UFLEX Q1 FY27 earnings call

UFLEX Limited commenced fiscal 2027 with robust performance, reporting a 38% year-on-year increase in consolidated revenue to Rs. 53,972 million. EBITDA soared by 92% year-on-year to Rs. 9,198 million, with the EBITDA margin expanding by 480 basis points to 17%, marking the highest in 21 quarters. Normalized EBITDA, after adjusting for forex derivative transactions, reached Rs. 8,373 million, reflecting a 78% year-on-year growth and a margin of 15.5%. The consolidated net profit after tax (PAT) stood at Rs. 4,233 million, significantly up from Rs. 580 million in Q1 FY26, with a net margin of 7.8%.

Overseas operations were a primary growth engine, contributing 80% of the incremental revenue and approximately 91% of the incremental EBITDA. Key regions like Egypt, Mexico, and Nigeria, alongside the India PET chips business, were significant drivers of profitability. Total sales volume for the quarter grew 1.7% year-on-year to 173,471 metric tons. Packaging Films volume expanded by 4.9% year-on-year to 136,186 metric tons, while overall Packaging volumes saw an 8.4% year-on-year decline to 37,285 metric tons, attributed to a strategic shift towards high-margin products in India and challenges in Aseptic Packaging.

The company incurred Rs. 4,782 million in capital expenditure during Q1 FY27, primarily allocated to four key projects: Egypt Aseptic facility (Rs. 1,236 million), Mexico WPP bags (Rs. 205 million), Noida Sector 155 recycling unit in India (Rs. 320 million), and Dharwad BOPP Line in India (Rs. 215 million). The 39,000 metric tons per annum recycling plant at Noida Sector 155 and the 80-million-unit WPP bags plant in Mexico were successfully commissioned. The Greenfield Aseptic project in Egypt, with a 12 billion packs capacity, remains on schedule for commissioning in FY27, with only USD 15 million in capex remaining for this project.

UFLEX is focused on strategic capital allocation towards high-margin, value-added products, with 60-70% of future capex directed to these segments. The company has successfully reduced its Debt-EBITDA ratio from 4.5x in FY26 to 3.5x in Q1 FY27, with a target to bring it below 3x by FY28. Management also expressed confidence in reducing interest costs by 1% over the next year, building on the 0.3-0.4% reduction achieved this quarter. The strategy prioritizes wealth creation for shareholders through growth rather than buybacks, given the significant growth opportunities.

The Aseptic Packaging segment experienced slower expansion in Q1 due to aggressive pricing from duty-free imports from Indonesia. However, management anticipates a recovery from Q3 onwards, driven by growing consumer demand in India and the commissioning of the Egypt Aseptic facility. The company expects its Egypt Aseptic plant to achieve 30% utilization (approximately 2 billion packs) in the current financial year and full 100% utilization by FY29. The focus on integrated operations and localized sourcing helps derisk supply chains and maintain pricing power, even amidst geopolitical challenges^🌐.

UFLEX projects a 35% growth in both top-line revenue and EBITDA for FY27, with an EBITDA margin expected to be 14% plus. The company aims to double its total sales volume of 173,000+ metric tons within the next three years, driven by the full utilization of new capacities in Egypt, Noida recycling, and Mexico WPP. Management emphasized a long-term perspective, expecting a decent growth trajectory until FY29, with a CAGR of at least 10% from FY26 to FY29, as all ingredients for growth are now in place.