Detailed Narrative
Robust Q4 FY26 Performance Driven by Volume and Cost Pass-Through
Century Enka reported a strong Q4 FY26, with operating revenue growing 9% year-on-year to ₹484 crores and a 17% sequential growth. EBITDA surged 530% year-on-year to ₹55 crores, leading to an EBITDA margin of 11.46%, an expansion of 948 basis points. This performance was primarily fueled by a 14% year-on-year increase in total volume to 20,711 metric tons and the effective pass-through of raw material cost increases, particularly in the Tire Cord business which saw robust demand from tractor and two-wheeler segments.
FY26 Overview and Profitability Improvement
For the full fiscal year 2026, Century Enka's operating revenue declined 15% year-on-year to ₹1,705 crores, and total volume saw a 6% degrowth to 73,692 metric tons. Despite the top-line contraction, the company achieved a healthy 29% year-on-year growth in EBITDA to ₹148 crores, with the EBITDA margin expanding by 294 basis points to 8.67%. Net profit for FY26 also grew significantly by 52% year-on-year to ₹101 crores, resulting in a PAT margin of 5.91%.
Strategic CAPEX for Growth, Efficiency, and New Products
The company plans a CAPEX outlay of over ₹100 crores for FY27, earmarked for value-added products, expansion of Mother Yarn capacity, and initiatives to reduce power consumption and waste. Additionally, an equity contribution of less than ₹10 crores is planned for renewable energy expansion through a group captive arrangement, aiming to increase renewable power content from 36% to 48%. The Polyester Tire Cord Fabric (PTCF) project, which has already seen an investment of close to ₹100 crores, is undergoing a rigorous approval process, with commercial sales expected in H2 FY27.
Managing Raw Material Volatility and Chinese Import Competition
Century Enka successfully navigated sharp increases in caprolactum prices following the Iran conflict by effectively passing these costs through to customers. While Chinese imports at very low prices continue to affect commodity products, the company is encouraged by a favorable anti-dumping ruling from DGTR. Awaiting final notification from the Finance Ministry, this ruling could potentially impact pricing by 10-30% of current FOB value, improving competitiveness against imports which constitute 20-25% of domestic demand.
Capital Allocation Focused on Growth and Sustainability
Management reiterated its capital allocation philosophy, emphasizing growth and long-term business sustainability over immediate shareholder returns like buybacks or higher dividends. The Board intends to utilize the company's significant balance in investments, exceeding ₹400 crores, for strategic growth initiatives, including exploring new segments within or outside textiles, and making investments to reduce costs and improve operational efficiency.
Outlook on Operating Margins and Radialization Impact
In a normalized scenario, Century Enka anticipates its operating margin to be in the range of 7% to 10%, driven by ongoing cost reduction efforts and increased renewable energy usage. Regarding radialization in the tire segment, management noted that it has reached approximately 60% in the truck and bus segment but does not significantly impact the tractor or two-wheeler segments. The overall growth of nylon as reinforcement in the tire segment is expected to be marginal, around 1% to 2%.