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    Ester Industries

    ESTER
    Capital Goods·7 Feb 2025
    Management Summary

    Ester Industries reported a strong Q3 FY25, with consolidated EBITDA reaching ₹65 crores and PAT turning positive at ₹25 crores, driven by accelerated momentum in both Film and Specialty Polymer segments. The Film business saw improved margins and profitability due to better product mix and exports, while Specialty Polymers achieved strong Y-o-Y growth. The company's JV with Loop Industries is progressing as planned, though the Specialty Polymer revenue target for FY25 might see a slight shortfall.

    Highlights

    5

    • Overall business momentum sustained and accelerated, with strong performance in both Film and Specialty Polymer segments.

    • Film business registered solid performance with improved margins and profitability, driven by better product mix and increased exports.

    • Specialty Polymer business achieved strong Y-o-Y growth, with 40% volume increase in Q3 FY25.

    • Consolidated EBITDA for Q3 FY25 turned positive at ₹65 crores, compared to a negative ₹15 crores in Q3 FY24.

    • The joint venture with Loop Industries is progressing according to its established timeline, targeting commercial operations by Q2 Calendar Year 2027.

    Concerns

    2

    • The Specialty Polymers revenue target of ₹200 crores for FY25 might be missed by 10-15%.

    • The BOPET film market still faces a demand-supply mismatch of around 12,000-15,000 tons per month, though it is narrowing.

    What Changed2

    vs Q4 FY25

    Risks discussed4 → 3 (-1)Q&A highlights6 → 8 (+2)

    Key financials

    Single quarter

    04 metrics
    1. 01Standalone Total Income₹277 Cr+31.3%YoY
    2. 02Standalone EBITDA₹44 Cr
    3. 03Consolidated EBITDA₹65 Cr
    4. 04Consolidated PAT₹25 Cr

    Segment breakdown

    Specialty Polymers
    785 MT Sales Volume (excl. R-PET)2,610 MT 9M Sales Volume (excl. R-PET)30% EBITDA Margin
    Film Business
    5% Exports Volume Growth (Consolidated)27% Value-Added Products Share (Consolidated)
    Ester Filmtech
    ₹90 Cr Revenues₹22 Cr Reported EBITDA6,698 MT Sales Volume
    List

    Order Book

    low confidence

    "The export business is described as a very recurring kind of business, not tender-driven, leading to repeat business once a product is established with a customer."

    Source:
    Q&A

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Capex

    ₹1,400 crores

    40% equity, 60% debt for JV project

    Debt

    Net ₹600 crores

    Maturity: Current maturity till March: Rs. 3-4 crore. Next year maturity: Rs. 80-85 crore.

    M&A

    Loop Industries Inc. (ELITe JV)

    joint venture · integrated · Consideration ₹NaN (mixed)

    Guidance & targets

    10
    CategoryTargetPriority
    Revenue
    Specialty Polymers Revenue
    close to ₹200 crore, but 10-15% short
    		Medium
    Revenue
    Ester Filmtech Revenue
    approximately ₹360 crores
    		High
    Revenue
    Ester Filmtech Revenue
    ₹450–₹500 crore
    		High
    Demand Growth
    BOPET Film Demand Growth in India
    9% to 10%
    		High
    Commercial Operations
    JV Commercial Operations Start
    Second quarter of calendar year 2027
    		High
    Profitability
    Specialty Polymers EBITDA Margin
    30%, 33%
    		High
    Profitability
    Ester Filmtech EBITDA Margin
    18% to 20%
    		High
    Volume
    Specialty Polymers Volume Growth
    double-digit growth
    		High
    Capacity Utilization
    Ester Filmtech Capacity Utilization Increase
    over 10 percentage point
    		High
    Sales Volume
    rPET Sales Volume
    800 to 1,000 tons
    		High

    Specialty Polymers Revenue Achievement

    Next quarter (Q4 FY25 results)
    CurrentExpected to be 10-15% short of ₹200 crore target for FY25
    TargetCloser to ₹200 crore or clear guidance for FY26

    Why it matters

    Indicates the company's ability to meet ambitious growth targets in a high-margin segment.

    we believe that it's going to be quite tough for us to hit that Rs.200 crore top line. And we are looking to come close to it, but I believe that in the end we might end up being 10% to 15% short in the top line target of Rs. 200 crore.

    How to verify

    guidance_and_targets[category='Revenue'][metric='Specialty Polymers Revenue']

    Risks & concerns

    3
    RiskSeverity

    Specialty Polymers Revenue Target Miss

    The FY25 revenue target of ₹200 crores for Specialty Polymers is likely to be missed by 10-15% due to current quarter performance. — Management acknowledged

    medium

    BOPET Demand-Supply Mismatch

    An oversupply of 12,000-15,000 tons per month still exists in the BOPET market, though it is narrowing and expected to stabilize. — Management acknowledged

    medium

    Attrition

    Management stated that recent attrition is not alarming, as departing employees had served for 4-5 years and new opportunities arise. — Management downplayed

    low

    Q&A highlights

    8

    “So, this is making the market more balanced with respect to supply-demand, and therefore, we expect that this recovery should continue and the margins should stabilize, given that the supply and demand are now coming closer to each other. Also, the other thing that we are expecting is from 1st of April, the government is going to implement PWMR rules for flexible packaging and polyester is a substrate where the recycled content can be much higher than the other substrates.”

    Management provided a detailed outlook on market dynamics, highlighting the narrowing demand-supply gap and the positive impact of upcoming regulatory changes (PWMR rules) on BOPET demand.

    asked by Jatin Damania

    2 min read7 chapters

    Detailed Narrative

    01

    Q3 FY25 Performance Overview

    Ester Industries reported a strong Q3 FY25, with consolidated EBITDA of ₹65 crores, a significant turnaround from a negative ₹15 crores in Q3 FY24. Consolidated PAT also turned positive at ₹25 crores, compared to a loss of ₹45 crores in the prior year. Standalone total income grew 31% YoY to ₹277 crores, driven by robust performance across both Film and Specialty Polymer businesses.

    02

    Film Business Resurgence and Product Mix

    The Film business demonstrated a strong resurgence, achieving margin enhancement and improved profitability in Q3 FY25. This was primarily due to a better product and market mix, with increased exports of high-margin value-added products. The share of value-added products on a consolidated basis rose to 27% in Q3 FY25, up from 16% in Q3 FY24, contributing to overall better profitability.

    03

    Specialty Polymer Segment Growth and Outlook

    The Specialty Polymer business registered strong Y-o-Y growth, with sales volume (excluding R-PET) increasing by 40% to 785 MT in Q3 FY25. For the nine months, volume grew 55% to 2,610 MT. While the FY25 revenue target of ₹200 crores might see a 10-15% shortfall, management expects to maintain EBITDA margins of 30-33% and achieve double-digit volume growth in the next fiscal year.

    04

    Ester Filmtech Performance and Future Plans

    The wholly-owned subsidiary, Ester Filmtech, generated revenues of ₹90 crores in Q3 FY25, with an EBITDA of ₹22 crores. The company expects Ester Filmtech to achieve revenues of approximately ₹360 crores in the current fiscal and ₹450-500 crores in the next fiscal year upon optimal utilization. An extruder is planned for commissioning by June/July 2025 to convert PET bottle flakes into granules, supporting PCR content requirements.

    05

    Loop Industries JV Progress and Funding

    The joint venture with Loop Industries Inc. (ELITe) is progressing as per schedule, with commercial operations targeted for the second quarter of calendar year 2027. The total CAPEX for the JV is estimated at ₹1,400-1,500 crores, funded by 40% equity and 60% debt. Ester and Loop have each contributed ₹8.5 crores in equity, with Ester having raised ₹175 crores via share warrants, of which 25% has been received.

    06

    BOPET Market Dynamics and Regulatory Tailwinds

    The BOPET market is expected to see strong demand growth of 9-10% in the next fiscal year, driven by natural growth (1.5x GDP growth) and the implementation of Plastic Waste Management Rules (PWMR) from April 1, 2025. These rules mandate 10% recycled content in flexible packaging, which is anticipated to boost demand for polyester film and help narrow the existing demand-supply mismatch of 12,000-15,000 tons per month.

    07

    Debt Profile and Rating Outlook

    Consolidated net debt stood at ₹600 crores as of December 31, 2024, with long-term borrowing at ₹400 crores. Ester Industries holds an A- rating, and Ester Filmtech a Triple B. Management is in discussions with rating agencies for a potential upgrade, citing strong Q3 results and expected future performance. Ester Filmtech has annual debt repayments of ₹50 crores, with existing debt projected to be extinguished by 2030.

    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.