Ester Industries Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from Ester Industries Limited (ESTER) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:09:24] Pratik Shroff from Dolat Capital enquired at what capacity is ESTER currently operating at in Uttarakhand. Girish Behal Business Head answered that ESTER is currently operating at full capacity at the Uttarakhand plant.

• [00:10:04] Pratik Shroff from Dolat Capital enquired about the visibility in the BOPET space. Girish Behal Business Head said that demand for goods and services remains strong, and external factors such as discretionary spending and a demand-supply imbalance are expected to keep pressure on margins in the short to medium term.

• [00:10:36] Pratik Shroff from Dolat Capital asked what gives ESTER confidence in SP’s performance in the near or mid-term and what product lines have seen increased demand. Girish Behal Business Head replied that ESTER made INR32 crore in revenue in 1H23, mostly from exports to the U.S. The December quarter was affected, but ESTER is seeing some revival in the March quarter and expects the next couple of quarters to be good for Specialty Polymer with improving economic conditions in the US.

• [00:12:39] Saket Kapoor from Kapoor Company asked about the percentage loss in terms of tonnage from the film plant 3. Pradeep Rustagi ED answered that ESTER lost 3,000 tons of production from the film plant 3 which is the largest plant in Khatima.

• [00:12:29] Saket Kapoor from Kapoor Company enquired about the factors that led to the drop in the realization levels. Pradeep Rustagi ED said that demand continues to grow, however the margins in the domestic market have been compressed due to increased competition.

• [00:21:08] Saket Kapoor from Kapoor Company queried that for value-added films, out of total sales what percentage is attributed to value added and its outlook. Pradeep Rustagi ED replied that in December, 23% of the total volume came from value-added and specialty products and 35% of the value was contributed by that portfolio. Going forward, the target is to increase that to 30-35%.

• [00:22:39] Saket Kapoor from Kapoor Company asked if ESTER had any impact of FX losses in 3Q23. Pradeep Rustagi ED answered that the company has gained INR5 crore so far in FY23 due to exchange rate fluctuations as it is now a net exporter.

• [00:23:32] Gaurav Lohia from Bowhead India asked about the June quarter utilization for 12 micron film and metalized film. Pradeep Rustagi ED said that for June quarter, ESTER had realization of 12 micron in the range of INR145. This was due to RM cost being very high at about INR95 a kg.

• [00:24:53] Rahil Shah enquired about the general industry scenario and when it will improve. Pradeep Rustagi ED answered that ESTER expects to see a recovery in the film business starting from the March quarter after 1-2 quarters of negative numbers due to the U.S. slowdown and other factors.

• [00:4:12] K. C. Puana asked that after commissioning the plant, if ESTER is performing to expectation on efficiency and product. Pradeep Rustagi ED replied that the plant is performing as per expectation.

• [00:44:04] Pratap Jagwani at Forbes Marshall asked about the total revenue in topline from Telangana expansion in 4Q23. Pradeep Rustagi ED replied that in Q4 ESTER should be achieving close to revenue of about INR70-75 crores from Telangana operations.

• [00:45:46] Pratap Jagwani at Forbes Marshall also enquired that once the insurance claim is approved and once it is available, when it will be available in top line. Pradeep Rustagi ED said that property damage claims are usually settled quickly, while loss of profit claims can take up to 6 months. ESTER expects the property damage claim of INR 3 crores to be settled by the end of March or early April.

• [00:50:51] Saket Kapoor from Kapoor Company asked about commoditized and the value-added films, quarter wise blended per Kg margin. Pradeep Rustagi ED replied that in June the blended margin in domestic market was close to INR60 and Sept. dropped to INR35 and in Dec. it is at about INR25. This is expected to improve going forward.