Manorama Industries Limited

Manorama Industries reported robust financial results for Q3 and 9M FY26. For the nine-month period, revenue grew by an impressive 81.3% year-on-year to INR 975 crores, with an EBITDA of INR 265 crores, yielding a 27.2% margin. Profit after tax stood at INR 174 crores, representing a 17.8% margin. Q3 FY26 alone saw revenues of INR 363 crores and an EBITDA of INR 98 crores, with margins of 27.1% and 18.8% for EBITDA and PAT respectively.

Buoyed by strong performance and confidence in its growth trajectory, the company revised its FY26 revenue guidance upwards. The new target is INR 1,300 crores, an increase from the previous guidance of INR 1,150 crores. This revision underscores the management's positive outlook on sustained demand and operational capabilities, including an enhanced mix of value-added products and optimized utilization of upgraded fractionation facilities.

Manorama Industries announced a significant capital expenditure plan of INR 460 crores over the next 2-3 years to fuel its next phase of growth. This investment will fund four key projects: a 75,000 MTPA facility for cocoa butter alternatives (CBA), a 75,000 MTPA fractionation plant for exotic seeds including ESOS, a 90,000 MTPA refinery, and a 90,000 MTPA processing factory in Burkina Faso, West Africa. These expansions are designed to meet growing demand and diversify the raw material base.

The company's strategy emphasizes a technology-driven, solution-oriented business model, distinct from commodity-linked operations. Management highlighted that its CBE fats and butters are developed through specialized fat blending and fractionation, leveraging advanced R&D. This approach, combined with strong customer relationships, allows for margin stability, with EBITDA margins consistently maintained in the 25-27% range, despite fluctuations in gross margins due to freight costs and byproduct realization. The company aims to increase value-added product contribution to sales from 75% to 85-90% going forward^⏳.

Manorama Industries expects a significant improvement in its working capital cycle with the new projects. While the existing business model has a working capital cycle of around 120 days (down from 150-160 days in H1), the new forward integration projects are projected to operate with a much shorter cycle of 1-3 months. This efficiency gain is attributed to the captive consumption of raw materials and different raw material sourcing for these new product lines, further strengthening the company's financial health.

Management addressed concerns regarding external factors such as cocoa price volatility and EU deforestation rules. They clarified that their business is not directly tied to cocoa commodity cycles due to their specialized product nature and diverse raw material base. Furthermore, the EU deforestation rules, which primarily apply to cocoa beans, do not impact Manorama's sourcing of forest wasted products from India and West Africa, ensuring business continuity and mitigating regulatory risks.