Analysis of Filatex’s FY22 Performance by financial Odyssey -FILATEX INDIA LTD – FY22 PERFORMANCE – Financial Odyssey
A great read - short and informative
Filatex India --Q2FY23–CNBC interview–Earning Highlights --22nd Nov22 :
–Q2 was weak due to dumping from China due to China has adopted zero covid policy ,so their internal consumption has gone down drastically, so the production they have not dropped. so Producers are trying to dump where they have a mkt so to stop that we have to drop our pricess .
–There is volume growth of 22% but the margins have dropped drastically as we have to compete with the imports coming from china
–Q3 will remain similar or slightly better but from Q4 we will see Chinese have their new Year in early January after that they should open up.
–They are also thinking of reducing capacity as even after dumping they dont see their production being consumed. Already they are 75% of world production of Polyester filament Yarn so by dumping also they are not able to release.
–There is appetite downstream that we have seen our volumes increase by 22%. Our exports are down as they are dumping everywhere in the world so we are becoming uncompetitive in the world. As this gets corrected the margins will jump up.
–current prices --it depends on RM but our Margins EBITDA used to be 14/15% or 15INR/Kg has come down to almost like INR 5/kg so we have dropped our margins by about 10/11INR/Kg
–China was selling 85% of their production locally and its exports used to be hardly 12/15% before this Covid thing happened so they are bound to reduce production capacity, they have not been able to gain mkt share in exports even after dumping as they were catering to almost 80% of export mkt.
–Annual capacity of 401040/tonns that is post expansion by FY23. This has come on stream in sep’22 and we have added 43000 tonnes more this year to make it 4L. Our capacity utilization was onwards of 95% in Yarn , now we are not selling any chips any more so 100% we are converting to Yarn in-house so we are out of the chips mkt. In the old capacity utilization 100% in the new one its 85 to 90%
–Total contribution of value added products which are high margins ? --We will keep increasing our value added products by FY24. Right now its 70% as value added
–Cash of 240Cr on books , plans ? --We will retire some debt as of now & will do capex on our recycling which we are developing . We will commit a capex for that by FY23 end. 200Cr capex.
–We will bring down our debt to below 300Crs by FY23 end.
–Exports we used to do 13/15% but in this Qtr we are only able to do 3/4% due to dumping by China in the world.
2 Likes
This article has done a good job capturing Filatex’s Q2FY23 results, earnings call highlights and some of the insights you won’t find anywhere else.
The company’s Cost of goods sold increased by 34.7% YoY and other expenses increased by 24.77% YoY, which were the biggest contributors to the margin compression and decline in profitability. Production during the quarter increased by 13.72% to 97169 MT and sales increased by 22.18% to 101488 MT. While the selling price per MT decreased by 1.32% during the quarter, the COGS per MT increased by 10.25%.
Another amazing write up on Filatex’s business economics by Financial Odyssey.
2 Likes
The section on pricing power is eye opening.
1 Like
Does anyone have any idea why the stock has jumped 10% today?
Hi Ganesh, are you still invested in Filatex? What’s your views? Why is this stock undervalued?
Excerpts from the Chairman Letter for FY 2023
The operating profits were impacted by several factorsincluding rising input cost of power and fuels, packing materials and consumables. Throughout the year, themargins remained under acute pressure due to large quantities of yarn being imported from China. The “zerotolerance” policy of China to contain Covid dampened their domestic demand . Even after relaxation on restrictions, the demand for yarns in China failed to gather momentum. Thus, Chinese yarn manufacturers started selling materials to India, Vietnam and other countries across the globe at very low prices. Though the material offered to Indian traders and importers was a minor fraction of China’s huge capacities and didn’t do much harm to them, but it was enough to almost destroy the domestic manufacturing capacity in India. While we did not cut operating capacity, we could sell only by matching Chinese prices. This situation led to a steep erosion of our margins. Several representations were made by Indian manufacturers through various associations and industry bodies. Surprisingly, this reality is grossly overlooked. In fact, the textiles yarn segment is not the only one that suffered. Several other industry segments had to face a similar situation. The information opacity relating to price, quantity and quality of these covert imports have made any project’ risk assessment difficult and all fresh investment plans are on “hold”. It would not be out of place to say that these imports are encouraging trading and assembling business at the cost of manufacturing investment. On one hand, we have a strained relationship due to the geopolitical situation and “Atma Nirbhar Bharat” but when it comes to imports from China , the situations seem quite different . Low Chinese prices also affected our exports. Despite slowdown in growth and disruptions in world trade and strained relations with China, imports from China to India were at a record level of over $102.25 billion in FY2022.The surge in scale and range of Chinese imports, aided and abetted by unscrupulous means including connivance among exporters, importers, clearing agents and customs, has sapped the performance, vitality and innate potential of the yarn sector. An import-dependent consumption, production and trading structure has evolved despite adequate manufacturing capacity. Cheaper imports of lowgrade quality yarn and fabrics continue to harm the Indian manufacturers. The Government of India is looking at ways and means through some policy initiative to stem this rot. QCOs on filament yarns have been prepared and are under implementation.
1 Like
“The continuous and increasing influx of Chinese imports was
unabated in this quarter. In order to retain their market share,
Indian manufacturers were forced to cut their prices to align
with import rates, which are lower by INR 4-5/kg. The industry
has been grappling with an erosion of margin. This has had an
adverse impact on profit margins despite a higher volume of
sales.
To further increase the share of renewable energy, the company
has signed PPA and SHA with Onevolt Energy Pvt Ltd, a 100%
subsidiary of Amplus Energy Solutions Pte Ltd, to procure solar
power as a captive consumer under the Inter -State
Transmission System (ISTS) for both its plants in Dahej and
Dadra.”
MADHU SUDHAN BHAGERIA
Chairman & Managing Director