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    Century Enka

    CENTENKA
    Textiles·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

    5
    • 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

    3
    • 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.

    What Changed2

    vs Q4 FY25

    Guidance items6 → 11 (+5)Risks discussed5 → 6 (+1)
    Key financials

    Metrics

    10

    Periods

    2

    Q3 FY25

    5
    • Operating Revenue
      ₹493 Cr
      YoY+9.5%
    • EBITDA
      ₹27 Cr
      YoY+48%
    • EBITDA Margin
      5.5%
    • PAT
      ₹14 Cr
      YoY+2.0%
    • Total Volume
      19,368 metric tons
      YoY+11%

    YTD FY25

    5
    • Operational Revenue
      ₹1,558 Cr
      YoY+22%
    • EBITDA
      ₹106 Cr
      YoY+116.0%
    • EBITDA Margin
      6.8%
    • Net Profit
      ₹60 Cr
      YoY+1.6%
    • Total Volume
      60,275 metric tons
      YoY+21%

    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
    List

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Capex

    Capex disclosed

    Debt

    Debt disclosed

    Liquidity

    Liquidity disclosed

    Company has sufficient cash on the balance sheet.

    Guidance & targets

    11
    CategoryTargetPriority
    Capacity
    Polyester Tyre Cord Fabric (PTCF) commercial production start
    Start in FY26
    High
    Demand
    NTCF demand growth
    Cautiously optimistic
    Medium
    Cost Reduction
    Renewable power expansion
    Expand by middle of next financial year
    High
    Regulatory
    Anti-dumping duty on NFY notification and implementation
    Hopeful for notification and implementation in next year, maybe Q1 itself
    Medium
    Revenue
    PTCF revenue at peak capacity
    Between 110 to 120 crores
    Medium
    Profitability
    PTCF EBITDA margins
    In excess of 10%
    Medium
    Approvals
    PTCF customer approvals
    Hopeful of getting approvals for at least some customers
    Medium
    Capital Allocation
    IRR hurdle rate for investments
    Minimum 12% or above
    High
    Capital Allocation
    Asset turns for new projects
    1 to 1.3-1.4
    Low
    Capacity Utilization
    Current capacity utilization (92,000 tons per annum)
    Around 80,000 plus in terms of capacity production
    Medium
    Capacity Utilization
    NTCF and Nylon capacity utilization
    Around 80,000-82,000 tons
    Medium

    PTCF commercial production start

    FY26
    CurrentApprovals in progress, trials started
    TargetCommercial 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.

    How to verify

    guidance_and_targets

    Risks & concerns

    6
    RiskSeverity

    Subdued NTCF demand due to poor truck and bus segment demand

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

    medium

    Increased imports by tyre companies reducing NTCF demand for domestic suppliers

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

    medium

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

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

    high

    Caprolactam price decline leading to stock losses and margin pressure

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

    high

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

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

    high

    NTCF being a shrinking market

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

    medium

    Q&A highlights

    8

    “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

    2 min read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.