HUHTAMAKI - HUHTAMAKI INDIA LIMITED Share Price

In the earnings call for the first quarter ended March 31, 2026, management provided an optimistic outlook. They reported a slight sales increase of 10 basis points compared to the prior year, while significantly improving EBITDA margins by 25%, driven by operational efficiencies and a favorable sales mix. EBIT grew by 4%, with a pre-tax profit (PBT) increase of 2.9%. However, earnings per share (EPS) saw a slight decline due to exceptional charges related to previously unrecognized depreciation.

Management emphasized their commitment to profitable growth and disciplined capital allocation, indicating a robust strategy focused on higher-value business opportunities. They expressed confidence in their ability to maintain margins despite rising raw material costs, which were quantified as a low to medium double-digit impact. Importantly, they highlighted that they effectively passed most cost increases onto customers, thereby mitigating margin erosion.

Key forward-looking points include:

1. Sustained focus on high-margin, innovative products aligned with customer needs.
2. Ongoing investments in sustainability initiatives, such as a solar electricity project at the Khopoli plant, aimed to enhance their environmental footprint and operational efficiency.
3. Plans to further optimize asset utilization while exploiting global procurement power to manage raw material costs effectively.

Management's comments suggest they are well-positioned to navigate market challenges, with a solid framework for future growth, underpinned by selective customer engagement and innovation. The next reporting for Q2 is scheduled for the end of July, where further insights will be shared.

Q&A Section of Earnings Call Transcript:

1. Question: Aaryan Vadaria: Could you explain the raw material situation post-war and the cost impact? Also, which segments are seeing demand currently?
Answer: As I noted, the situation is quite dynamic due to the political climate. We've observed a low to medium double-digit increase in raw material costs. Thankfully, availability is stable, and we've managed to pass most costs onto customers, ensuring minimal margin impact. Demand is stabilizing; we see typical industry growth rates of 5-7%, with larger clients around 2-5%.

2. Question: Vishnu: If your volumes are stable, are you losing market share given the industry's growth rates?
Answer: The market's growth varies within segments. We focus on selective innovation and premiumization, which may not align with broader market growth. While some smaller players may grow faster, we're content with our strategy and customer engagement, particularly in sustainability.

3. Question: Vishnu: Can you explain the significant increase in other income this quarter?
Answer: This increase is driven primarily by interest on an income tax refund of approximately INR 6.5 crores, enhanced fixed deposit interest, and foreign exchange gains from weakening currency. It's important to note that there are also one-off impacts that influence our overall financials.

4. Question: Rajkumar Vaidyanathan: When do you anticipate dynamic growth correction?
Answer: I can't specify exact numbers, but we're focused on profitable growth. We are enhancing customer engagement and innovation to capture more market opportunities. Our strategy is structured to support this growth in the near future.

5. Question: Rajkumar Vaidyanathan: Will raw material inflation help your top line?
Answer: Yes, we expect to see revenue growth as we pass costs to customers. However, our margins remain intact, as the increase is typically offset by the cost pass-through process.

6. Question: Vipul Shah: How quickly is the raw material cost passed to customers?
Answer: We implemented price adjustments swiftly following rising raw material costs, by end of March we had future orders at new prices. Our transparent relationship allows for flexible adjustments based on material costs, ensuring good price realization.

7. Question: Aaryan Vadaria: Is inflation due to the war benefiting your top line?
Answer: Certainly, while we pass on costs to customers, it minimally impacts margins. We're leveraging our resources better than smaller firms due to our global supply network, which positions us well in this challenging landscape.

8. Question: N Modi: What is your current capacity utilization?
Answer: While I can't disclose exact percentages due to competitiveness, I can assure you that we have significant operational capacity without constraints, allowing room for growth.

9. Question: Rajkumar Vaidyanathan: Are you considering inorganic growth opportunities?
Answer: Currently, our focus is on organic growth and strengthening operations. We see ample market opportunity aligned with our value proposition; thus, we're not pursuing acquisitions at this time.

10. Question: Anil Sharma: Can you elaborate on the assets for sale?
Answer: Yes, we have put up our property in Daman for sale, having curtailed operations there. This is part of optimizing our asset utilization. Thank you for your inquiry.