ECORECO - Eco Recycling Limited Share Price

Management provided a positive outlook, driven by strong financial performance, regulatory tailwinds, and strategic expansions. Key highlights include:

1. Financial Growth: Q1 FY25 revenue surged 69.48% YoY to Rs.13.44 crore, EBITDA rose 76.38% (margin: 76.12%), and PAT increased 73.04% (margin: 60.64%). Standalone revenue grew 86.46%, with EBITDA and PAT nearly doubling.

2. Government Initiatives: Emphasis on India's Critical Mineral Mission to secure lithium, cobalt, and rare earths via recycling. EPR regulations and stricter CPCB enforcement are expected to channel more e-waste to formal recyclers like Ecoreco.

3. Capacity Expansion: Funded internally, capacity increased to 25,200 metric tons/year. Future expansions (e.g., lithium-ion battery recycling) will be evaluated by September 2025.

4. EPR Momentum: Management anticipates higher EPR fees as CPCB mandates formal sector pricing to bridge the informal-formal gap. This is expected to boost volume and margins.

5. Margin Sustainability: Focus on premium services for global clients, reduced procurement costs (via partnerships), and tech-driven efficiency aid high margins (EBITDA ~76%). No immediate pricing pressure expected due to compliance-driven demand.

6. Strategic Positioning: Leadership in compliant recycling, partnerships with global brands, and TERRA collaboration enhance credibility. Centralized facilities and innovation prioritize value over volume.

7. Future Plans: Utilization of new facilities (post-June 2024 inauguration) and alignment with the Rs. 15,000 crore MSME subsidy for eco-investments will further scale operations.

Management remains confident in growth from regulatory support, capacity ramp-up, and strong client demand, targeting sustainable profitability through premium, compliant services.

Question: Over the last quarter, Q4, we have seen a 75% jump in total income, but the materials consumed have more than halved. Can you explain what is happening there?

Answer: The reduction in material costs stems from negotiating lower acquisition prices for e-waste with producers (e.g., nominal pricing, shared expenses). Additionally, revenue growth includes EPR fees, reflecting a shift toward higher-margin service-driven income rather than raw material reliance.

Question: Are EPR fees expected to ramp up over the next 2-3 quarters?

Answer: Yes, due to rising recycling volumes, stricter CPCB enforcement to formalize the sector, and potential government-mandated EPR fee hikes to bridge price gaps between formal and informal recycling channels.

Question: How much net cash is in the business, and will it be monetized for expansion?

Answer: The company has accumulated cash internally, with Rs. 50 crores invested in plant and machinery. Future expansion plans (e.g., lithium-ion battery recycling) will be evaluated post-FY25, pending capacity utilization and performance assessments.

Question: What is the procurement mix (contractual vs. secondary markets vs. imports)?

Answer: 100% procurement is via direct agreements with end-users (MNCs, producers) or door-to-door collection. No reliance on secondary markets or imports.

Question: What was the weight of materials recycled this quarter?

Answer: Approximately 3,000 metric tons, inferred from profit metrics (Rs. 30/kg profit assumption). Focus remains on value over volume.

Question: How does the EPR mechanism work, and how are fees decided?

Answer: EPR mandates producers to ensure responsible disposal of end-of-life products. CPCB may standardize category-based EPR fees (for 7 e-waste categories) to incentivize formal recycling, compensating for higher operational costs vs. informal sectors.

Question: Can you quantify EPR revenue this quarter?

Answer: EPR fees are integrated into overall revenue (recycling, refurbishment, data destruction) and not disclosed separately to maintain competitive confidentiality.

Question: How did the company reduce raw material costs from MNCs?

Answer: Premium compliance services (environmental standards, advanced tech) justify higher fees. MNCs prioritize regulatory adherence over cost, enabling margin optimization without volume-driven procurement.

Question: Why did employee expenses remain low (Rs. 94 lakhs) despite 50 employees?

Answer: Expenses reflect operational efficiency and a mix of roles (collection, processing). Salaries, including leadership, are disclosed annually but emphasized as prudent and aligned with profitability.

Question: Are current margins (76% EBITDA) sustainable?

Answer: Margins reflect premium service pricing and cost discipline. Future growth hinges on value-driven models (not volume), with optimism around CPCB reforms and rising demand for compliant recycling.

Question: What is the status of the new facility's ramp-up and utilization?

Answer: Limited utilization in Q1 (inaugurated June 5), but capacity expansion (25,200 MT) positions the company for growth. CPCB's stricter enforcement is expected to boost formal-sector reliance, driving future utilization.

Question: How does the TERRA partnership benefit the company?

Answer: TERRA enhances global networking, client acquisition, and knowledge-sharing among top recyclers, indirectly boosting brand credibility and business opportunities.

Question: What differentiates Eco Recycling from competitors?

Answer: Emphasis on end-to-end compliance (vs. formalities) and premium services for MNCs/producers, ensuring adherence to global environmental standards. This fosters client trust and justifies higher fees.

Question: Are margins at risk with rising competition?

Answer: Margins are sustainable due to regulatory tailwinds (EPR enforcement) and focus on value over volume. Compliance-driven demand offsets competitive pressures.

Question: What are long-term capacity goals (5-7 years)?

Answer: Scalability aligns with margin-focused growth. Achieving 100,000 MT capacity is feasible, driven by regulatory demand and client trust in compliant recycling services.