Key highlights from UFLEX Limited (UFLEX) Q2 FY23 Earnings Concall
- [00:10:09] Subham Agarwal from Aequitas asked why the BOPET spreads have declined so much in last 1-2 months. Rajesh Bhatia Group CFO answered that the spreads are expected to go up again next quarter. Generally, 2Q23 is generally lean quarter and in Europe, the demand was impacted due to the consumption issues.
- [00:12:14] Subham Agarwal of Aequitas enquired about the volume decline in Europe vs. March qtr. Rajesh Bhatia Group CFO replied that UFLEX doesn’t share the numbers plant wise. But the decline seen on a QtoQ basis was mainly due to the lower volumes in the packaging films business.
- [00:13:32] Subham Agarwal with Aequitas also asked when the working capital requirement will squeeze and have enough cash to repay debt, since RM prices have declined. Rajesh Bhatia Group CFO answered that the debt amortization is already happening. UFLEX added that the working capital requirements have gone up in line with the incremental volumes. Also working capital is largely funded from internal resources.
- [00:16:31] Yash Dantewadia from Dante Equity enquired about the margin guidance for 2H23. Rajesh Bhatia Group CFO replied that UFLEX is looking at overall for FY23, 16% margins. Also this is affirmed by the fact that volumes are improving in liquid packaging from January. Even in lean quarters, UFLEX is doing above 90% capacity utilization in that business.
- [00:19:15] Yash Dantewadia of Dante Equity asked when UFLEX is expecting the capacity utilization level to move to 80-90% for the Dharwad capacity. Rajesh Bhatia Group CFO replied that it might take 12-18 months time with the current demand scenario.
- [00:20:07] Yash Dantewadia from Dante Equity enquired about RM prices going forward. Rajesh Bhatia Group CFO said that RM prices have corrected and in line with the demand supply equilibrium. UFLEX added that it’s not seeing any issues with the availability as seen earlier.
- [00:22:58] Yash Dantewadia with Dante Equity asked what kind of ROE UFLEX is expecting from the Panipat capex. Rajesh Bhatia Group CFO answered that it’s about 18% ROE the company is expecting.
- [00:25:04] Jiten Parmar of Aurum Capital asked about the status of Asepto. Rajesh Bhatia Group CFO answered that Asepto margins are expected between 15-17% on a normalized basis.
- [00:29:12] Jiten Parmar from Aurum Capital also enquired about the revenue expectation in FY24 for Asepto as a separate division. Rajesh Bhatia Group CFO said that UFLEX should be looking at about INR1,500 crores for FY24.
- [00:29:52] Kaushik Poddar with KB Capital Markets enquired about higher other income in 2Q23, if it’s operating income or anything else. Rajesh Bhatia Group CFO clarified that it’s all other income. And it’s categorized as other income due to accounting norms. Something that’s not sale and purchase is recorded as other income.
- [00:36:25] Avnish Shah enquired about the peak debt that’s expected for UFLEX. Rajesh Bhatia Group CFO answered that the company is not going to add much of the debt. Except Dharwad, all other things have been completed.
- [00:37:30] Arushi Shah of Sushil Finance asked about any competition in the Asepto business. Rajesh Bhatia Group CFO replied that Tetra Pak is the biggest competition and it has over 70% market share. However, the market is growing at 18-20% annually, which should help UFLEX.
- [00:39:17] Arushi Shah with Sushil Finance asked how much the backward integration plant in Panipat would translate into margins. Rajesh Bhatia Group CFO said the project has an ROI of 18%, so the cost of the project is about INR587 crores.
- [00:44:08] Rohit Sinha from Sunidhi Securities asked about overcapacity in the global space, and what time it takes to absorb capacity addition and when UFLEX expects normalization in demand-supply. Rajesh Bhatia Group CFO said internationally there is no overcapacity. In India, there is couple of plants that’s coming in H2, including Dharwad. So next quarter onwards margins should be back to normal.
- [00:47:20] Rohit Sinha from Sunidhi Securities enquired that of the overall portfolio, how much would be contribution from value added products and if it will be expanded in future. Rajesh Bhatia Group CFO replied that UFLEX is doing that, which requires investment and is being done in Egypt and Mexico. So UFLEX is looking to do more value added products, which is the way to go.
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