Century Enka Limited

Century Enka reported Q3 FY26 operating revenue of INR 412 crores, a marginal 1% increase QoQ but a significant 17% decline YoY. Despite the revenue dip, EBITDA saw a robust increase of 50% YoY and 29% QoQ, reaching INR 41 crores. This led to a substantial EBITDA margin expansion to 9.93%, up 442 basis points YoY and 220 basis points QoQ, reflecting improved operational efficiency. Profit after tax (PAT) also grew by 69% YoY and 6% QoQ to INR 24 crores, with a PAT margin of 5.76%.

For the nine months ended FY26, operational revenue stood at INR 1,222 crores, down 22% YoY, while EBITDA declined 13% YoY to INR 92 crores. However, EBITDA margins improved by 75 basis points YoY to 7.56%. Total volume for the period decreased by 12% YoY to 52,981 metric tons, with tyre cord fabric sales down 24% YoY to INR 571 crores and filament yarn sales down 19% YoY to INR 599 crores. The volume decline was attributed to lower demand in the tyre cord segment due to GST cut expectations and weak demand in the filament yarn segment post-Diwali due to extended monsoon and labor issues.

Margins continued to face pressure from low-priced imports from China and duty-free imports from free trade agreement countries. Management noted a 50-70% increase in nylon filament yarn imports YoY and QoQ, driven by weak domestic demand in China and US tariffs. The industry association has applied for anti-dumping duties, with a final ruling from DGTR expected in February or March 2026, which could help mitigate the dumping impact.

The company is actively pursuing renewable energy initiatives, with current renewable sources meeting about 15% of power requirements. This is projected to increase to 30-35% by the second half of FY27, expected to generate an annual gain of INR 10-12 crores, with full benefits flowing in FY28. The Polyester Tyre Cord Fabric (PTCF) project is progressing, with commercial sales anticipated to begin in FY27, and management expects similar margins to existing businesses, targeting a minimum 12% IRR for new projects.

Caprolactam prices increased from October, following a period of low margins for producers. Management believes this trend will continue towards sustainable levels, supported by industry-wide production cuts in China. The company expects to pass on raw material cost increases to customers, maintaining that pricing normally accounts for RM costs and that rising markets should not significantly impact margins, though timing adjustments may occur.

Century Enka maintains a debt-free status with a positive cash balance, indicating strong financial health and sufficient internal cash for large projects. While shareholders inquired about a potential buyback, management stated their primary aim is to deploy cash for growth-oriented projects that enhance profitability. They confirmed that shareholder sentiments regarding buybacks are conveyed to the board, which will make the final decision.

The company's new Polyester Tyre Cord Fabric (PTCF) product is undergoing a rigorous approval process with tyre companies, involving extensive testing and audits. This process is time-consuming due to the critical nature of the product in passenger car tyres, which often use a single-ply reinforcement. Management views this as a learning curve but is hopeful for stabilization and easier commercialization once approvals are secured.