GHCL - GHCL Ltd. Share Price

In the Q4 FY25 earnings conference call for GHCL Limited, management provided an optimistic outlook despite challenging market conditions. R.S. Jalan, the Managing Director, highlighted that while global demand for soda ash remains weak, the Indian market experienced a 5% growth in FY25. The company is poised to benefit from structural tailwinds in domestic demand driven by the renewable energy sector and a duty imposed on imported solar glass.

Management indicated that production volumes aligned with the previous quarter and emphasized operational excellence and cost optimization, allowing for improved margins even amidst pricing pressures. They reported a consolidated revenue of INR 807 crores for Q4 FY25, with an EBITDA of INR 244 crores, resulting in an EBITDA margin of 30.2%, up from 23.8% the previous year. For the full year, GHCL recorded a PAT of INR 626 crores, marking a 9% increase year-on-year.

Looking ahead, the management confirmed that the commissioning of their vacuum salt and bromine projects is on schedule for FY26. These projects are expected to contribute significantly to revenue growth. The total capex for growth in FY25 was INR 311 crores. Management noted strong fundamentals and expressed confidence in GHCL's strategic investments in greenfield projects that aim to optimize operational performance.

Key forward-looking points mentioned include:

• Anticipated demand growth in soda ash driven by solar glass manufacturing.
• Projected contributions from newly commissioned salt and bromine projects starting FY26.
• Resilience to external pressures due to a focus on operational efficiencies.
• Future capacity plans aiming to reach 2 million tons depending on market demand.

The management remains committed to delivering stakeholder value while navigating a complex market environment.

Q&A Section Summaries from the Earnings Transcript

1. Question: "Sir, when we look at this quarter, margins have been relatively better year-on-year, largely due to lower raw material costs. Can you provide insights on the current soda ash cycle and the demand outlook?"

Answer: Our margins benefited from operational excellence despite challenges. The future market outlook is uncertain due to geopolitical tensions and slowing Chinese demand. However, Inner Mongolia's capacity has been effectively absorbed due to prior demand growth.

2. Question: "Could you give us an estimate of new soda ash capacity set to come online in the next two years?"

Answer: In light of geopolitical concerns, several projects are facing delays. Currently, we anticipate approximately 2 million tons of soda ash will come from existing projects worldwide, with 1.1 million tons from China and 0.9 million tons from the rest of the world.

3. Question: "On the bromine and salt projects, how's the work progressing since acquiring the land, and are you meeting quality expectations?"

Answer: The bromine project is underway with commissioning expected in FY '26, along with vacuum salt. Both initiatives are on schedule and will provide benefits from the third quarter of FY '26.

4. Question: "With new players entering the salt market, how do you view competition and the potential impact of your own capex on your market position?"

Answer: The Zara Zumara expansion will support our internal needs and offer a cost advantage. This new area will feed our plants, helping maintain our market competitiveness against new salt players.

5. Question: "What is your outlook for soda ash pricing given the current demand softness and external market conditions?"

Answer: It's currently challenging to predict pricing trends, but with softening demand indicated in China, Europe, and the U.S., we anticipate similar downward pressures on soda ash prices in the coming quarters.

6. Question: "How has the Minimum Import Price impacted the industry, and what are the prospects for its continuation?"

Answer: The Minimum Import Price has established a floor, but its actual benefits remain limited. We will advocate for its extension and pursue anti-dumping duties in light of current market dynamics.

7. Question: "Could you confirm the commission status of the vacuum salt and bromine projects?"

Answer: Both projects are on target for commissioning in the third quarter of FY '26, confirming our timelines for operational readiness.

8. Question: "What is the distribution of your capex for FY '25, particularly for growth initiatives?"

Answer: Approximately INR 311 crores has been invested, with INR 180 crores for growth initiatives including greenfield projects and salt development. The remaining is allocated to existing plant upgrades.

9. Question: "Considering China's current solar panel capacity, will there be a lag in soda ash demand?"

Answer: Current soda ash demand for solar glass is around 11,000 tons per month, expected to double by FY '26-'27. A significant ramp-up in solar investments indicates strong future growth.

10. Question: "With the current market pressures, do you foresee any potential for global capacity closures affecting price dynamics?"

Answer: There are reports of a Polish plant closure; however, while there may be fluctuations, competitive pressures and demand growth in India should keep our strategy robust. We're not currently pursuing acquisitions but remain focused on operational efficiency.