UFLEX Limited — Q3 FY25 earnings call

Call held 17 Feb 2025

Management summary

Uflex reported a strong Q3 FY25 with significant revenue and volume growth, accompanied by substantial margin expansion. The company saw improved capacity utilization across its key international plants and achieved a positive PAT. Strategic investments in recycling, Aseptic packaging, and WPP bags are underway, positioning Uflex for future growth and compliance with new regulations, while managing debt levels.

Highlights

  • Revenue up 12.8% YoY to INR 3,774 crores.

  • Volume growth of 6.3% in Q3 FY25.

  • EBITDA margin at 13.8% for Q3 FY25, up from 11.4% in Q2 FY25.

  • 9-month EBITDA margin at 12.6%, a YoY growth of 1.1%.

  • Aseptic Packaging capacity utilization reached 104% in Q3 FY25, up from 84% in Q3 FY24.

  • Nigeria plant utilization improved to 90% in Q3 FY25 from 64% in Q2 FY25.

  • Reported a positive PAT of INR 111 crores in Q3 FY25, including a positive currency devaluation impact of INR 26 crores from Nigeria.

  • Announced a new PET bottle recycling facility in Noida with an investment of INR 317 crores and a $50 million WPP bags facility in Mexico.

Concerns

  • BOPP overcapacity in India

Key financials

3 periods

Headline

  • Revenue
    ₹3,774 Cr
    YoY +12.8%
  • Volume Growth
    6.3%
    YoY +6.3%
  • Net Debt to EBITDA Ratio
    3.24×
  • Consolidated Debt
    ₹6,150 Cr

Q3 FY25

  • EBITDA Margin
    13.8%
  • PAT
    ₹111 Cr

9 Months FY25

  • EBITDA Margin
    12.6%
    YoY +1.1%

What they filed

Q1 FY27: revenue up 37.6%, net profit up 629.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,833 3,735 3,814 3,901 3,832 −0%3,612 −3%4,056 +6%5,366 +38%
EBITDA392 454 410 454 386 −2%436 −4%584 +42%889 +96%
Net profit-65 137 169 58 27 +142%36 −74%196 +16%423 +629%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Capacity

  • Nigeria Plant Capacity Utilization Capacity · FY26 · High confidence 100%
    Nigeria plant, we'll be able to operate at 100% capacity utilization.

    — Rajesh Bhatia, Group President and CFO

  • Mexico Plant Capacity Utilization Capacity · FY26 · High confidence 100%
    for the year as a whole, we expect that the Mexico as well as the plant in Nigeria, we'll achieve 100% capacity utilization for the whole of the FY '26

    — Rajesh Bhatia, Group President and CFO

  • Poland Plant Capacity Utilization Capacity · FY26 · Medium confidence 80%
    And we'll try to achieve about 80% levels in the FY '26 for this.

    — Rajesh Bhatia, Group President and CFO

  • Egypt Aseptic Packaging Capacity Capacity · FY27 onwards · High confidence 12 billion units
    This is new 12 billion units.

    — Rajesh Bhatia, Group President and CFO

  • BOPP New Capacity (India) Capacity · FY26 (June onwards) · High confidence 12,000-13,000 tons/month (excess)
    So, every month, there will be an excess product of about 12,000 to 13,000 tons given the presently it is balanced.

    — Rajesh Bhatia, Group President and CFO

  • PET New Capacity (India) Capacity · FY27 (or late FY26) · High confidence 4,000 tons/month
    I think next 1 year or so, there will be one plant more, which will be coming. That will be maybe in FY '27 or maybe later part of FY '26.

    — Rajesh Bhatia, Group President and CFO

Volume

  • Asepto Packs Sales Volume Volume · FY26 · Medium confidence 10.5-11 billion packs
    So, FY '26, if I think out of 12 billion packs, if we can achieve anywhere around between 10.5 billion to 11 billion packs a year, I think we target that as of now for FY '26.

    — Rajesh Bhatia, Group President and CFO

Revenue

  • New Facilities (PET chips, Aseptic Sanand, CPP Mexico) Annual Revenue Revenue · Annually, at full utilization (FY27 for full potential) · High confidence INR 2,200-2,500 crores
    So, these 3 will give us anywhere between INR2,200 crores to INR2,500 crores of the top line at a full capacity utilization basis. So, I think we can maybe FY '26, we'll achieve partial, but FY '27, we will achieve its full potential.

    — Rajesh Bhatia, Group President and CFO

Profitability

  • WPP Bags EBITDA Margin Profitability · Null · High confidence 22-25%
    So overall, this business should generate anywhere between 22% to 25% EBITDA margin.

    — Rajesh Bhatia, Group President and CFO

  • Overall EBITDA Profitability · FY25 · High confidence INR 2,000 crores

    Previously INR 1,950 crores → INR 2,000 crores

    So, FY '25 looks like we'll be able to achieve about INR2,000 crores of EBITDA, as I had said at the beginning of the year. So, we have already achieved INR1,425 crores in the first 3 quarters. And if we replicate the same number as what we achieved in Q3 and Q4, then we are about INR1,950-odd crores. And the additional volumes from the PET chips and Asepto expansion should take us to about INR2,000-odd crores of numbers for sure.

    — Rajesh Bhatia, Group President and CFO

  • Overall EBITDA Growth Profitability · FY26 · Medium confidence 12-15%
    I think we should look at about 12% to 15% over FY '25.

    — Rajesh Bhatia, Group President and CFO

  • Overall EBITDA Margin Profitability · FY26 · Medium confidence 14%
    Margin I think let's keep 14% as of now.

    — Rajesh Bhatia, Group President and CFO

Capex

  • PET Bottle Recycling Facility Investment Capex · Null · High confidence INR 317 crores
    we are going to spend about INR317 crores for setting up this facility.

    — Rajesh Bhatia, Group President and CFO

  • WPP Bags Facility Investment (Mexico) Capex · Null · High confidence $50 million
    we've also announced the WPP bags investment of about 50 million in Mexico

    — Rajesh Bhatia, Group President and CFO

  • Egypt Aseptic Packaging Expansion Investment Capex · Next couple of years (completion FY26, operations FY27) · High confidence INR 1,700 crores (more to be spent)
    And then there is $126 million of Asepto packaging expansion announced in Egypt, of which about 19-20 million is already spent. So, I think we will spend about INR1,700 crores more in the new expansion, what is happening in the next couple of years.

    — Rajesh Bhatia, Group President and CFO

Renewable Energy

  • Power Sourcing from Renewables Renewable Energy · Next two years · High confidence 70-80%
    We think that ultimately, in all the plants, we will take about 70%-80% power from renewables in the next two years.

    — Rajesh Bhatia, Group President and CFO

Project Completion

  • PET Food Packaging Plant (Mexico) Completion Project Completion · End of '26 · High confidence Null
    Food packaging, also, we are targeting completion towards the end of '26.

    — Rajesh Bhatia, Group President and CFO

Risks & concerns

  • BOPP overcapacity in India

    high

    Four new BOPP capacities are coming on stream in FY26 (June onwards), which will create an excess of 12,000-13,000 tons/month and may impact BOPP prices.

    Management acknowledged

  • Europe demand affected / Poland plant underutilization

    medium

    Demand continues to be affected in Europe, leading to Poland plant capacity utilization of 61% in Q3 FY25, with a target to reach 80% in FY26.

    Management acknowledged

  • Potential 25% tariffs on Mexican exports to the U.S.

    medium

    Management discussed multiple scenarios, including non-implementation, lower tariffs, or a level playing field if other exporting countries also face duties.

    Analyst acknowledged

  • Industry not ready for mandated recycled material norms

    medium

    Government of India mandated 30% recycled material in rigid plastics and 10% in flexibles from April 1, 2025, but the industry as a whole is not ready with this capacity.

    Management acknowledged

  • Low margins in flexible packaging business

    medium

    Management stated that margins in flexible packaging are very low, hence they are not expanding capacity in this segment, focusing instead on value-added products.

    Management acknowledged

  • Low PAT margin (2-3%)

    low

    Management explained that in this industry, they focus on EBITDA margin as capital is debt-financed, leading to higher interest and depreciation impacting PAT.

    Analyst downplayed

Areas of evasion (1)

  • Specific market size and margin details for the ultra-high barrier film in Hungary.

Q&A highlights

2 direct
Impact of potential 25% tariffs on Mexico exports to the U.S. Direct
So, I think there are multiple options here. The first scenario is that this does not get implemented. And as we saw, this was levied but then withdrawn the next day and postponed for a month's period. ... So hopefully, if that gets taken care of, there will be no duty. Other aspects are that if there are duty on Mexican products, if not 25, maybe 10, maybe 15, maybe 5, we don't know as yet. So, in all likelihood, all the other countries exporting to U.S. will also have some sort of duties or the other, which will put us on a level playing field vis-a-vis others who are exporting to America.

Addresses a significant geopolitical risk to their Mexico operations and provides management's strategy and outlook on mitigating it.

Asked by Chirag Singhal

Debt levels and plans to reduce leverage. Direct
I think as of now, I have no sort of guidance on this. So, whatever we are planning as of now, we are planning through a mix of debt and internal accruals. As I said, even if in the next 2 years we spend INR1700 crores and INR2000 crores gets repaid, so you are not added on to your ultimate debt level. If you see our overall debt-to-EBITDA, from the last 2 years we've done investment, but debt-to-EBITDA ratio is around the same only.

Directly addresses investor concerns about increasing debt due to continuous project announcements and clarifies management's approach to funding and debt management.

Asked by Aman Sonthalia

Consistency of 'other operating income' and 'other income' for future projections. Partial
I think it is 100% achievable. The consistency is achievable ahead also. One factor I mentioned is the expected overcapacity in BOPP from the first quarter of FY '26. What is the impact of this as of today, and how soon will the industry address it? Other than that, all other aspects of the business seems manageable.

This question probes into the quality and sustainability of non-core income streams, which can often mask core operational performance, and management's response highlights a potential future headwind (BOPP overcapacity).

Asked by Saket Kapoor

3 min read 7 chapters

Detailed narrative

Q3 FY25 Performance Overview

Uflex reported a robust Q3 FY25, with revenue increasing by 12.8% year-on-year to INR 3,774 crores, supported by a 6.3% volume growth. The company achieved a significant EBITDA margin expansion, reaching 13.8% in Q3 FY25 compared to 11.4% in Q2 FY25. For the first nine months of FY25, the EBITDA margin stood at 12.6%, marking a 1.1% year-on-year improvement. A positive PAT of INR 111 crores was recorded, partly aided by a positive currency devaluation impact of INR 26 crores from Nigeria.

Capacity Utilization Improvements

Operational efficiencies and demand recovery led to notable improvements in capacity utilization across key facilities. Aseptic Packaging capacity utilization surged to 104% in Q3 FY25, a significant increase from 84% in Q3 FY24. The Nigeria plant, which previously faced currency devaluation issues, saw its utilization improve to 90% from 64% in Q2 FY25, with management expecting 100% utilization in FY26. Similarly, the Mexico plant's capacity utilization reached 98% in Q3 FY25, up from 85% in Q2 FY25, also targeted for 100% utilization in FY26. The Poland plant, however, remained below 70% utilization, with a target of 80% for FY26.

Strategic Investments & Expansion Plans

Uflex is actively pursuing several strategic expansions. The company is investing INR 317 crores in a new PET bottle recycling facility in Noida, aligning with upcoming government mandates for recycled content. Additionally, a $50 million investment is underway for a WPP bags facility in Mexico, targeting the North and South American pet food industry with an expected EBITDA margin of 22-25%. The India Aseptic facility's expansion from 7 billion to 12 billion packs and the 216,000 MTPA PET chips facility in Egypt have both achieved mechanical completion and are moving towards commercial operations. The Egypt Aseptic packaging expansion, a $126 million project, is expected to be operational by FY27, adding 12 billion units of capacity.

Recycling Mandate and Opportunity

The Government of India's mandate for using recycled materials (30% in rigid plastics, 10% in flexibles) from April 1, 2025, presents a significant opportunity for Uflex. Management highlighted that the industry is not fully prepared for this change, giving Uflex a first-mover advantage due to its existing recycling expertise and planned INR 317 crore facility in Noida. This move is expected to improve margins as blended materials with recycled content become a necessity for customers.

Debt and Capital Expenditure Outlook

Despite ongoing expansions, Uflex reported a net debt to EBITDA ratio of 3.24x. The company has spent approximately INR 1,100 crores on capex in the first nine months of FY25, with a net debt increase of INR 550 crores, indicating significant internal accruals. Total consolidated gross debt stands at INR 6,150 crores. Management anticipates spending an additional INR 1,700 crores on new expansions over the next couple of years, primarily for the Egypt Aseptic project. They expect natural amortization of about INR 1,000 crores annually to manage debt levels, maintaining that the debt-to-EBITDA ratio has remained stable despite investments.

Industry Dynamics: BOPET, BOPP, Aseptic

The BOPET segment is showing signs of recovery, with India's capacity utilization at 77% in Q3 FY25, up from 73% in Q3 FY24, and pain from overcapacity seems to be subsiding due to increased exports. However, the BOPP segment faces potential overcapacity, with four new plants expected to come online in FY26, adding 12,000-13,000 tons/month of excess capacity. The Aseptic packaging market, particularly for liquor in states like Uttarakhand and UP, is seen as having enormous potential, requiring a 4-5 times increase in current capacity if widely adopted across states.

Flexible Packaging & Holography Business

Uflex is not expanding capacity in the flexible packaging business due to very low margins, instead focusing on value-added products like retort pouches. Management noted that the industry's margin profile is not at the desired level, leading to a strategic decision to avoid further capacity additions in this segment. In contrast, the Holography business is performing well, showing consistent growth and good margins, which Uflex intends to continue pursuing. The company also aims to source 70-80% of its power from renewables across all plants within the next two years.

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