ESTER - Ester Industries Ltd. Share Price

Management of Ester Industries has provided an optimistic outlook for FY'26, expecting consolidated revenue in the range of Rs. 1450 to Rs. 1500 crores, reflecting a growth driven by continued demand in both specialty polymers and polyester films. The Specialty Polymers segment is projected to grow by approximately 25% year-on-year, which would result in revenue of around Rs. 220 to Rs. 230 crores.

Key forward-looking points highlighted by management include:

1. EBITDA Margin Improvement: Management anticipates EBITDA margins will range from 13% to 16% during FY'26, reflecting operational efficiencies and a favorable product mix.

2. Capacity Utilization: Expected capacity utilization is projected to rise from approximately 70% in FY'25 to over 85% in FY'26, supporting enhanced production and profitability.

3. Investment in rPET: The company is investing Rs. 110 to Rs. 120 crores in CapEx for the year, which includes Rs. 50 crores for a new rPET production line in Hyderabad, expected to start operations in August 2025.

4. Joint Venture with Loop Industries: The JV is progressing well, with a combined investment of approximately Rs. 510 crores expected. Construction is anticipated to begin by the second half of 2027.

5. Resilience to Pricing Pressures: Despite challenges such as imports at low pricing from competitors, management believes the company can maintain sustainable demand and pricing power through product differentiation and ongoing improvements in their specialty portfolio.

Overall, management expresses confidence in their growth strategy, capitalizing on the emerging demand in sustainable packaging and specialty products, indicating they are well-positioned for the future.

Key Questions and Answers from Q&A Section

1. Question: Could you explain the contribution and realization from the rPET segment? Answer: The rPET will primarily supply the polyester film with recycled content, transitioning from specialty polymers to the film business for reporting. This shift means sales to third parties will occur without arm's length transactions within our business structure.

2. Question: What were the key factors affecting profitability at the Telangana unit? Answer: The significant drop in profitability resulted from a surge in imports at predatory pricing from China and Thailand, forcing corrections in our domestic pricing to remain competitive. We're actively addressing this through government dialogues.

3. Question: How has the realization changed over the past quarters? Answer: Prices for our 12-micron commodity film dropped from Rs. 117 in December to Rs. 110 in March. Value addition fell from Rs. 36 to Rs. 26 per kg, primarily due to this pricing correction.

4. Question: What are the expected capacity utilization levels going forward? Answer: We anticipate improvements, projecting utilization rates for FY'26 to reach over 85%, significantly up from the 70% seen last year, thanks to better demand-supply dynamics.

5. Question: What is the investment in CAPEX for the current year? Answer: Our total CAPEX this year is estimated at Rs. 110 to Rs. 120 crores, including Rs. 50 crores specifically for rPET. The rest will cover sustenance and maintenance projects to enhance asset quality.

6. Question: How will recent developments affect margins and what are sustainable margins? Answer: Margins have faced pressure from import surges; however, we expect gross value addition to stabilize at Rs. 30-35. With increased capacity utilization, we foresee improved profitability numbers despite lower margins.

7. Question: Can you provide insights on the progress of the joint venture? Answer: The joint venture is progressing well, with timelines on track. We've recently confirmed CAPEX estimates and are acquiring land to commence operational setups in the second half of 2027, with total investments around $175 to $180 million.

8. Question: What revenue growth do you expect for FY'26 and key growth drivers? Answer: For FY'26, we're targeting consolidated revenues between Rs. 1450 to Rs. 1500 crores. Growth will stem from specialty polymers, expected to grow 25%, and improved utilization in polyester films.

9. Question: What is the company's long-term sustainability roadmap? Answer: Sustainability is central to our strategy. We aim for our plants to utilize 60% to 70% renewable power sources by 2026, alongside continuous efforts to reduce carbon emissions.

10. Question: What are the current and future margins you anticipate? Answer: While peak margins reached Rs. 75-80 are not expected soon, we currently see margins around Rs. 30, with ambitions for them to rise gradually as our specialty film portfolio expands.