UFLEX Limited (UFLEX) Q1 2027 Earnings Call Transcript

Posting very strong first quarter numbers, profits zooming upwards of six times on a year on your basis. In fact, we've got on board with us Arun Kumar Sharma, the President of Finance and Accounts, as well as the CFO of UFLEX, here to break down those numbers with us right now. Very good morning. Thank you for joining us in on ET now. I'm seeing revenue growth was much stronger than volume growth in the first quarter. And going forward, how do you see the balance between volume growth, realizations, and also the value-added mix in driving your revenues going forward?

Yeah, good morning to you and to our viewers. So, as you can see, the first quarter has been a very strong quarter for us. And it was primarily driven by higher packaging film realizations from raw material inflation pass-through and local sourcing premiums, Supported by volume growth, currency tailwinds, and improved product mix across flexible packaging and value-added packaging films. So you can see all the products are contributing to this growth in Q1. EBITDA also rolled almost 46% sequentially, and it was also driven by packaging films and other businesses quite equally on this. EBITDA margin also expanded to 17%. Year-on-year, primarily driven by overseas business with Egypt, Mexico, and Poland as key contributors, along with India-patriot businesses. As regards your question for seeing the continuity of this momentum, what we have gained in Q1, let me just take you back to Q4. For Q4, we gave a very positive result, and the same momentum continued in Q1 this year, and Q2 also, we are very confident that the same momentum will continue, and for the full year, we are very hopeful that this year we'll report very strong performance on overall basis.

Thank you for that, Mr. Sharma. Also tell us, the first quarter also saw quite a sharp improvement in spreads. This is as the BOPP as well as the BOPET prices rose faster than the raw materials are feeding in. Can you tell us how sustainable are the current spreads and also what would it take for a normalization to get triggered over here?

See, when the crisis started, this West Asia crisis started, the prices of around 82 to 90 range. But when the thing in June and it was touching almost 120 to 125 level. But now because the prices are almost at a higher level, we can expect a decent growth from here on also because still the supplies are saying supply chain is a little impacted because the So getting the raw material as well as product through the channel is very difficult. So people who are present across the geographies, like we are in Egypt, we are in Poland, we are in Hungary, Mexico. So we are able to meet the customer demand in a very, very regular manner. And customers are depending on us more than the other players because they can see our integrated player coming into play. And we are able to manage their supply chain as well. So we expect that for this quarter also, the growth should be there. But I think we should look at some normalization happening in this quarter because whatever rose in Q1 was very sharp, but some normalization we can expect in Q2. But still, there'll be a very decent growth in Q2 also going forward.

All right. Decent growth in Q2, but still some normalization expected in terms of those spreads.

Let me just, why I'm saying normalization is because this quarter we reported 900 plus EBITDA, obviously. And what indication we have given to the market for the full year is a top-line growth of 30% to 35% year-on-year basis. And similarly, EBITDA also will grow by 30% to 35%. So if you look quarter-on-quarter, there can be some normalization in any quarter. Another quarter can jump again. But overall, if you look at fully a perspective, there's going to be a strong growth in FI27 from all our verticals what we are running down.

Okay, understood. So that's the outlook going ahead. And I'm just trying to understand your e-drift aseptic. First of all, good morning, my name is Nehi, and good to be speaking with you. The e-drift aseptic is the biggest upcoming growth trigger once commercialized. How quickly can utilization ramp up? Abhan, and by when do you expect the facility to become meaningfully abita-equitative?

Very good morning to you. I think a very valid question because this is one of our premium projects that's coming up now. And we have given an indication to the market that in H1, we'll commercialize this project. And hopefully, in first year, generally what happens in these projects is that capacity utilization range from around 30% to 35% in first year. Second year, it will go around 50% to 60%, and third year, it will go around 90% to 100%. So in first year, there will be a good growth on aseptic business, but capacity utilization will remain around 30-odd percent, but that will also add a sizable figure to our bottom line as well as to our top line.

Okay, understood. And lastly, before we let you go, also give us a sense of the 35% revenue growth that you're targeting for FY27. And you have said that quarter two may see some normalization after an exceptionally strong quarter one. What kind of normalization or moderation should we expect in quarter two on the top line?

See, moderation means like 600 times we have grown in this quarter. So we cannot grow that much in every quarter, because if we grow in every quarter that month, our results will be much, much higher. But to give a decent way forward to the business, I think we'll have a strong quarter two also, led by quarter three and quarter four. So, overall, we see a decent margin coming into play in FI27, and we see overall growth of 30% to 35% coming into play. So, why I'm saying normalization, because quarter-on-quarter, you cannot control these things, like prices, sometimes they're very high, sometimes prices normalize. So, all these things, because so much of geopolitical disturbance is happening as of now, and we have to take into account all these things. But because we are an integrated player, we are able to pass on the cost to our customers, and we are able to manage the supply chain in a very, very strong way. That is giving us good results quarter-on-quarter basis. So some normalization, 5%, 10% prices going here and there is always expected. So quarter-on-quarter, I think one should not be very worried about if my quarter goes a little down here. But the overall sentiment or overall guidance remains very strong for the full financial year of PI27. That we'll have a 30 percent, 30 to 35 percent growth in top line as well as in bottom line.

Mr. Sharma, your optimism for the second quarter is definitely something that we're going to be keeping track of. Thank you so much for joining us here on the show. It was a pleasure having you on board and chatting with us.

Thank you. Thank you so much.

Thank you. With that, viewers, we're completely timed out on this edition of Midcap Masala. Stay tuned to ETNR for more.