Q4FY21 Company Update - Filatex India - ICICI Direct

The manmade yarn market has been characterised by strong demand and supply constraint within the industry, which has been beneficial for Filatex. After a strong performance in Q3, Filatex India (FIL) reported yet another robust quarter, driven by sustained enhancement in yarn spreads. Revenue for the quarter grew 18% QoQ (28% YoY) to Rs. 852.8 crore, mainly driven by blended realisations increasing 32% QoQ (36.4% YoY). Gross spreads (including inventory gain) increased substantially by 49% QoQ (111% YoY) to Rs. 37.3/kg, with gross margins expanding ~400 bps QoQ (1200 bps YoY) to 30.0%. Commencement of additional DTY capacity has also contributed to higher margins. Subsequently, EBITDA margins expanded significantly by 550 bps QoQ (1280 bps YoY) to 22.1%, with absolute EBITDA increasing by 57% YoY to Rs. 188.7 crore (EBITDA/kg: Rs. 24.3 vs. Rs. 14 in Q3FY21). Ensuing PAT came in at Rs. 118.5 crore vs. Rs. 66 crore in Q3FY21. We expect EBITDA margins for FY22E-FY23E to stay at 15-16% driven by robust demand in both domestic, export markets and capacity constraint due to 5-6% of industry capacity being not functional owing to fire at one of major manufacturer's production facility (expected to restart only by mid CY22). However, in the near term, demand may be negatively impacted owing to re-imposition of lockdown in certain states. Also the management indicated the spreads have declined in April but they expect demand to pick up once lockdown restrictions are removed while spreads should also start trending upwards.

Valuation & Outlook

Enhanced government support for polyester sector through production linked incentive (PLI) scheme and withdrawal of anti-dumping duty on PTA (raw material for polyester) augur well for the profitable growth of polyester players. The strong performance in FY21 has enabled the company to generate healthy cash flows, which has enabled it to reduce debt by ~ Rs. 140 crore (D/E: 0.8x in FY21 vs. 1.2x in FY20). We expect further deleveraging to result in D/E of ~0.2x in FY23E. Factoring in better-than-expected earnings performance in H2FY21 and improved product margins, we revise upwards our earnings estimates for FY22E and introduce FY23E estimates. Subsequently, we expect RoCE to get enhanced by 600 bps to 28% over FY21-23E. We reiterate our BUY recommendation on the stock with a revised target price of Rs. 90 (6.0x FY23E EPS, earlier target price: Rs. 85).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Filatex_CoUpdate_Apr21.pdf

Shares of FILATEX INDIA LTD. was last trading in BSE at Rs.73.05 as compared to the previous close of Rs. 74.85. The total number of shares traded during the day was 149290 in over 1178 trades.

The stock hit an intraday high of Rs. 77.6 and intraday low of 72.45. The net turnover during the day was Rs. 11252522.

Source : Equity Bulls

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