount of EPR credit?
A: The calculation is based on the type of recycling and the products made from recycled tires. The value is market-determined. We have monetized some credits and accrued the rest based on the government portal's records. - Gaurav Sekhri, Joint Managing Director
Q: What is the revenue potential of the recently commissioned Varle plant?
A: At full capacity, the Varle plant should generate between INR80 crores to INR100 crores annually. We expect it to reach around 70% capacity utilization by early Q3 this year. - Gaurav Sekhri, Joint Managing Director
Q: Is there a benchmark for deciding when to monetize EPR credits?
A: We consider INR2 per unit a safe number. We have sold credits at higher than INR2 per unit so far. - Gaurav Sekhri, Joint Managing Director
Q: Can you provide an outlook on the demand and supply scenario of EPR credits?
A: It's too early to speculate. However, tire companies collectively may need roughly INR500 crores of EPR credits to offset their obligations. - Gaurav Sekhri, Joint Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
