Filatex India Q1 FY27 earnings call

Filatex India Limited reported a robust Q1 FY27 with revenues increasing by 16.3% QoQ to INR1,145 crores, primarily driven by improved realization due to higher raw material prices. PBT rose significantly to INR65.87 crores from INR53.47 crores in Q4 FY26, and PAT increased by 22.1% QoQ to INR49.1 crores. Despite stable sales volumes at 89,872 metric tons QoQ, production was cut to 84,075 metric tons in April due to high raw material costs, a strategic decision to avoid high-cost inventory.

The global textile and polyester industry faced a dynamic environment in Q1 FY27, marked by geopolitical uncertainty^🌐, volatile raw material prices (PTA and MEG), and cautious customer buying. Disruptions in the Strait of Hormuz impacted supply chains, but Filatex mitigated risks by procuring MEG from the US. While April saw challenging conditions with high crude prices, the market improved from May onwards, with margins stabilizing and demand picking up, especially for the winter season.

The company's comprehensive capital expenditure program of approximately INR690 crores is progressing steadily. The brownfield PFI expansion, aimed at enhancing FDY, POY, and DTY capacities, is expected to be 50% complete by September 2026 and fully operational by October 2026, projected to add INR400 crores to the top line annually. The steam distribution project, with a capex of INR80-85 crores, is now expected to commercialize by September 2026, generating an estimated EBITDA of INR60 crores.

Filatex's entry into textile-to-textile chemical recycling through its subsidiary Ecosis is a transformational milestone. The project, which involves converting end-of-life textile waste into virgin-like polyester chips, is expected to deliver a minimum 30% EBITDA margin, with an estimated INR80-90 crores EBITDA primarily in FY28. The company has secured product approvals from multiple brands and has strategic partnerships, including with Decathlon, with 15-20% of production already committed.

Out of the INR690 crores capex program, approximately INR450-500 crores have already been deployed. The company's net debt at the end of Q1 FY27 was around INR150-200 crores, with an expected peak net debt of INR150-200 crores by the end of FY27. Management expressed comfort with a debt-to-equity ratio of 0.4 and highlighted existing free cash flow of over INR150-200 crores, indicating a prudent approach to capital management.

Raw material prices, particularly for PTA and MEG, remained volatile. However, Filatex demonstrated its ability to pass on increased costs to customers, maintaining or improving margins. The expiry of import duties on PTA/MEG did not significantly impact spreads as domestic prices adjusted. The company noted that margins have stabilized since April, and the winter season is expected to drive demand, further supporting profitability.