Detailed Narrative
Q3 & 9M FY25 Performance Overview
Heranba Industries reported a 9M FY25 revenue from operations of ₹1,075 crores, marking a 7.5% increase from ₹1,000 crores in 9M FY24. Profit After Tax (PAT) for the nine-month period grew by 25.7% YoY to ₹44 crores, up from ₹35 crores in the previous year. However, EBITDA margins for 9M FY25 were suppressed at 11%, primarily due to lower product realization and increased operating expenditures.
Pricing Environment and Export Market Challenges
The company faced significant pricing pressure, particularly in the export technical business during Q3 FY25, leading to a 200-300 basis points drop in gross margins. This was attributed to challenging global macros, a slowdown in demand, and high inventory levels. Competition from both Indian and Chinese players contributed to the price dip. Management, however, noted a slight revival in prices and demand in Q4 FY25 across both domestic and export markets, with expectations for better realization in Q1 FY26.
CAPEX and Capacity Expansion
Heranba has deployed approximately ₹425 crores in CAPEX over the last two years, with an additional ₹50-100 crores expected to be deployed. The Sarigam Phase 2 facility and the new Greenfield Saykha facility are both anticipated to commence commercial production by the end of Q4 FY25 (March end). These new capacities are crucial for the company's projected 35-40% revenue growth in FY25-26 and a total turnover of ₹1,850-1,950 crores.
Margin Compression and Cost Headwinds
The 9M FY25 EBITDA margin was 11%, impacted by lower realizations and increased expenditures. Specifically, Q3 FY25 saw a margin hit due to fixed costs of approximately ₹15-20 crores associated with new plant capacity that commenced in October but was not yet fully utilized. Management expects FY25 EBITDA margins to be in the range of 10-12%, with an improvement of 200-300 basis points in the next year, targeting 12-14% for FY25-26.
New Business Initiatives and Market Outlook
The Daikaffil unit, acquired as a sick unit, started production in Q3 FY25, contributing ₹3.5 crores from contract manufacturing. The company plans to ramp up its own product manufacturing and establish an R&D setup at Daikaffil. In the US market, Heranba is a late entrant, with registrations taking time, but expects new registrations in the coming year to scale business. China currently accounts for about 10% of the total business.