SUTLEJTEX - SUTLEJ TEXTILES & INDUSTRIES LIMITED Share Price

Management Outlook: Sutlej Textiles remains cautiously optimistic about FY26, expecting a positive cycle for textiles driven by improved domestic demand and global stability post-geopolitical uncertainties. The domestic market is anticipated to benefit from budgetary measures like the cotton technology mission (boosting cotton quality), 20% import duty on knitted fabrics (curbing Chinese imports), lower interest rates, and tax reliefs spurring discretionary spending. However, near-term challenges persist due to muted global demand, Turkey's economic instability, and post-U.S. election trade uncertainties.

Major Points:

• Financials: 9M FY25 EBITDA improved to INR48 crore (vs. loss of INR26 crore YoY) with 97% capacity utilization. Debt-equity ratio stable at 0.85.
• Cost Optimization: Focus on reducing employee costs (15% of revenue), automation, and product mix diversification (e.g., lycra twisted yarn, non-apparel segments).
• Demand Recovery: Global demand for dyed/synthetic yarn remains subdued but expected to rebound with easing inflation, interest rate cuts, and geopolitical clarity.
• Home Textiles: Export challenges in the Middle East and U.S. (high mortgage rates) impacted performance; domestic credit tightened.
• Recycled Fiber: PET bottle price volatility affected margins, but summer demand may improve supply.
• Competition: Import duties and rupee depreciation to aid domestic market; China's currency depreciation remains a competitive threat.
• Outlook: FY25 Q4 critical for setting FY26 trajectory; management targets margin improvement via demand recovery, cost controls, and value-added products.

Question 1:
Aditya Sen (Robo Capital): Sir, my question is about EBITDA margins, which have been quite low since quite some time. So is there any strategic move that we are planning to get back to the previous margins? Or will the margins be only driven by the macro events?
Answer: Margins are impacted by subdued global demand and supply imbalances. The company expects improvement as domestic and export markets stabilize, aided by government initiatives (e.g., cotton technology mission, import duties on fabrics). Cost optimization and product diversification (e.g., value-added yarns) are ongoing strategies.

Question 2:
Kanishk Jain (AK Investment): I wanted to know about the strategy which you are planning or will be adopting to stabilize our margins going ahead? Any specific plan are you thinking of?
Answer: Focus areas include cost reduction, product mix optimization (shifting to non-apparel segments), and value-added products (e.g., lycra yarn). Demand recovery in export markets and domestic consumption (boosted by tax cuts, interest rate reductions) are critical for margin revival.

Question 3:
Kanishk Jain (AK Investment): And also just wanted to know we have volume up pretty well; capacity utilization is pretty good? So, how long does it take to revive completely, any target or anything to that in your mind?
Answer: Capacity utilization is 97%, but demand recovery depends on geopolitical stabilization, interest rate cuts, and consumer spending. Optimism for FY26 due to government stimulus, improved cotton production, and easing inflationary pressures.

Question 4:
Vikram Suryavanshi (PhillipCapital India): What was our production from the green fiber this quarter? And are we seeing the improvement in that business also? Or how is it?
Answer: Green fiber production exceeded capacity at 130 tonnes/day (vs. 120 tonnes/day capacity). Challenges include rising PET bottle prices affecting margins. Summer may increase bottle availability, improving recycled fiber demand.

Question 5:
Vikram Suryavanshi (PhillipCapital India): And last, sir, our home textile business also seems to be impacting the profitability, but are we seeing -- not seeing some benefit of lower raw material cost in home textile?
Answer: Home textiles faced reduced Middle East exports and tightened domestic credit. Lower raw material benefits offset by weak demand. Strategic focus on high-margin exports and cautious domestic sales continue.

Question 6:
Prerna Jhunjhunwala (Elara Capital): So just wanted to understand what -- how much percentage of your yarn volumes would now be value-added yarn?
Answer: Value-added yarns (e.g., melange, lycra) constitute ~20% of production, but demand fluctuates with market conditions. Knitting capacity remains limited; expansion depends on demand visibility and processing integration.

Question 7:
Amit Aggarwal (Leeway Investments): Our employee cost to turnover is still very high, 15%. Any comment on that part?
Answer: Employee costs reflect ongoing automation and workforce optimization. Revenue stagnation (vs. pre-pandemic levels) exacerbates the ratio. Efforts include reducing headcount and modernizing machinery, with gradual improvements expected.

Question 8:
Rahul Shah (DD Associates): What is the volume growth in both yarn and home textile segment?
Answer: Yarn volumes remain stable (full spindle utilization). Home textiles saw export stagnation and reduced domestic sales (credit tightening). Processing volumes dipped due to weak cloth demand. Growth hinges on macroeconomic recovery.