NITINSPIN - Nitin Spinners Ltd. Share Price

Management provided an optimistic outlook for Nitin Spinners, highlighting a recovery in demand and improved yarn prices in the textile sector. The company reported its highest quarterly revenue of INR 859.8 crores for Q4 FY '26, reflecting a 7.4% increase quarter-on-quarter and a 2.2% increase year-on-year. EBITDA for the same period stood at INR 130.4 crores, up 16.9% quarter-on-quarter and 8.4% year-on-year. The EBITDA margin expanded to 15.17%, up from 13.93% in the previous quarter, attributed to improved operational efficiency and cost-saving measures. Profit after tax reached INR 57.4 crores, a significant 29.2% increase from the previous quarter and a 23.7% rise year-on-year.

Management indicated expectations for continued improvement, citing that the upward trend in yarn prices, coupled with the ongoing capacity expansion, should yield a revenue increase of around 30% to 35% in the coming financial years. The expansion is projected to enhance the company's capacity by adding 35 million meters of fabric and 22,000 tons in spinning, allowing for a diverse product range and entry into new markets.

Geographically, the company indicated that exports contributed 63% of total revenue in Q4 FY '26, with promising demand growth expected from the recent India-U.K. and India-EU Free Trade Agreements, which are anticipated to enhance competitiveness in these regions. Management remains hopeful for sustained growth despite geopolitical tensions and has emphasized resilience in the cotton supply chain.

Long-term plans also include enhancing the operational efficiency of renewable energy projects, aiming for approximately 50% to 55% of energy needs to be met through renewable sources after capacity additions. Lastly, management targets an EBITDA margin in the range of 16% to 20% for FY '27, supported by expected growth in the fabric segment.

Q&A Section Summary from Nitin Spinners Ltd. Q4 FY '26 Earnings Call Transcript

Question 1: What benefits can we expect under the Rajasthan Investment Promotion Scheme for new capex? Dinesh Nolkha: The Rajasthan Investment Promotion Scheme includes a capital subsidy of 20%-27%, depending on capital allocation and employment generation. We also receive a 5% interest subsidy on term loans for five years and various electricity duty benefits. As for IRR, capital subsidies accrue over ten years, while interest savings are reflected annually in our financials.

Question 2: What percentage reduction in overall power cost per unit does management expect from renewable investments by FY '28? Dinesh Nolkha: We anticipate annual savings of around INR 50 crores once all projects are operational. For this fiscal year, we expect savings around INR 30-35 crores.

Question 3: What EBITDA margin is targeted for the upcoming fabric expansion project? Dinesh Nolkha: We don't set specific margin targets, but historic finished fabric margins are superior to yarn margins. Our normal margin range is projected to be 16%-20% in FY '27.

Question 4: What is the timeline for new capacity commercial production? Dinesh Nolkha: Commercial production for fabric will likely begin in Q3 FY '27, while spinning capacity is expected to start from January/February 2027.

Question 5: What is your perspective on yarn realization and its relation to fabric prices? Dinesh Nolkha: Yarn realization improved by 5%, while woven fabric realization rose by about 2-2.5%. Fabric prices lag behind yarn; thus, increases in yarn will eventually reflect in fabric pricing.

Question 6: How do you expect U.S. inflation to impact demand? Dinesh Nolkha: Predicting macro trends is challenging. Prices have generally corrected since the highs in 2021-2022. If retail prices increase significantly, demand might be affected, but currently, we see stable expectations from customers.

Question 7: What effect do you foresee from the ratification of FTAs on domestic demand? Dinesh Nolkha: FTAs can reduce logistics costs and improve demand. Companies like ours will benefit, especially as the market diversifies from traditional suppliers to India.

Question 8: Can you elaborate on your margins for the yarn business? Dinesh Nolkha: Last year, our yarn margins ranged from 11.5% to 12%. To reach normalized margins of 14%-15%, the spread needs to increase further, but current spreads are at INR 120-125.

Question 9: How much cotton inventory do you currently have? Dinesh Nolkha: I apologize, but I cannot disclose specific inventory levels. However, you can reference our balance sheet for insights.

Question 10: Will the government remove import duties on cotton? Dinesh Nolkha: We've been advocating for the removal of duties. While the discussion is ongoing, we foresee potential progress within six months. The industry is pushing for a permanent removal to aid growth.