ESTER - Ester Industries Ltd. Share Price

In the Q1 FY '26 earnings call, management provided an optimistic outlook for Ester Industries, highlighting strong performance across key business segments. The company reported a 19% increase in consolidated revenue, reaching INR 346.85 crores, accompanied by a significant improvement in EBITDA margin, which expanded by 240 basis points to 8.35%.

Key forward-looking points shared during the call included:

1. Recycled PET Revenue Surge: There was a notable increase in recycled PET revenue, which rose from INR 0.5 crores in Q1 FY '25 to INR 14 crores in Q1 FY '26, driven by significant volume expansion and aligning with sustainability trends.

2. Capacity Utilization: Polyester Films' capacity utilization improved to 82% from 64% year-on-year, with a sales volume of 21,531 metric tons, reflecting a growth of 22.57%. The goal is to maintain high utilization rates moving forward.

3. Specialty Polymers Growth: Management expected to achieve double-digit growth in the Specialty Polymers segment over the next few years, supported by a strong product line and strategic innovation efforts.

4. Joint Venture Progress: The joint venture with Loop Industries is advancing as planned, with expectations for successful project implementation that could impact the circular economy positively.

5. Challenges and Responses: Management acknowledged challenges from import pressures and foreign exchange fluctuations but emphasized resilience through strategic pricing and product differentiation.

6. Financial Health Indicators: The company reported a substantial recovery in profit after tax (PAT), amounting to INR 9.64 crores compared to a loss of INR 2.04 crores in the previous year.

Overall, management's commitment to growth through innovation, sustainability, and operational efficiency sets a positive trajectory for Ester Industries in the upcoming fiscal year, projecting a strong foundation for future profitability and value creation.

Q&A Section Summary from Earnings Call Transcript (1st August 2025)

Question 1: My question is that the BOPET industry settled with very high capacity and oversupply situation. So when can we see that this overcapacity gets over?

Answer: We observe a reduction in surplus capacity and the operating rates of Indian capacity are around 80%. The BOPET segment is expected to grow at nearly 10% year-on-year, indicating a market demand increase of approximately 80,000 to 85,000 tons annually. With exports rising, the demand will exceed 1.1 million tons. In 2-3 years, we expect to clear the surplus capacity of about 250,000 tons, maintaining healthy operating rates.

Question 2: In the month of May, there was a fire in one of the peers plant. After that, BOPET and BOPP prices saw a significant jump, but they have reverted. Are margins limited due to this?

Answer: Yes, you're correct. We are maintaining a balance between our margins and import prices. We're engaging with the government to mitigate low-priced imports, and we hope to see positive developments soon. Our core strategy is to transition towards specialty films, which shield us from fluctuations in commodity markets.

Question 3: What type of potential are we seeing in rPET and its margins?

Answer: rPET is crucial for our film business, driven by sustainability regulations increasing demand for recycled content in films. The margins from PCR films are significantly higher than commodity films. We plan to utilize rPET mainly as feedstock for our high-quality recycled films, improving profitability.

Question 4: How do we foresee moving from 85-88% contribution of two products in Specialty Polymers to others?

Answer: We anticipate strong ongoing demand for IQ PBT, and our positioning is solid for MB03 as sulfonated nylon demand grows. We expect to introduce new geographies for these products, which may take 9-12 months for volume buildup, with an aim to grow in double digits over the next few years.

Question 5: What is the current split of revenue from exports?

Answer: Approximately 35% of our revenue comes from exports, with a significant contribution from specialty polymers and some from polyester films. We have an extensive presence across 50 countries.

Question 6: With the U.S. imposing tariffs, what impact do we see on our margins?

Answer: The tariffs are evolving, with a current 25% in question. Our exposure to the U.S. is around 10% of total revenue, mainly from specialty films. With strong price resilience, we've managed to pass on tariff costs lessening the potential negative impact on profitability.

Question 7: When can we expect Ester Filmtech to start delivering consistent PAT profits?

Answer: We observed a significant improvement in cash profits. We foresee reaching sustained positive PAT in the next 2-3 quarters as we scale operations and enhance specialty product offerings.

Question 8: Are there operational challenges facing the Hyderabad unit compared to Khatima?

Answer: Yes, the Hyderabad plant, established in January 2023, has faced delays in product approvals. However, we are seeing consistent improvements in capacity utilization and expect it to reach 80-85%, comparable to Khatima.

Question 9: What is the stance on financing, especially regarding Filmtech?

Answer: While there may be an increase in working capital loans due to growth, we expect a decline in finance costs as a percentage of turnover, due to higher revenue generation.

Question 10: What is the current demand-supply ratio in the BOPET segment?

Answer: The capacity stands at approximately 1.35 million tons, satisfying around 850,000 to 900,000 tons of domestic demand, with about 250,000 tons being exported. This provides a narrow gap in production capacity when factoring operational efficiencies.

This Q&A summary captures the essence of the earnings call. Each response reflects the management's insights and strategic direction while providing updated figures and expectations.