GHCL Q3 FY25 earnings call

GHCL reported a healthy operational performance in Q3 FY25, with revenue at ₹807 crores, a marginal decline of 0.74% YoY and 0.37% QoQ. Despite this, EBITDA saw a significant increase to ₹259 crores, up 56.97% YoY and 13.60% QoQ. This led to a substantial expansion in EBITDA margin to 32%, compared to 20.3% in Q3 FY24 and 28.2% in Q2 FY25. PAT from continuing operations also grew robustly to ₹168 crores, reflecting a 68% YoY and 8.38% QoQ increase, primarily driven by operational efficiencies and cost control.

The Indian soda ash market experienced better demand growth than global markets, but faced challenges from cheaper imports. Management expects the recently imposed Minimum Import Price (MIP) to stabilize domestic pricing and reduce import volumes, with volume benefits anticipated within 1-2 months. The growing solar power sector, supported by increased government allocation in the Union budget for 2025-26, is projected to significantly boost domestic demand for soda ash, a key component in solar glass manufacturing.

GHCL's strategic growth initiatives are progressing well. The Greenfield project has received environmental clearances and is expected to be completed in approximately 3 years (FY28). The Vacuum Salt and initial Bromine projects are on track for commissioning in FY25-26, specifically around July and September 2025. The Bromine project is projected to generate ₹50-60 crores in annual revenue with a 40-50% EBITDA margin, while Vacuum Salt is expected to add ₹100-120 crores in revenue with a 30-40% EBITDA margin once fully operational.

The improvement in gross and EBITDA margins during the quarter was largely attributed to operational efficiencies and cost reduction measures, rather than raw material price reductions. Management emphasized that these cost initiatives are permanent and will continue to drive margin improvement. While acknowledging overall market volatility^🌐, they expressed confidence in the sustainability of these efficiency gains, though the exact extent of future margin expansion will depend on evolving market dynamics.

GHCL currently has approximately 30% backward integration for salt and 20-25% for limestone. The company plans to significantly increase its salt backward integration with a new salt field, for which a CAPEX of ₹350 crores is earmarked over the next 3 years. This new capacity will feed 30-35% of the current soda ash plant's requirements, with the remainder supporting the new soda ash plant in the Kutch area, enhancing raw material security and cost stability.

Demand for soda ash is set to benefit from the increasing consumption of solar glass in India. Management highlighted recent trade protection measures, including anti-dumping duties imposed on textured, tempered, coated, and uncoated glasses from China and Vietnam, and the re-imposition of basic duty on solar glass imports. These measures are expected to create a more favorable environment for domestic solar producers, driving significant growth in 2025-26 and consequently boosting soda ash consumption.

For the nine-month period ended December 31, 2024, GHCL generated ₹556 crores in cash profit after tax. The company invested ₹240 crores in CAPEX, repaid ₹82 crores in loans, and distributed ₹114 crores as dividends to shareholders. GHCL maintains a robust financial position, being a debt-free company with cash and investments totaling ₹1,036 crores and a net cash surplus of ₹920 crores as of the quarter end.