Garware Hi-Tech Films Ltd Q4 FY22 Earnings Conference Call Insights

Key highlights from Garware Hi-Tech Films Ltd (GARWARPOLY) Q4 FY22 Earnings Concall

Q&A Highlights:

• Samir Desai of PH Capital asked that in distribution, if there has been any consideration of going downstream into resolution by acquiring some stake of an exclusive distributor. Deepak Joshi Director said it is considering some organic or inorganic expansion. In USA, the company is evaluating opportunities.

• Samir Desai of PH Capital also enquired about how the company is maintaining its bargaining power with distributors vs. big players. Deepak Joshi Director answered that majority of agreements with distributors are exclusive in nature in most countries. Cost increases are passed on and the process is very transparent with distributors.

• Anshul Shah with Alpha Plus Capital enquired about capex utilization. Pradeep Mehta CFO replied that there were two tranche of INR135 crore each totaling INR270 crore. First tranche of INR135 crore was utilized for PPF and upgradation of existing lines. Second tranche is planned for new lamination line for which trial run is going on. From July, commercial production is expected with INR300 crore additional revenue.

• Anshul Shah with Alpha Plus Capital asked about the contribution of domestic market in the PPF business. Deepak Joshi Director replied that initially idea was 95% of exports as PPF is well known commodity in US and European market. The company now feels this business might go up to 20% of total business in the domestic market.

• Anshul Shah with Alpha Plus Capital asked if the new capex will be able to produce PPF. Deepak Joshi Director said the new lines will produce window films, but PPF can also be produced. But there is also a dedicated line for PPF only.

• Anshul Shah with Alpha Plus Capital enquired if the company is seeing any slowdown in demand in the last couple of months. Deepak Joshi Director answered there is no slowness seen in demand but the company is also having continuous dialogues with its customers in US and ROW markets. Market ups and downs are common and GARWARPOLY will try to do best out of it.

• Anshul Shah with Alpha Plus Capital asked that if the company expects revenue of about INR600 crore from the capex of INR270 crores, at full capacity by end of FY24. Deepak Joshi Director replied that it will come in a staggered manner, but the total output would be to the tune of INR600 crore.

• Nikhil Agrawal of VT Capital asked the reason why the other income was up by 100% during 4Q22 vs. 3Q22. Deepak Joshi Director answered that there is a unutilized redundant asset which the company has monetized it. So it’s a one-time extra income in 4Q22.

• Dhaval Mehta from Aditya Birla AMC asked that in the next 2-3 years which particular segment the company is seeing to be fastest growing. Deepak Joshi Director replied that it could be PPF, architectural window films and shrink films.

• Dhaval Mehta from Aditya Birla AMC asked about the current capacity utilization, excluding the INR270 crore capex. Deepak Joshi Director answered that it’s full all the time because there are products which the company has order booked for next 2-3 months.

• Ritesh Chheda of Lucky Investment asked about the size of the PPF films business currently. Deepak Joshi Director said that the line is more than 50% utilized and last year it achieved breakeven and now the company is getting margins. And revenue of INR80-100 crores in first year of operation.