Century Enka Limited — Q3 FY25 earnings call

Call held 12 Feb 2025

Management summary

Century Enka delivered strong financial growth in Q3 FY25, with significant increases in revenue, EBITDA, and PAT, driven by robust performance in the Filament Yarn segment. However, the Tyre Cord Fabric segment faced headwinds from subdued demand and increased imports, while overall margins were impacted by volatile raw material prices and competitive pressures from Chinese imports. The company is actively pursuing cost reduction, renewable energy expansion, and anti-dumping duties to mitigate these challenges.

Highlights

  • Operating revenues grew by 9.5% YoY to INR 493 crores in Q3 FY25.

  • EBITDA increased by 48% YoY to INR 27 crores in Q3 FY25, with EBITDA margins at 5.51%.

  • PAT surged by 198% YoY to INR 14 crores in Q3 FY25, achieving a PAT margin of 2.84%.

  • Filament Yarn revenue increased significantly by 23% YoY to INR 255 crores in Q3 FY25.

  • Total volume grew by 11% YoY to 19,368 metric tons in Q3 FY25.

Concerns

  • NTCF demand was subdued due to poor truck and bus segment demand and increased imports by tyre companies.

  • Margins remained under pressure due to volatile raw material prices and imports from China.

  • Caprolactam prices continued to decline, resulting in stock losses and margin pressure.

Key financials

2 periods

Q3 FY25

  • Operating Revenue
    ₹493 Cr
    YoY +9.5%
  • EBITDA
    ₹27 Cr
    YoY +48%
  • EBITDA Margin
    5.5%
  • PAT
    ₹14 Cr
    YoY +198%
  • Total Volume
    19,368 metric tons
    YoY +11%

YTD FY25

  • Operational Revenue
    ₹1,558 Cr
    YoY +22%
  • EBITDA
    ₹106 Cr
    YoY +116%
  • EBITDA Margin
    6.8%
  • Net Profit
    ₹60 Cr
    YoY +165%
  • Total Volume
    60,275 metric tons
    YoY +21%

What they filed

Q1 FY27: revenue up 37.8%, net profit up 306.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue536 493 444 402 409 −24%412 −16%484 +9%554 +38%
EBITDA38 27 9 20 32 −16%41 +52%55 +511%86 +330%
Net profit22 14 7 15 23 +5%24 +71%40 +471%61 +307%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Tyre Cord Fabric (Q3 FY25)
    ₹214 Cr Revenue
  • Filament Yarn (Q3 FY25)
    ₹255 Cr Revenue
  • Tyre Cord Fabric (YTD FY25)
    ₹752 Cr Sales
  • Filament Yarns (YTD FY25)
    ₹735 Cr Sales

Capital allocation

high confidence
  • Capex Capex disclosed
    • Polyester Tyre Cord Fabric (PTCF) project completion ₹103 Cr
    • Upgradation of NTCF operations (power consumption, productivity, energy efficiency, Grade 1 products) ₹20 Cr
    • Upgradation of NTCF operations (power consumption, productivity, energy efficiency, Grade 1 products) ₹30 Cr
    • Capacity addition in PTCF (new dipping line at Pune) and NTCF capacities at Bharuch (last 3-4 years) ₹400 Cr
    So, in PTCF we have already completed the CAPEX, and we spent about 103 crores on this project. I mean the denier mix makes a difference on the total production that comes out of this capacity, but it could range between 4,000 to 5,000 tons per annum depending on the denier mix as I said. Second, we expect to continue to spend on the upgradation of the equipments which continues to be used for our NTCF operations to mainly to reduce the power consumption on per unit per kg or per ton basis and that will be a continuous exercise but on an average we are being spending between 20 to 30 crores which are primarily focused on improving productivity and energy efficiency and getting more Grade 1 products from our existing equipment. So, these will continue year-on-year. As far as other large CAPEXs are concerned we are still not ready to-I mean in terms of these are still under discussion stage. So as and when we are ready and we get a board approval then through a due process it will be announced to all the regulatories as well as to the investment community. So, your concern is valid. What I would like to only state is that in last 3 to 4 years we already invested close to 400 crores in capacity addition in PTCF in a new dipping line at Pune and in expansion and replacement of NTCF capacities at Bharuch.
  • Debt Debt disclosed
    But as I said these are still at a discussion stage and we do not have any net borrowings. In fact, we are sufficient.
  • Liquidity Liquidity disclosed Company has sufficient cash on the balance sheet.
    Yes, we have sufficient cash on the balance sheet to make future investments.

Guidance & targets

Capacity

  • Polyester Tyre Cord Fabric (PTCF) commercial production start Capacity · FY26 · High confidence Start in FY26
    Approvals for Polyester Tyre Cord Fabric are in progress and we expect commercial production to start in FY26.

    — Suresh Sodani

Demand

  • NTCF demand growth Demand · Q4 and FY26 · Medium confidence Cautiously optimistic
    We remain cautiously optimistic about NTCF demand growth in Q4 and FY26.

    — Suresh Sodani

Cost Reduction

  • Renewable power expansion Cost Reduction · Middle of next financial year · High confidence Expand by middle of next financial year
    So, we are already drawing renewable power at Bharuch in the current year, and we intend to expand that by middle of next financial year.

    — Suresh Sodani

Regulatory

  • Anti-dumping duty on NFY notification and implementation Regulatory · Next year, maybe Q1 · Medium confidence Hopeful for notification and implementation in next year, maybe Q1 itself
    So, we are hopeful that certain in the next year, maybe in Quarter 1 itself the BIS could get notified and then implemented in due course.

    — Suresh Sodani

Revenue

  • PTCF revenue at peak capacity Revenue · Peak capacity · Medium confidence Between 110 to 120 crores
    Revenue at peak capacity should be as I said, it's a function also of the raw material. But at a standard, what we assume as a price should be about between 110 to 120 crores and margins at least in excess of 10%, EBITDA margins.

    — Suresh Sodani

Profitability

  • PTCF EBITDA margins Profitability · Peak capacity · Medium confidence In excess of 10%
    Revenue at peak capacity should be as I said, it's a function also of the raw material. But at a standard, what we assume as a price should be about between 110 to 120 crores and margins at least in excess of 10%, EBITDA margins.

    — Suresh Sodani

Approvals

  • PTCF customer approvals Approvals · Between first and second quarter (FY26) · Medium confidence Hopeful of getting approvals for at least some customers
    But yes, in between first and second quarter we are hopeful of getting approvals for at least some of the customers.

    — Suresh Sodani

Capital Allocation

  • IRR hurdle rate for investments Capital Allocation · Ongoing · High confidence Minimum 12% or above
    So, we look at IRR a minimum hurdle rate of 12% or above.

    — Suresh Sodani

  • Asset turns for new projects Capital Allocation · Ongoing · Low confidence 1 to 1.3-1.4
    But if you were to take just a ballpark number, at least 1 to 1.3-1.4, the asset turns should be there.

    — Suresh Sodani

Capacity Utilization

  • Current capacity utilization (92,000 tons per annum) Capacity Utilization · This year · Medium confidence Around 80,000 plus in terms of capacity production
    And just on the current capacity which have almost I think 92,000 tons per annum. So, this year probably will go to as almost like around 80,000 plus in terms of capacity production.

    — Suresh Sodani

  • NTCF and Nylon capacity utilization Capacity Utilization · Full year · Medium confidence Around 80,000-82,000 tons
    But for NTCF and nylon, basically we can go around 80,000-82,000 tons this year on full year?

    — Suresh Sodani

What to watch in Q4 FY25

PTCF commercial production start

FY26
Current Approvals in progress, trials started
Target Commercial production started

Why it matters

New product segment, key for diversification and future revenue growth.

Approvals for Polyester Tyre Cord Fabric are in progress and we expect commercial production to start in FY26.

Risks & concerns

  • Margins under pressure due to volatile raw material prices and imports from China

    high

    Margins remained under pressure due to volatile raw metal prices and imports from China.

    Management acknowledged

  • Caprolactam price decline leading to stock losses and margin pressure

    high

    Caprolactam prices continue to decline resulting in stock losses and margin pressure, though mitigated by cost reduction measures.

    Management acknowledged

  • China dumping material at very low prices, particularly on the commodity side

    high

    China continues to dump a lot of material, especially commodity-side, at very low prices, creating margin pressure.

    Management acknowledged

  • Subdued NTCF demand due to poor truck and bus segment demand

    medium

    NTCF demand was subdued due to poor truck and bus segment demand, partly offset by two and three-wheeler segments.

    Management acknowledged

  • Increased imports by tyre companies reducing NTCF demand for domestic suppliers

    medium

    Increased imports by tyre companies following supply chain normalization reduced demand for domestic NTCF.

    Management acknowledged

  • NTCF being a shrinking market

    medium

    Analyst raised concern that NTCF is not a growing product and is a shrinking market.

    Analyst acknowledged

Q&A highlights

8 direct
Margin pressure, revival outlook, cost cutting, anti-dumping duty (ADD) on NFY, demand environment, new capacity growth. Direct
One was with respect to the margins pressure, which is right because the margin pressures continue and being in very volatile external environment these are also quite varying, and we have been taking continuous measures on the cost side for margin improvement.

Addresses key investor concerns on profitability, strategic responses, and the impact of external factors like imports and demand.

Asked by Mohit Upadhyay

CAPEX for PTCF (amount, funding, capacity, predicted revenue) and modernization/diversification CAPEX roadmap. Direct
So, in PTCF we have already completed the CAPEX, and we spent about 103 crores on this project. I mean the denier mix makes a difference on the total production that comes out of this capacity, but it could range between 4,000 to 5,000 tons per annum depending on the denier mix as I said.

Provides specific figures for PTCF investment and capacity, and clarifies the company's approach to future CAPEX and modernization.

Asked by Abhishek Jain

Concern about NTCF being a shrinking market and its future profitability. Direct
So, your concern is valid. What I would like to only state is that in last 3 to 4 years we already invested close to 400 crores in capacity addition in PTCF in a new dipping line at Pune and in expansion and replacement of NTCF capacities at Bharuch.

Management acknowledges a critical market challenge for a core product and highlights past strategic investments to diversify and modernize.

Asked by Abhishek Jain

Technology tie-up for PTCF (in-house or external). Direct
These are standard technologies and these are mostly by the equipment suppliers itself. So, there is no technology per se. What we need to do is we have to get the product through our own internal technical know-how to meet the requirements of the tyre companies.

Clarifies the nature of technology for the new PTCF product, indicating reliance on internal expertise for product development and customization.

Asked by Abhishek Jain

Typical asset turn for CAPEX. Direct
But if you were to take just a ballpark number, at least 1 to 1.3-1.4, the asset turns should be there. I mean top line should be there on an investment of reasonable size; magnitude.

Provides a ballpark estimate for asset turnover on new investments, useful for financial modeling and understanding capital efficiency.

Asked by Priyankar Sarkar

Payback period / IRR for CAPEX. Direct
So, we look at IRR a minimum hurdle rate of 12% or above.

Sets the minimum return expectation for capital allocation decisions, indicating the company's investment criteria.

Asked by Priyankar Sarkar

When to expect PTCF revenues and expected revenue/margin. Direct
Revenue at peak capacity should be as I said, it's a function also of the raw material. But at a standard, what we assume as a price should be about between 110 to 120 crores and margins at least in excess of 10%, EBITDA margins.

Provides specific revenue and margin targets for the new PTCF segment, crucial for future growth projections.

Asked by Abhishek Jain

Impact of caprolactam price fall on raw material cost/inventory. Direct
So, our model, as long as the prices are varying at a decent pace, I mean the volatility is less, that is more suitable to us because otherwise it can have an impact on our effective margins that we are able to report.

Explains how raw material price volatility affects reported margins and the company's preference for stable price movements.

Asked by Vikram Suryavanshi

2 min read 6 chapters

Detailed narrative

Q3 FY25 Financial Performance Overview

Century Enka reported a robust Q3 FY25 with operating revenues growing by 9.5% year-on-year to INR 493 crores. EBITDA saw a significant increase of 48% year-on-year, reaching INR 27 crores, with EBITDA margins at 5.51%. Profit after tax surged by almost 198% year-on-year to INR 14 crores, translating to a PAT margin of 2.84%. Total volume for the quarter also grew by 11% year-on-year to 19,368 metric tons.

Segmental Performance and Challenges

The Tyre Cord Fabric (NTCF) segment experienced a 5% year-on-year revenue decrease to INR 214 crores in Q3 FY25, primarily due to subdued demand from the truck and bus segments and increased imports by tyre companies. Conversely, the Filament Yarn segment demonstrated strong growth, with revenue increasing by 23% year-on-year to INR 255 crores, driven by improved demand from marriage and festive seasons. For the nine months of FY25, NTCF sales grew by 22% to INR 752 crores, and filament yarn sales increased by 20% to INR 735 crores.

Strategic Investments and Capacity Expansion

The company has completed CAPEX of approximately INR 103 crores for its Polyester Tyre Cord Fabric (PTCF) project, with commercial production expected to commence in FY26. Over the last 3-4 years, Century Enka has invested close to INR 400 crores in PTCF capacity addition and replacement of NTCF capacities at Bharuch. Additionally, INR 20-30 crores are annually allocated for upgradation of NTCF operations to reduce power consumption and improve productivity.

Margin Management and Cost Reduction Initiatives

To counter margin pressure from volatile raw material prices and imports, Century Enka is focusing on increasing its share of renewable power, with plans to expand this by the middle of next financial year. The company is already drawing renewable power at Bharuch. The company is also investing in reducing power consumption in older equipment and improving overall productivity through in-house measures, which are expected to yield more results over time.

Raw Material Volatility and Import Challenges

Caprolactam prices continued to decline during the quarter, leading to stock losses and margin pressure. The company noted a $140 per ton fall between Q2 and Q3 FY25. Management highlighted that China's dumping of material, especially in the commodity segment at low prices, significantly impacts margins. To address this, an application for anti-dumping duty on NFY has been filed, with hopes for notification and implementation in the next year, possibly Q1 FY26.

Outlook and Future Targets

Century Enka is cautiously optimistic about NTCF demand growth in Q4 FY25 and FY26. For the new PTCF segment, the company anticipates peak capacity revenue between INR 110 to 120 crores with EBITDA margins exceeding 10%. Customer approvals for PTCF are expected between Q1 and Q2 FY26. The company maintains a minimum IRR hurdle rate of 12% or above for new investments and expects asset turns of 1 to 1.4 for new projects. Overall capacity utilization for NTCF and Nylon is projected to be around 80,000-82,000 tons for the full year.

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